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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Procurement Law – Your 2024 Comprehensive Guide
Key takeaways
- To maintain equality, competitiveness, and compliance, procurement law regulates purchases made by both public and private sectors.
- Different countries have different laws about procurement; such as Germany’s Act Against Restraints on Competition and India’s Article 299.
- Comprehending procurement laws is crucial for legal compliance, promoting fair competition, and minimizing risk during transactions.
Just like any other law, procurement law safeguards the parties that are involved in the transaction. In addition, it regulates the purchasing of the public and private sectors. However, not many people know about the laws in procurement.
For this article, we will discuss what procurement law is. We will also explore the applicable legislation of some countries in public procurement. In addition, we will unfold why procurement law is important in the field of procurement.
After reading this article, you will have a deeper understanding of procurement law. This will allow you to follow all the regulations. In addition, you will know the dos and don’ts of procurement to stay compliant in the field of procurement.
What is Procurement?
To give a brief review, procurement is simply the act of buying and negotiating materials needed by an organization. The organization performs this to sustain its daily operation.
IT Procurement is a vital business function as it encompasses a range of processes involved in obtaining goods or services. The steps that organizations take to carefully select and purchase goods or services remain as important as ever.
In the past, it has been used synonymously with purchasing. However, through the years, many professionals have realized that it is just one of the processes that procurement covers.
Whatis Procurement Law?
Procurement law is the area of law that deals with the purchasing of goods, services, or project construction. Typically, it regulates private companies or government departments.
In common law jurisdictions, there are two primary sources of law. First are the statutes and other legislations. Second is the common law which is developed or created by the courts.
In Europe, the directives of the European Union (EU) on public procurement govern all procurement by public sectors. The directives contain detailed rules on the processes that need to be followed. In addition, it also points out what the public sector may do or not do.
Therefore, lawyers in Europe typically look at the directives or the laws that have been applied in the relevant country.
However, it is not the same in Canada. In Canada, procurement law is usually based on contracts and has been created or developed by the courts.
In practice, when a bidder submits a binding offer to a buying party, a contract is formed between the two parties. The details of the contract will be discussed further to detail the stipulations in the agreement.
The Canadian courts are active in implying terms into the contract to ensure fair and equal treatment for bidders.
Why is Procurement LawImportant?
Procurement law does not just affect the public sectors but also the private sectors. Procurement laws and rules apply to numerous factors in procurement.
This includes the bidding process, the nature and location of the parties, the origin of goods or services, and the terms in procurement.
It is crucial to be aware of the procurement laws and rules so that the public and private sector stays compliant.
Although procurement laws seem like an annoying challenge, it does help the parties involved in the transaction. Like the enactment of the Agreement on Internal Trade to prevent discrimination based on province of origin.
Legal responsibility is good news for both parties. They can file a lawsuit if one of the parties in the contract is non-compliant. These laws exist to ensure an open, equal, and competitive procurement process.
The law sounds scary. One wrong move and you will incur fines or lawsuits. However, if you know how these laws work, it will allow you to stay compliant and avoid those risks.
Applicable Legislation in Procurement for Different Countries
For different countries, the applicable legislation is done differently. As different countries have different legalities the way procurement is handled may also be different.
1. India
For India, the legal framework governing public procurement is Article 299 of the Constitution of India.
It states that all contracts made in the exercise of the executive power of the Union of India or a State of Government must be in the name of the president or the Governor of the State as the case may be, and be executed on behalf of the President or the Governor or by such person as he or she may direct.
Furthermore, the following are the rules and directives for public procurement put in place at the federal level:
- General Financial Rules, 2017 (GFR)
- Delegation of Financial Powers Rules, 1978
- Manual on Policies and Procedures for Purchase of Goods provided by the Ministry of Finance
- Manual of Policies and Procedure for Employment of Consultants released by the Ministry of Finance
- Director-General of Supplies and Disposals Manual
- Manuals governing processes for the purchase of goods or services provided by individual ministries or departments
- Government requests regarding price or purchase preference or other facilities to sellers. This includes the handloom Sector, cottage, and small-scale industries, and central public sector undertakings
- Guidelines by the Central Vigilance Commission to improve transparency and objectivity in public procurement.
2. Germany
The German procurement law is guided by the rules that are contained in the following levels of regulation:
- Federal and State Budgetary regulations
- German Act Against Restraints on Competition
- Procurement ordinance for the sectors in energy, water, and transports
- Procurement ordinance for the sectors of security, defense, and negotiation concession
- German Procurement Regulations for Works
3. Canada
The legal framework for government procurement in Canada comprises trade agreements, regulations, statutes, case law, and policies.
The legal framework applies at the federal level of Canada. However, it does not apply in Canada’s 10 provinces.
4. Malaysia
In Malaysia, there is no specific legislation that governs the government procurement process. However, it is largely governed by the treasury instructions and circulars issued by the Ministry of Finance of Malaysia.
Moreover, there are legislations that apply to certain aspects of government procurement which are the following:
- The Government Contracts Act (1949)
- The Financial Procedure Act (1957)
5. Japan
In Japan, there are two different types of public procurement systems that exist. These are the national and the local governments.
The Accounting Act and the Cabinet Order on Budgets and Accounts are the main legislation that governs the national government.
On the other hand, The Local Autonomy Act and the Order for Enforcement of the Local Autonomy Act govern the procurement system of the local governments. Aside from these, there are a number of specific laws that govern public procurement.
Conclusion
Procurement law serves as the legal framework governing the acquisition of goods and services by government entities.
It ensures transparency, fairness, and competition in the procurement process. By outlining rules and procedures, procurement law aims to prevent corruption, promote accountability, and maximize the value of public resources.
Compliance with procurement regulations is crucial for fostering trust, efficiency, and responsible use of taxpayer funds in government acquisitions.
Frequentlyasked questions
What is procurement law?
It is the area of law that deals with the purchasing of goods, services, or project construction.
Why is Procurement law important?
It is important to safeguard the parties involved in the transaction. Additionally, procurement law regulates the purchases of the public and private sectors.
Are the procurement laws from each country the same?
No. Each country has different legislations and regulations regarding public and private procurement.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
