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Beyond Bidding: The Challenge of the Last Mile in Public Procurement

For a marathon runner, the last mile is the toughest. For businesinteses, it's the costliest. With that in mind, the private sector is continually exploring ways to reach consumers in the shortest time and at the lowest cost, from labels that allow real-time package tracking to drone deliveries. However, serving the last mile still costs businesses twice as much as other links in the logistics chain.

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What about governments? Alongside personnel expenses, the procurement of goods, services, and works is a major component of public expenditure. In Latin America, it represents, on average, about 25% of total public spending. In some cases, like Peru, it can account for up to 50% of the total bills paid by the state.

For governments, the last mile is not only the costliest but also the most crucial. Government logistics teams must be able to deliver public services to all corners of the geography. This includes supplying medical supplies to remote areas in a timely and appropriate manner, distributing fertilizers to small producers in rural areas far from urban centers, and ensuring the timely and high-quality provision of school meal programs.

The question is: Are the governments of Latin America and the Caribbean prepared to respond efficiently from the first to the last mile?


Good, Cheap, and Fast: Myth or Goal?

In their mission to achieve a more efficient state and combat corruption, governments in the region have been strengthening their procurement capabilities in recent years. These efforts have materialized in concrete initiatives, such as the creation of specific agencies (such as ChileCompra, PerúCompras, or Colombia Compra Eficiente), the expansion of mechanisms to aggregate demand (such as Colombia's framework agreements, Panama, or Chile), or the introduction of transactional platforms (e.g., COMPR.AR). This has helped address recurring issues like fragmented purchases, pre-awarded tenders, or delays in procurement processes, among others. The creation of specific agencies has also resulted in significant savings in some cases.

But to provide good public service, buying well (on time, comparing offers, at the best value, and in appropriate quantities) is not enough. Sometimes, by the time the product reaches the recipient, the conditions are not optimal. In Peru, for example, school supplies did not arrive on time for the start of classes in 27% of schools in 2018, and the lack of medicines and basic materials in public health facilities forced 57% of their users to resort to the private sector in 2015. In Chile, it was recently discovered that there is a 32% non-compliance rate among suppliers of the school meal program for kindergartens.

In other words, it's a myth to believe that buying good, cheap, and fast is sufficient. Managing products once they are purchased has as much or more impact on service quality as the contract award.


Public Focus on the Last Mile: What Are Governments Doing?

Several OECD countries have made progress in consolidating integrated public procurement systems. This approach strengthens procurement planning (leading to more efficient and timely purchases) and makes service delivery more effective.

These systems combine the best of centralization and decentralization. On one hand, central agencies responsible for the procurement system regulate and monitor the storage, distribution, and delivery of goods and services from suppliers. Individual entities (ministries, subnational governments, etc.) plan contracts and manage the last mile a few links before and after the central agencies.

These systems integrate private sector practices and information technologies that allow close monitoring of each step of a contract: from planning, through the procurement process, to the subsequent distribution or service delivery, and the final performance monitoring of the entire chain. They also include mechanisms to incorporate the perspective of end users, both suppliers and citizens.


The Last Mile in Latin America and Citizen Trust

Beyond the OECD, significant progress has been made in this area in Latin America. For example:

  • Peru introduced the National Procurement System into its regulations in September 2018 and is in the process of development and implementation. The system encompasses multi-year planning of services, goods, and works, as well as procurement or contracting management. One innovative aspect of this model is the extensive coordination among different system actors, including the Public Procurement Central Unit (Peru Compra), the State Contracting Supervision Body (OSCE), and procurement executing entities. Another unusual aspect is that it covers both movable and immovable goods.
  • The state of Pernambuco in Brazil instituted a similar focus in 2013 with the Integrated System for Procurement, Contracts, Tenders, Property, and Logistics (PE-INTEGRATED System), which is also in the process of implementation. Although this process has taken several years and spanned different administrations, it has successfully integrated with the financial management system.

Citizen trust in the state is at stake every day in the effective delivery of public services. Strengthening the public procurement chain is essential here. This new integrated management model will allow Latin American governments to strategically manage their procurement from the first to the last mile!

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