Expression of Institutional Economic Theories in Public Procurement Process

Simona Ereminaitė


Public procurement is a relatively new practice of the institutions in public sector associated with the new ideas in public management: to take over the business management principles and adapt them to the public institutions, to save the state money, to efficiently distribute and promote public and private sectors. Institutionalism is described of the 19th-20th centuries, especially when the focus is on the social and economic development of the country, economic problems, appropriate solutions for the public and the private sectors in the search, without distinction between primary and secondary institutions, and analyzing them as a whole in the public procurement process.
According to an independent economic institutionalism theory direction, the public procurement process can be understood as a set of institutions with an exceptional inter-relationship between purchasers and suppliers, as well as affecting the economic development of the country. The institute in the procurement process consists of: 1) the formal rules governing public procurement procedures, and informal relations between contracting authorities and suppliers, affecting both their mutual relations and their common agreements and economic development activities, 2) the coercive measures imposed to ensure public procurement procedure norms, sanctions and violence in defiance of state of the Republic of Lithuania procurement legislation. In the public sector, public procurement plays a dominant role in procurement services, law enforcement processes, health, social services, education, defense, transport and the environmental issues sectors, and therefore, to achieve public policy objectives and meet civil society needs in the public sector organizations in the procurement volume is much larger than in the private sector.
Institutionalism allows the identification of self-formed purchasers and suppliers to separate the network of economic actors’ public and private sectors, groups and organizations. In the relationship between individual behavior and analyses of these theories, new institutional economic theory is born. New institutionalism encourages looking at the practical and effective institutions in the procurement process, analyzing not under the ideal conditions of a theoretical model, and according to the public procurement law with the alternative, which allows to extend the micro-economic analysis. In addition to physical and technical limitations inherent in classical institutionalism theory, new institutionalism identified and further analyzed the institutional structure of the society. The institutional structure formed in economic circumstances reflects the situation in the procurement process, the state authorities of the contracting authority must be interested in a cost-effective and/or efficient purchasing, while suppliers (business organizations) – the maximum profit possible after the procurement.


institute; institution; institutionalism; new institutionalism; economic theory; public procurement

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