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Local Public Procurement A Key to Local Economic Development in Municipal Authorities
An analysis of the procurement expenditure in Sha’ar Hanegev regional authority as a case study which outlines and examines the procurement policy of a municipal authority and its impact on the local economy.

This paper presents an analysis of the procurement spending in the Sha’ar Hanegev regional authority as a case study through which to outline and examine the procurement policy of a municipal authority and its impact on the local economy. Our analysis paints a paradoxical picture. On the one hand, the authority has a de facto policy of local procurement, reflected in the fact that of the total tenders published by the authority and checked by us, 60% were won by contractors and suppliers in the area. On the other hand, however, the total value of these “local” tenders is just 35% of the authority’s expenditure, so that in fact 65% of that expenditure is given to non-local suppliers. This means that a significant percentage of the public resources at the authority’s disposal are flowing out of its field of operation, while only a small percentage contributes to the local economic activity of the residents. 

Analysis of the contracts according to the variables “sector of activity” and “contract type” showed that the primary cause of this centralized and paradoxical situation is bundled tenders,1 which consist of large-scale contracts with non-local, large suppliers, usually conducted through the “Mashcal”2. The considerations that led the authority to contact external suppliers and contractors, both through public tender on the authority’s behalf and through the Mashcal, include: a) a lack of suitable local suppliers, b) specialized sectorial characteristics, c) risk management considerations and d) price considerations. The paradox we saw in the authority’s procurement faithfully represents an ongoing process of structural fallacy that is detrimental to local small and medium-sized businesses (SMEs) in the periphery. The minimal requirements of large tenders are such that local SMEs cannot but fail to meet them, so that the tenders are necessarily and consistently won by large, national suppliers. This phenomenon, of huge tenders with obstacles to small businesses inherently embedded in them, condemns the procurement budget of many municipal authorities (including the case before us) to a perpetual dynamic of “leakage”. The result is that a significant part of the budget leaks out, instead of supporting local and regional businesses and populations.

Irit Porat, Shatil Editor: Gili Baruch, Shatil

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