A purchase made by the government or state for a work or service to be provided to the public must necessarily have a budget. This budget will serve as a control and parameter for the demands of the project. Let’s learn more about this process.
What this article covers:
What are public procurement budgets?
The budget for public purchases is the share of the price that the government makes when carrying out a work, a service, a construction or any project that requires public money.
When is the budget for public bidding procurement made?
When a public sector carries out a work, constructs a building, maintains a public asset such as a bank, squares, renovates a building or cultural building, etc., it is necessary to draw up a budget for public purchases.
Regardless of whether it is a service with bidding or direct purchase, this budget is mandatory and necessary for the work to be carried out.
What is the function of the budget estimate?
The function of the budget for public procurement is to define government how much will be spent on a project contracting materials or services that are not within the scope of the state.
Why is the estimated budget required for tenders?
The estimated budget for tenders and other public works is necessary and mandatory for numerous reasons. In the first place, the obligation of the budget prevents possible fraud and diversion of public money for purposes other than the work. The values being correct, consistent with the material resources that will be used in the work when correctly reported, it works as a parameter against any deviation.
Another reason for making it mandatory is due to the planning of public accounts. The values being correctly reported help in the long-term planning of the state or government for other works and projects that also demand resources.
How to define the budget for public procurement?
As in a domestic economy in which the person responsible for the family resorts to research and seeks the best price, the same is done with the budget for public purchases.
The budget is not made arbitrarily, nor does it respond to any table or fixed values. To prepare the budget, a representative responsible for the government quotes the materials that will be used in the project or public work, looks for the lowest price and the best and most reliable materials, and then returns with the complete budget report.
The definition of the objects to be purchased and acquired for the work must be very clear so that there are no errors or lack of products. However, it is also necessary to be careful with the specifications of the products.
Very precise specifications can voluntarily force the government to buy products in certain stores in a way that encourages some kind of corruption.
The quantity should always be specified so that there is no shortage, and the opportunity for the state to get some discount based on the wholesale price common in some promotions and deals in the trade.
Relevant market price variables
We know how product prices can vary according to the time of year (there are numerous seasonal products), whether the product is new or not, whether it is more effective than another brand, etc.
All these variables must be taken into account when researching the budget.
It is mandatory that in the budget for public purchases each product is specified in its price, quantity, supply, whether it is a service or not and other details referring to the relevant characteristics of the products.