Jirí Skuhrovec

Why is Public Procurement So Inefficient: Czech Case: Transaction Costs in Public Procurement and Measuring Transparency in Public Spending Jirí Skuhrovec

Public procurement is a highly monitored area, since through these contracts flow significant share of public funds; in the Czech Republic it was about 15.5 % of GDP in 2010. The importance of public procurement lies mainly in its high value in relation to GDP, yet the difference between public procurement contract and ordinary contract between two private subjects has different roots. In the case of public procurement, employees of public entities manage public resources which creates risk of self-interested behavior resulting in agency inefficiencies. Public procurement is a highly monitored area, since through these contracts flow significant share of public funds; in the Czech Republic it was about 15.5 % of GDP in 2010. The importance of public procurement lies mainly in its high value in relation to GDP, yet the difference between public procurement contract and ordinary contract between two private subjects has different roots. In the case of public procurement, employees of public entities manage public resources which creates risk of self-interested behavior resulting in agency inefficiencies.