Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Procurement Law — Your 2025 Comprehensive Guide
What is procurement law?
- Procurement law is the area of law that deals with the purchasing of goods, services, or project construction.
- Comprehending procurement laws is crucial for legal compliance, promoting fair competition, and minimizing risk during transactions.
- Different countries have different laws about procurement; such as Germany’s Act Against Restraints on Competition and India’s Article 299.
Whatis Procurement Law?
Procurement law is the area of law that deals with the purchasing of goods, services, or project construction. Typically, it regulates private companies or government departments.
In common law jurisdictions, there are two primary sources of law. First are the statutes and other legislations. Second is the common law which is developed or created by the courts.
In Europe, the directives of the European Union (EU) on public procurement govern all procurement by public sectors. The directives contain detailed rules on the processes that need to be followed. In addition, it also points out what the public sector may do or not do.
Therefore, lawyers in Europe typically look at the directives or the laws that have been applied in the relevant country.
However, it is not the same in Canada. In Canada, procurement law is usually based on procurement contracts and has been created or developed by the courts.
In practice, when a bidder submits a binding offer to a buying party, a contract is formed between the two parties. The details of the contract will be discussed further to detail the stipulations in the agreement.
The Canadian courts are active in implying terms into the contract to ensure fair and equal treatment for bidders.
After reading the rest of this article, you will have a deeper understanding of procurement law. This will allow you to follow all the regulations. In addition, you will know the dos and don’ts of procurement to stay compliant in the field of procurement.
I have created a free-to-download, editable procurement contract template. It’s a set that includes a PowerPoint file and a Word file. You can use and tailor them to your needs when contracting with a supplier. I even created a video explaining how to use the templates.
Why is Procurement LawImportant?
Procurement law does not just affect the public sectors but also the private sectors. Procurement laws and rules apply to numerous factors in procurement.
This includes the bidding process, the nature and location of the parties, the origin of goods or services, and the terms in procurement.
It is crucial to be aware of the procurement laws and rules so that the public and private sector stays compliant.
Although procurement laws seem like an annoying challenge, it does help the parties involved in the transaction. Like the enactment of the Agreement on Internal Trade to prevent discrimination based on province of origin.
Legal responsibility is good news for both parties. They can file a lawsuit if one of the parties in the contract is non-compliant. These laws exist to ensure an open, equal, and competitive procurement process.
The law sounds scary. One wrong move and you will incur fines or lawsuits. However, if you know how these laws work, it will allow you to stay compliant and avoid those risks.
Applicable Legislation in Procurement for Different Countries
For different countries, the applicable legislation is done differently. As different countries have different legalities the way procurement is handled may also be different.
1. India
Public procurement in India is governed by a range of constitutional provisions, rules, and directives:- Constitutional Provision: Article 299 of the Constitution of India mandates that all contracts executed by the Union or State governments must be in the name of the President or the Governor and executed by authorized individuals.
- General Financial Rules (GFR), 2017: Provides a comprehensive framework emphasizing efficiency, economy, and transparency in public procurement.
- Delegation of Financial Powers Rules, 1978: Specifies the financial authority delegated to various officials.
- Procurement Manuals: Includes the Manual for Procurement of Goods (2017), Services (2017), and Works (2019) issued by the Ministry of Finance, offering procedural guidance.
- Sector-Specific Policies: Policies such as the Defence Acquisition Procedure and the New Exploration Licensing Policy cater to specific sectors.
- Central Vigilance Commission (CVC) Guidelines: Enhances procurement transparency and objectivity in public procurement.
- The Public Procurement (Preference to Make in India) Order, 2017 promotes local manufacturing by giving preference to domestically produced goods and services.
- The General Instructions on Procurement and Project Management, 2021 aims to streamline procurement and project execution across government departments.
- India is a signatory to the World Trade Organization (WTO) Government Procurement Agreement (GPA), which encourages non-discriminatory procurement practices.
- India is also part of several free trade agreements (FTAs) that influence procurement, such as the India-ASEAN Free Trade Agreement.
2. Germany
German procurement law operates under a multi-level framework that incorporates both federal and EU directives:
- Budgetary Regulations: Govern procurement processes at both federal and state levels.
- Act Against Restraints on Competition (GWB): Ensures fair competition in procurement activities.
- Procurement Ordinances: Address specific sectors, including energy, water, transport, security, and defense.
- Procurement Regulations for Works (VOB): Standardizes procedures for construction-related procurement.
- Germany, as part of the European Union, is bound by the EU Public Procurement Directives, which regulate public procurement across member states.
- Germany is also a signatory to the WTO GPA as an EU member.
3. Canada
Government procurement in Canada is governed by a blend of trade agreements, regulations, and policies:- Federal Level: Procurement frameworks include trade agreements, statutes, case law, and policies.
- Provincial Level: Each of Canada’s ten provinces maintains its own procurement regulations, which may not align directly with federal laws.
- Canada is a signatory to the Comprehensive Economic and Trade Agreement (CETA) with the EU, which provides open access to public procurement markets.
- It also participates in the WTO GPA, committing to transparent and non-discriminatory procurement practices.
4. Malaysia
Malaysia’s procurement framework is primarily guided by treasury instructions and key legislations:- Treasury Instructions and Circulars: Issued by the Ministry of Finance to govern procurement processes.
- Government Contracts Act, 1949: Governs the formation and management of government contracts.
- Financial Procedure Act, 1957: Provides guidelines on financial management and procedures.
- Malaysia is part of the ASEAN Free Trade Area (AFTA) and has signed procurement-related agreements under WTO GPA.
- Malaysia is also involved in the Regional Comprehensive Economic Partnership (RCEP), which affects its procurement policies.
5. Japan
Japan’s procurement system is divided between national and local governments, with specific regulations for each:
- National Level: Governed by the Accounting Act and the Cabinet Order on Budgets and Accounts.
- Local Level: Regulated by the Local Autonomy Act and its enforcement order.
- Specific Laws: Includes the Act on Prevention of Delay in Payment under Government Contracts and the Act on Promotion of Procurement of Eco-Friendly Goods and Services.
Recent Developments:
- The Green Procurement Act (2000) mandates government agencies to set and report annual targets for purchasing eco-friendly products.
- Japan’s Digital Agency became a PEPPOL Authority, promoting standardized electronic invoicing.
International Agreements:
- Japan is a member of the WTO GPA and is bound by its provisions related to public procurement.
- Japan also has trade agreements with countries like the EU and the United States, which influence its procurement practices.
6. United States
Public procurement in the United States is governed by comprehensive legal frameworks and international agreements:- Federal Acquisition Regulation (FAR): The primary set of rules governing federal government procurement processes, ensuring consistency and transparency across federal agencies.
- Title 41 of the United States Code: Covers federal statutes related to public contracts, including procurement policies and procedures.
- Buy American Act of 1933: Mandates preference for American-made products in federal procurements.
- Trade Agreements Act: Allows the procurement of products from designated countries under specific trade agreements.
- The Buy American Act (1933) mandates preference for American-made products in federal procurements.
- Recent efforts focus on sustainable procurement and strengthening domestic supply chains as part of national economic resilience policies.
- The World Trade Organization (WTO) Government Procurement Agreement (GPA): The U.S. is a signatory, committing to fair and non-discriminatory procurement practices among member countries.
7. United Kingdom
Post-Brexit, public procurement laws in the United Kingdom have undergone significant changes:- Procurement Act 2023: Overhauls public procurement law, simplifying processes and increasing opportunities for small businesses.
- Public Contracts Regulations 2015: Implements EU procurement directives into UK law, governing the procurement processes of public sector bodies.
- The Procurement Act 2023 overhauls public procurement law, simplifying processes and increasing opportunities for small businesses.
- The Public Contracts Regulations 2015 still governs procurement procedures, while the Procurement Bill 2023 further addresses post-Brexit challenges.
- The WTO GPA: The UK remains an independent member post-Brexit, adhering to the agreement’s principles.
8. Philippines
The Philippines has introduced modernized legislation to enhance its procurement processes:
- Republic Act No. 12009 (New Government Procurement Act): This act modernizes and standardizes government procurement processes, focusing on transparency and efficiency.
- Government Procurement Policy Board (GPPB): Oversees procurement policies and ensures compliance.
- Philippine Government Electronic Procurement System (PhilGEPs): An online portal serving as the primary source of information on government procurement, ensuring transparency and efficiency.
Recent Developments:
- Republic Act No. 12009 (New Government Procurement Act) modernizes and standardizes government procurement processes, focusing on transparency and efficiency.
- The Philippine Government Electronic Procurement System (PhilGEPS) continues to be a vital tool in promoting transparency and digitalization of procurement.
International Agreements:
- The Philippines is a signatory to the WTO GPA, aligning its public procurement practices with international standards.
- The Philippines-Japan Economic Partnership Agreement (PJEPA) also influences procurement in specific sectors.
9. Brazil
Brazil’s procurement system has been updated to reflect modern practices:
- Law No. 14,133/2021 (New Public Procurement Law): This replaces previous procurement laws, with a focus on transparency and efficiency.
- Complementary Law No. 123/2006: Offers preferential treatment for micro and small enterprises in public procurement.
Recent Developments:
- Law No. 14,133/2021 (New Public Procurement Law) replaced older laws, focusing on transparency, efficiency, and the adoption of modern procurement practices.
- Brazil is introducing digital procurement platforms and aims to reduce bureaucratic barriers through technological solutions.
International Agreements:
WTO GPA: Brazil is negotiating accession to align its procurement practices with international standards.
10. Australia
Australia’s procurement system emphasizes value for money and accountability:
- Public Governance, Performance and Accountability Act 2013 (PGPA Act): Establishes a framework for the proper expenditure of public funds by government entities.
- Commonwealth Procurement Rules (CPRs): Define the government’s policy framework for procurement.
Recent Developments:
- The Public Governance, Performance and Accountability Act 2013 (PGPA Act) and the Commonwealth Procurement Rules (CPRs) have been updated to reflect changes in public sector procurement priorities.
- Australia has been focusing on green procurement policies and sustainability in government purchasing.
International Agreements:
- Australia is a signatory to the WTO GPA, aligning its procurement practices with international standards.
- Australia has bilateral agreements with countries such as Singapore and the United States, which influence its procurement practices.
11. South Korea
South Korea’s procurement laws focus on ensuring transparency and fairness at all levels of government:- Act on Contracts to Which the State is a Party: Governs central government procurement.
- Act on Contracts to Which a Local Government is a Party: Regulates local government procurement activities.
- South Korea has been working on enhancing digital procurement platforms to ensure more efficient and transparent procurement practices.
- Green procurement practices have gained momentum, with policies promoting environmentally friendly products.
- South Korea is a member of the WTO GPA, committing to transparent and open procurement policies.
- The Korea-US Free Trade Agreement (KORUS) also includes procurement-related provisions, allowing access to both markets.
12. Netherlands
The Netherlands adheres to both national and EU procurement standards:- Dutch Public Procurement Act (2012, amended in 2016): Implements EU procurement directives, governing national and European procedures.
- Public Procurement Decree: Offers detailed regulations complementing the Procurement Act.
- Proportionality Guide: Ensures procurement requirements are proportional to the contract’s subject matter.
- The Dutch Public Procurement Act (2012, amended in 2016) continues to evolve to better align with EU standards and promote sustainability.
- The Netherlands is promoting e-procurement solutions and integrating social and environmental criteria into procurement processes.
- The Netherlands, as part of the EU, adheres to the EU Public Procurement Directives and is also bound by the WTO GPA.
- The EU-South Korea Free Trade Agreement includes provisions impacting public procurement processes.
Conclusion
Procurement law serves as the legal framework governing the acquisition of goods and services by government entities.
It ensures transparency, fairness, and competition in the procurement process. By outlining rules and procedures, procurement law aims to prevent corruption, promote accountability, and maximize the value of public resources.
Compliance with procurement regulations is crucial for fostering trust, efficiency, and responsible use of taxpayer funds in government acquisitions.
Frequentlyasked questions
What is procurement law?
Procurement law is the area of law that deals with the purchasing of goods, services, or project construction. Typically, it regulates private companies or government departments.
Why is Procurement law important?
Procurement law is important to safeguard the parties involved in the transaction. Additionally, procurement law regulates the purchases of the public and private sectors.
Are the procurement laws from each country the same?
No. Each country has different legislations and regulations regarding public and private procurement.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
