How Kazakhstan is combating non-competitive procurement

Kazakhstan’s persistent problem with single-source procurement

For many years, the majority of public procurement in Kazakhstan was conducted using non-competitive methods, despite the corruption and inefficiency risks.

In the general government procurement market, which covers primary sectors such as health, education, and infrastructure, estimates put the share of single-source procurement as high as 81% in 2017¹. This is well above the range of 10-20% recommended by the OECD.

According to international standards, competitive procurement should be the norm and buyers must have a good reason to use single-source procurement (for example, during emergencies or for national security reasons). In Kazakhstan, until 2014, there were 67 exceptions that allowed procuring entities to use single-source methods instead of competitive procurement.

Consequently, improving competition became a strategic priority for the government and a key recommendation of Kazakhstan’s development partners, including the World Bank, OECD, and International Monetary Fund².

The effectiveness of efforts to combat non-competitive practices in the general government procurement market can be assessed because of machine-readable data provided by the government and public analytics tools built by third parties. Open contracting data about general procurement procedures is published on the government’s platform goszakup.gov.kz. The data can also be analyzed using a business intelligence platform, created by the company Datanomix and the Open Contracting Partnership, that connects to the government data via API.

All state-regulated procurement in Kazakhstan totaled US $61 billion in 2023, or 23% of gross domestic product. General government procurement accounts for nearly a third of that spending. The rest is spent by state-owned enterprises and the sovereign wealth fund (23%) and mining, oil and gas companies (46%) (see Figure 1). While some efforts have been made to improve the transparency of these markets, greater access to high-quality data is needed to meaningfully assess their performance.

According to data from the public procurement business intelligence (BI) module of Kazakhstan, the share of single-source purchases in the general government procurement market has steadily declined from 57% in 2021 to 23.5% in 2024. The total value of purchases during this period increased by 160%, reaching 12.37 trillion tenge (US$25.1 billion)³, while the value of single-source purchases remained more or less stable (see Figure 2).

The data also indicates that buyers are making a concerted effort to improve their planning. Procuring entities are including significantly less non-competitive procurement by value in their procurement plans, dropping from 43% in 2021 to 17% in 2024 (see Figure 3). Although implementation data shows that buyers are still resorting to using sole-source procedures more often than detailed in their procurement plans, the overall share of single-source procurement has halved over four years and the gap between plans and implementation has narrowed (from a difference of 14 percentage points in 2024 to 6 percentage points in 2024).

Conditions for using single-source procurement

There are a number of different procurement processes that result in direct contracting in Kazakhstan. The most common is through legal exceptions to competitive methods (discussed in detail later). Single-source procurement is also allowed when a competitive tender fails to attract two or more qualified bidders, and it is often used for school meals (which are governed by separate legislation that accounts for government-owned canteens that are a legacy from the Soviet era).

Tactics for combatting single-source procurement

In this section, we will analyze the steps taken by stakeholders to reduce single-source procurement. Policymakers mostly relied on regulatory mechanisms. Let’s take a closer look at them.

1. Reducing legal justifications

The Public Procurement Law is the main document regulating the rules, procedures, and thus, the circumstances under which sole-source procurement is allowed. In 2024, the Government was instructed by Presidential Decree to reduce the number of exceptions that allowed procurement through direct contracting, continuing a decline in the number of justified uses for single-source procurement over the last decade (see Table 2).

The Public Procurement Law directly affected competition by determining that non-competitive procedures are applied only in cases where it is impossible to carry out competitive ones. This made it possible for the Committee of Internal Public Audit of the Ministry of Finance (CIPA) to block attempts to conduct single-source procurement, without proper justification, even at the procurement planning stage.

2. Increasing penalties for violations

In December 2018, the Parliament adopted amendments to the Code of Administrative Offenses, which introduced fines of about US$700 for public servants who used direct procurement without a legally valid reason or who procured goods, works, or services not listed in the annual public procurement plan.

In November 2021, an amendment to the Public Procurement Law assigned personal responsibility to the head of procuring entities for single-source procurement and for implementing competitive procurement methods.

In 2024, fines were issued to entities and/or procurement officials in 47 cases involving administrative violations, representing 2% of the 2,177 claims submitted, according to official legal statistics. This illustrates the difficulty of successfully issuing penalties and personal responsibility of buyers in Kazakhstan.

In terms of criminal offenses, statistics on actual prosecutions related to public procurement are not available, but media reports indicate that one in five corruption-related crimes involves the procurement sector. In total, 1200 criminal corruption offenses were registered in Kazakhstan from January to July 2024 – 8.1% more than the same period in 2023.

3. Addressing the ‘failed tenders’ loophole

In 2019, the World Bank assessed the public procurement system, noting that 68% of all purchases under the “open competition” procedure were unsuccessful in 2017. The failed tenders were then awarded using the “single-source” procurement method. The report suggests that these high rates of failure could be due to the fact that procuring entities could automatically revert to the single-source method without analyzing the reasons for such failure (a loophole closed by a legal amendment in 2018), as well as minimal use of non-price award criteria and the lack of life-cycle costing.

The amendment to the Public Procurement Law of December 2018 introduced mandatory re-tenders (or auctions) after failed procedures. Procurement from a single source was allowed only in the absence of two or more suitable bids at the second stage, and this measure did not apply to requests for quotations. 

According to the OECD, in 2018, 41% of open tenders led to direct awards after failed bidding; that is, they were declared failed because buyers received fewer than two bids that met the tender documentation requirements. Failed procurement accounted for 52% of the value of all government procurement in 2018.

According to the business intelligence (BI) module of the e-procurement system, the share of failed procurement using the “open competition” procurement method was 3.4% by value in 2022, 3.2% in 2023, and 3.7% in 2024, indicating the effectiveness of legislative changes discussed earlier.

The renewed Public Procurement Law, which came into force on January 1, 2025, removed the obligation to re-tender after failed tenders with one bid. Now, if a competitive tender receives one bid, the procedure is considered valid without needing to proceed to a second round of competition. This will reduce the number of unsuccessful tender procedures in the future and speed up the awarding of tenders.

4. Addressing corruption risks in intellectual property procurement

Intellectual property procurement has been notoriously vulnerable to corruption schemes in Kazakhstan. Taking advantage of gaps in patent legislation, unscrupulous suppliers registered patents for their goods (light bulbs, furniture, IT products, etc.). Some buyers colluded with suppliers to procure goods with such pseudo-intellectual property through non-competitive procedures at inflated prices.

The new Public Procurement Law addresses this by only permitting the use of direct awards for goods and services related to intellectual property with the approval of the antimonopoly authority. Furthermore, direct awards to state-owned enterprises are now only allowed in cases where no private businesses are engaged in the production of similar goods or services. This, too, must be approved by the antimonopoly body. 

This will lead to the transfer of certain procurement (see Table 3) to a competitive environment:

Table 3: Changes in the Public Procurement Law requiring the presence of a conclusion from the antimonopoly authority for carrying out non-competitive procurement. All references to clauses and articles refer to Public Procurement Law 2015, valid until December 31, 2024.

These regulatory changes will affect purchases with a total value of 418 billion tenge (US$788 million), which is 17.6% of all single-source procurement. Some of them will move into a competitive environment. However, it is worth noting that the effectiveness of such measures depends on their accurate implementation and the elimination of loopholes in the system. Despite the reduction in justified uses of direct awards, some non-competitive categories were reintroduced in the new law. 

The law includes a number of measures to promote competition, for example, state-owned enterprises with a state share of more than 50% are automatically excluded from tenders if two or more private suppliers participate in a tender.

5. Introducing risk analysis and “format-logical” control

The Ministry of Finance introduced a “format-logical” control approach on the government procurement portal, which limits the pool of buyers who are allowed to use the “single source” procurement method, and the suppliers who are allowed to participate in such procedures (for example, when a procurement officer chooses the “single source” method for purchasing electricity or heating services from certain suppliers).

Erlan Seitov, Director of the Department of Public Procurement Legislation at the Ministry of Finance, told us that internal auditors at CIPA improved monitoring of over 20 categories of justifications for non-competitive procurement. As part of the desk audit, buyers must send the draft contracts to suppliers and CIPA auditors (waiting period of 3-5 days) for analysis on how justified the single-source procurement method is. Auditors stopped single-source procurement procedures for which non-competitive procedures were poorly justified, returning them to buyers with a request to conduct a competitive procedure.

How has competition changed as a result of tackling single-source procurement?

Ultimately, the fight against non-competitive procurement should be reflected in an improvement in the business climate and competition in procurement. Let’s check whether the data confirms such trends. The public procurement BI module in Kazakhstan provides an opportunity to review some indicators that reflect the competitiveness of the public procurement sector. Among them are:

The data in Table 4 demonstrates an improvement in the competitiveness of public procurement in Kazakhstan from 2021 to 2024, reflecting the impact of reforms and changes in legislation, namely:

• An increase in the total volume and value of competitive contract lots indicates the expansion of opportunities for businesses to compete for the government procurement market.
• An increase in the average number of suppliers per procuring entity confirms that new suppliers are entering the public procurement market of Kazakhstan and are bidding more actively (an increase in the average number of participants per lot).
• A lower share of lots with one valid bid indicates improved tender planning and improved customer interaction with the market to attract more suppliers.

Ruslan Shokaev, Managing Director of the Chamber of Commerce “Atameken”, notes that Atameken actively participated in the working group for the development of the new Public Procurement Law, in which it called for compliance with the principles of competitiveness in public procurement. Atameken also provides businesses with an analytical tool for government procurement through the “Single window for government procurement”, a platform designed to enable more businesses to find opportunities and participate in public procurement.

How does the CSO community “Kun Jarygy” contribute to the fight against single-source procurement?

The Kun Jarygy coalition, which includes 25 non-government organizations and 35 experts, actively contributes to the fight against non-competitive procurement by monitoring procurement, identifying violations, and advocating for legislative changes. The coalition’s priorities include the professionalization of procurement officers, promoting sustainable procurement, an independent appeal system, and a mechanism for engagement between control agencies and civil society organizations involved in public procurement. OCP provides coalition members with data analytics and capacity-building support to promote fair, efficient, and sustainable public procurement in Kazakhstan.

Monitoring

As a result of the Coalition’s first year of work (2023), 270 procurement violations were identified, most of which were related to opacity and single-source procurement. This led to five criminal cases being opened and 11.38 million tenge ($24,000 USD) being returned to the budget.

During 2022-2024, the civil society organization Adildik Joly identified more than 1,000 cases involving inflated prices amounting to 15.1 billion tenge ($28.5 million USD). As a result of their work and appeals to regulatory authorities, 98 criminal cases were opened, 1,206 people were issued fines for administrative violations, and more than 800 million tenge ($1.5 million USD) were returned to the budget. Cases of identified procurement violations include a canal by Vodokanal Uralsk, the Tourist Information Center “Open Turkistan”, and an arch in a public square by the Department of Housing and Public Utilities, Uralsk.

Advocacy

Previously, regulatory authorities could refuse to consider appeals from CSOs about violations in public procurement, citing the fact that CSOs are not a party to the public procurement procedure. In 2023, Kun Jarygy made a proposal to enshrine civic monitoring in the Public Procurement Law. Subsequently, the new law (2025) introduced the concept of civic procurement monitoring, creating the preconditions for improving cooperation between CSOs and law enforcement agencies. Community experts are now working to develop a public monitoring framework to determine the civic monitoring procedure. Coalition experts raised the issue of non-competitive procurement at many conferences and public events dedicated to the public finances of Kazakhstan.

Increasing the capacity of civic procurement monitors

The Coalition regularly conducts training on civic procurement monitoring, including a training-of-trainers in 2024. As a result, 15 out of 41 participants became certified trainers and trained 275 civic activists. These coaches helped to spread knowledge and involve more people into public oversight of government procurement. As part of the Anti-Corruption Caravan project, Bauyrzhan Zaki, a coalition expert, trained 80 activists from the cities of Aktobe, Uralsk, and Atyrau on public procurement monitoring.

Conclusion and further recommendations

Our analysis of procurement reforms in Kazakhstan shows significant progress in reducing the share of single-source procurement and improving competition. However, challenges remain in the fight for competitive and efficient procurement that require the attention of stakeholders. The following measures are needed to achieve truly lasting results:

1. Strengthen preventive measures: Continue work to further reduce the number of justifications for single-source procurement in the Public Procurement Law and improve the qualifications of procurement officers, category managers, and employees of antimonopoly authorities.

2. Improve control mechanisms: Improve mechanisms for analyzing the risks of artificially inflating prices in non-competitive procurement through the analysis of significant deviations from median prices, conduct mandatory audits of buyers who systematically violate the principles of public procurement and abuse non-competitive procurement methods, and bring the quasi-public sector procurement (Samruk Kazyna) under the regulatory framework of public procurement.

3. Ensure enforcement of penalties for violations: Strengthen the accountability of employees responsible for public procurement and their superiors over violations of procurement law associated with single-source procurement, tighten sanctions by reviewing the value of fines provided by the Code of Administrative Offense, and improve the qualifications of prosecutors and judges to increase their ability to prosecute violations in public procurement.