Red Flags in Russian Public Procurement

Russia’s state procurement amounts for nearly 25% of its GDP and new legal framework approved in 2013 – Federal Law - 44 was supposed to increase its efficiency and decision-makers flexibility. After few years from the implementation of new provisions, it is possible to measure the performance of new law, as it is not only a reflection of institutional efficiency but might be also a proxy for measuring budget losses. Such research for new potential ways of measuring collusion, embezzlement, risk-aversion or even potential corruption, is dictated by an ever-lasting need to improve our benchmarks and indexes, especially those not based on any hard data and in-depth insight into particular problems. To compare the performance of new procurement law, I am applying a set of red flags, indicating risk of corruption, collusion or risk-aversion. Performed literature review explains the most prevalent forms of corruption in procurement and indicates potential best red flags for the research. The sample in this paper consists of data collected from the public procurement website juxtapose it with indicators of previous legal provisions and data on EU procurement performance. Results provide insight into Russian procurement under the provisions of Federal Law – 44 and expose the biggest issues in that system. The main findings are focused on an extremely low competition, dominance of only two types of procurement procedures and more than 400 billion roubles lost due to lack of competition or usage of single-sourcing. A potential solution to this situation might lie within increasing the transparency and procurer’s flexibility, encouraging competition and reforming the control over procurement.