ISSN 2219-746X EISSN 2219-7478
ECONOMICS / PUBLIC ADMINISTRATION
RECEIVED 26.03.2015 ACCEPTED 25.04.2015 PUBLISHED 01.06.2015
DOI: 10.15550/ASJ.2015.03.106
UNDERSTANDING THE NATURE OF
GOVERNMENT NEEDS
I. Petrunenko
National University “Odessa Law Academy”
7, Varlamov Str., Odessa 65000 Ukraine
[email protected]
Abstract: This article is concerned with determining the nature of government needs as one of the aspects of
public procurement system and the main factor of public procurement management. It is stated that
«government needs» became a legal term after the transition to market economy based on different forms of
ownership. Proved that public needs can be identified by various qualities and introduced the criteria for
distinguishing public needs. Supported the concept of «government needs» viewed as a mixed economy term
that presents market mechanism of governmental interaction with business entities to satisfy needs in goods,
works, and services. Maintained the position that the term «government needs», the scope of which can be
changed with respect to historic and economic conditions, constitutes the expression of public private
partnership. Distinguished the terms «public needs» and «public interests». Formulated the thesis that special
public interests, which are met by means of specifically designed regulation mechanisms, are recognized as
government needs. Satisfying government needs meets the demands of the whole society and the government;
hence the needs have both economic and social content, which leads to the thesis that the term «public needs»
would be more appropriate than the term «government needs».
Keywords: Public procurement, government needs, public interest, social needs, governmental regulation of
the economy, public private partnership.
Introduction
Current policy of any government is aimed at establishing stable relations with business entities by
signing respective agreements that would affect economic development and improvement by means of public
funds application. The government establishes legal and economic regulations that apply to the procurement
of goods, works, and services at public expense, reinforcing relation between public procurement and
government economics. The idea of dialectical causality of legal and economical grounds for the procurement
of goods, works, and services at public expense is noteworthy, given that the law is considered as a
concentrated manifestation of economy (Myhajlyk and Vernygora, 2011, p. 13). Said interconnection can be
described as investing government budget funds into economy. In the context of financial and economic
crisis, discovering most considerate forms and methods of public funds reallocation is of the essence. It is
worth noting that reallocating public funds will not satisfy needs of every population group, since some
groups are supported at the expense of other ones, and reaching consensus during the reallocation process is
challenging. Under current conditions it is reasonable to introduce transparent reallocation of GDP through
the budget, while the fiscal policy should be aimed at promoting business activities and discovering new
forms of public private production modernization partnerships on the basis of innovative changes. (Butenko,
2009, p. 92-96).
The specifics of public procurement market are high stability and guaranteed product distribution.
However, there are negative aspects, such as pressure on the manufacturer. As reasonably mentioned by
D. E. Sorokin, the excessive expansion of government share of the market is dangerous for business
competition (Sorokin, 2002, p. 75), hence strict regulations that eliminate the possibility of corruption and
ensure the competition between manufacturers are needed.
The function of governmental establishments financed by government and local budgets is endowed
through public procurement. In this case public procurement means acquiring any goods by government
clients at public expense.
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It appears that the efficiency of most budget systems expenditures directly depends on legal, theoretical,
and methodological support of public procurement institution and its development level, which provides for
the relevance of research within this field.
Government needs as a certain legal economic procedure should be considered in relation to public
procurement market and certain need-specific factors. For example, A. O. Olefir mentions that it is reasonable
to study public procurement problems within the context of legal relations, the requests of which are solved
by said questions, since every one of them is instantiated by specific qualities (Olefir, 2012, p. 9). The quoted
above provides for the author’s interest towards the outlined problem and specifies the range of research.
Method
Common academic interest of the author is studying legal and economic basics of public procurement
system, providing grounds for systematic establishing of legal relations in context of current economic and
legal policy, and providing recommendations concerning improvement of current legislation. The purpose of
this research is studying the nature of government needs and understanding them during public procurement
operations. It is possible to fulfill this purpose, provided that the following tasks are set: to determine nature
and legal essence of public procurement and procurement management, to study the history of public
procurement development and consider the possibility of adopting positive historical experience of legal
regulation, and to analyze functions and principles of public procurement. The methodological basis of
research includes general and special scientific methods: dialectical, logical, deductive, systematic, dogmatic,
comparative legal, and historical-legal. For instance, social and legal nature of public procurements system, as
well its interrelation with other fields and factors of economic management are studied using dialectic
method; historical-legal method allowed analyzing certain conditions of public procurement system
establishment and development; comparative legal method was used to study origination and historical
establishment of said economic law institution; dogmatic method provided for public procurement regulations
content analysis and allowed identifying the mistakes therein.
Results
One of the most important aspects for establishing awareness regarding government matters is that the
government acts as a specific economic entity. Therefore, the government is, on one hand, is a supreme body
of public economy, on the other hand – relative to other states – is a special social establishment
(Beljanevych, 2006, p. 436). George Jellinek (Jellinek, 2004, p. 136, 374-375) mentioned that the government
and public law unions are not only the bearers of public authority, but also entities that manage economy and
their business by means available to a person not vested with power. The line between union’s actions as a
wielder of power and as a business entity should be determined primarily by the respective legislation.
The very existence of such social establishment as government preconditions and explains the necessity
of satisfying ever-present public needs by means of public procurement that represents an integral system.
Supporting development priorities is simultaneously the government management element and a public need,
although the government management is too, by its nature, a public need. Largest Economies directly support
the fields that represent the organizational policy and have limited capabilities for commercial and economic
implementation of innovations. These fields include newly established knowledge-consumptive industries or
businesses that require development alignment. The following manifestations of government influence on
economy can be distinguished: supporting marginal economic entities and industries that improve living
standards of population; revitalizing industry sectors that suffer from crisis; taking measures to mitigate
possible unemployment; industrialization of underdeveloped regions by means of establishing new
businesses, providing employment, personnel development, etc.; environmental protection and realization of
economic ecological programs, etc.
The elements of public procurement system are identifying needs in certain goods, works, or services,
preparing orders for supplying goods, performing works, or providing services, placing orders, signing
government contracts and their fulfillment. The analysis of introduced system implies studying it as a whole,
and characterizing interaction of its elements. This methodological approach supposedly allows developing
legal government mechanism adequate to complex legal relations in public procurement field, providing
coordination of public and private interests when procuring goods, works, and services, as well as fixing
legislation inconsistencies in this field.
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The term «government needs» constitutes an element of public procurement system. The necessity to
develop special regulations that would determine which needs are recognized as government needs and met
through the special procedure is evident.
«Government needs» became a legal term after the transition to market economy based on different
forms of ownership. Centrally planned economic system also did not recognize social needs that would be
met by government. However, within that social and economic period, pursuant to the dominating concept,
the government managed all aspects of economy: manufacturing, exchange, distribution, and consumption. As
a representative of public interest, the government organized realization of planned production in the fields of
industrial development, construction, transportation, agricultural produce procurement, etc. Government
property was declared a public asset, all managing activity was performed by the government as a public
representative, consequently, government and public interests were not distinguished; integral centralized
mechanism of meeting social needs by setting planned tasks to manufacture certain goods in a specified
volume and distribute them among specific consumers was in effect.
Reformation period that changed perspective on economic role of the government began in the late 80th
of XX century. References of that period mentioned that economic role of the government consist not only in
direct management of enterprises, but is assured by the variety of its activities (Abalkyna, 1988, p. 380). The
political course taken by the government was aimed at democratization of all aspects of public life, and
included new economic system that was managing the activity of government enterprises basing on cost
accounting and self-sufficiency. Plans tasks for enterprises expressed in a form of government order did not
include the full volume of produce, but covered a part of enterprise’s manufacturing program. The policy of
reducing the government orders relative share in the total volume of produce and encouraging enterprises to
improve independent development of manufacturing program was in effect. Consequently, economic and
legal content of government order was not limited to decentralization of planning comparatively to former
directory tasks. The idea of A. F. Nozdrachev that government order reflected the following fundamental
changes in the functions of centralized management relatively to enterprises: placing government orders only
on essential produce, assuring the manufacturing of said produce, distribution of manufactured product at
established price, making provisions for contractors’ commitment, etc. is definitely appealing (Nozdrachev,
1990, p. 45).
The term «government needs» started being used as an independent legal term within legal framework
that regulated market relations. It is known that needs can vary and include physical, spiritual, cultural,
economic, and other aspects. Well-known notionalists, political and economic experts of the past and present,
such as J. Gobson, K. A. Helvetius, G. W. F. Hegel, K. Marks, M. Weber, F. A. Hajek, and others viewed the
need as the expression of human nature and subsumed it to the group of key economic categories. Need is a
category that reflects the attitude of the public towards its living conditions. Social needs structure includes
several types of relations that describe the reflection of life conditions of public, such as attitude towards
environment (need to communicate with environment and protect it), current living means (needs in
manufacturing means and commodities), towards themselves and other persons (self-expression, selfimprovement, social status, communication), towards labor and leisure (need in interesting creative work, rest,
etc.). The nature of needs can be illustrated by the example of establishing new needs that arise from the
people’s attitude to living conditions that are prone to the change due to people’s will. Hence, the needs have
objective and subjective nature. The term «needs» is closely related to the term «interest». There is a reason
why one of the meanings of «interest» is defined as «needs».
Reference sources mention that special public interests, which are met by means of specifically designed
regulation mechanisms, are recognized as government needs. Public interests can be identified by various
attributes. One of criteria is provided by the law purpose for supplying goods, performing works, and
providing services for public needs. Second criterion is a specific procedure for recognizing public needs.
Public needs must be recognized in a manner specified by law. Another criterion of recognizing public needs
is their financial source – budgetary and extrabudgetary funds that are specifically employed for these
purposes (Dobrovolska, 2010, p. 78-79).
«Government needs» is a mixed economy term that presents market mechanism of governmental
interaction with business entities to satisfy needs in goods, works, and services (Andreeva, 2011, p. 10).
Satisfying government needs is a type of interaction between government and private business (private
business representatives) that constitutes an expression of public private partnership (Znamens’kyj, 2009, p. 7;
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Vinnik, 2010, p. 133). It would be reasonable to suggest that public private partnership is not any act of
cooperation between government and private business, but the one caused by social need in realization of
complex and/or long-term investment/innovation projects that the public interest bearers (government,
community) cannot realize on their own (without involving private partners) due to the lack of necessary
funds and other constituents necessary to implement these projects (experience, qualified personnel,
innovative technology, etc.) (Shcherbyna, 2012, p. 71).
The scope of government needs depends on specific historical and economic conditions, and can
eventually change. However, as proven by historical and international experience, the purchases are made by
the government for the purpose of resolving national issues, maintaining national defense capability and
national security, as well as solving major social, economic, scientific, technological, and other problems.
Thus, government needs can include demands in property, goods, services, and labor.
The concept of government needs is articulated by special legal acts that regulate the provision of goods
(works, services) for governmental purposes. A lot of countries significantly changed their legal acts in terms
of public procurement; however, distinct criteria are required to define the notion of government needs, since
public procurement is associated with vast spending of budget funds and is performed by implementing
special legal mechanism introduced via legal acts.
Therefore, «government needs» is a legal term that has its independent meaning. Public interests
represent a vaster notion than government needs. The notion of government needs is based on the notion of
public interests, which are, in fact, social needs recognized by the government. However, government needs
are not equal to the notion of public interests. From our point of view, only special public interests that are
met by means of specifically designed regulation mechanism are recognized as government needs
(Petrunenko, 2013, p. 7).
As was mentioned before, public interests can be identified by various attributes. One of criteria is
provided by the law purpose for supplying goods, performing works, and providing services for public needs.
Second criterion is a specific procedure for recognizing public needs. Public needs must be recognized in a
manner specified by law. Another criterion of recognizing public needs is their financial source – budgetary
and extrabudgetary funds that are specifically employed for these purposes.
Listed arguments confirm that the needs of the whole society and government are satisfied by meeting
government needs. These needs have both economic and social continent, therefore, we think that «public
needs» would be a more appropriate term than «government needs».
Discussion
As concluded by the conducted research, public procurement as an economic and legal category
represents a certain system with content, subjects, and other specific aspects. Organizing and performing
public procurement can be considered as system composed from several elements. All elements of this system
are related and their function is aimed at a single purpose – satisfying government needs. The term
«government needs» is an element of public procurement system. The necessity to develop special regulations
that would determine which needs are recognized as government needs and met through the special procedure
is evident. Satisfying government need of various goods is performed in a context of establishment and
development of goods market. Specifically, contractual form of relations with business operators is
implemented, as it is in foreign countries. Public procurement market covers the turnover of goods, works,
and services required to meet the most important needs of the society. These findings emphasize the economic
and legal nature of public procurement and can constitute the basis for further research in this field.
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This paper has been presented at the International Conference
“SCIREPS EDUCATION FORUM” in Paris (April 25-30, 2015).
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