Estonia’s Procurement Reforms Seen as Key to Building a Fair and Sustainable Economy

The OECD, working alongside the European Union’s Technical Support Instrument and the Estonian government, has issued a Public Governance Review that puts Estonia’s public procurement system under the microscope. Procurement in the country is enormous in scale, worth 15.3 percent of GDP and 34.9 percent of government spending in 2023, but still falls far short of its potential as a tool for green, social, and innovation goals. The figures are sobering: only 9.5 percent of tenders were labelled green, just 0.7 percent social, and a meagre 0.2 percent innovation. The review frames procurement not merely as a technical activity but as a lever for shaping markets, advancing national strategies, and securing resilience in an age defined by climate change and geopolitical risk.

A Toolbox of Rules, But Unevenly Used

Legally, Estonia has armed itself with a robust procurement framework. The Public Procurement Act empowers buyers to award contracts based on the most economically advantageous tender rather than price alone, to apply social and environmental considerations, and to use life-cycle costing. Stricter than EU rules in some areas, it includes exclusion grounds for companies linked to illegal migrant labour and allows contracts to be rejected if construction wages are below national thresholds. Mandatory green criteria already apply to certain categories, furniture, IT equipment, cleaning services, and paper, with vehicles covered by separate rules. A draft Climate Resilient Economy Act promises to broaden requirements by 2030. Yet this toolbox often remains underused. Buyers report confusion about how to apply social responsibility rules, reluctance to venture into innovation procurement, and weak monitoring that allows compliance to slip.

Strategies, Principles and Political Will

Momentum has picked up in recent years. In November 2023, the government adopted new Public Procurement Strategic Principles: reliable, green, innovative, socially responsible, security-oriented, and reasonable. By late 2024, an action plan with 63 measures will be followed, complete with a public website and measurable targets. By 2035, the ambition is for 20 percent of procedures and half of total procurement value to be green, with socially responsible procurement at 10 percent of procedures and 20 percent of value, and innovation procurement reaching 2 percent by 2027. For the first time, procurement is explicitly linked with national security, underlining its strategic significance. Awareness of these principles is high among public buyers, though over half of the surveyed businesses remain unaware, highlighting the urgent need for outreach to suppliers.

Market Realities and Buyer Hesitations

On the ground, leadership buy-in is patchy. Many managers and officials worry that adding strategic criteria increases costs, narrows competition, or opens the door to appeals. Half of procurement officials are unsure if their supervisors truly support strategic procurement, while a third are uncertain about auditors’ attitudes, reinforcing risk-averse behaviour. Suppliers, meanwhile, show surprising willingness. Larger firms in particular welcome tenders with green or innovative requirements, seeing the public sector as a stable partner. Yet procedural shortcomings undermine this enthusiasm. Tenders are often rushed, evaluation periods are long, specifications are vague or impractical, and contracts are laden with penalties. Small and medium-sized enterprises feel these burdens most acutely. For them, more consultations, clearer and measurable criteria, and longer bidding timelines would make a decisive difference.

Professionalising Procurement for the Future

The OECD insists that professionalisation is the linchpin of reform. Estonia has created a procurement competency model that identifies 21 essential skills, and a self-assessment of 143 officials revealed the greatest needs lie in innovation procurement, socially responsible practices, risk management, green criteria, and market dialogue. Current training is piecemeal, delivered by different ministries, agencies, and programmes, but lacks an overarching strategy or certification system. The review urges the government to consolidate efforts into a coherent national strategy, tie competencies to job profiles, introduce certification pathways, and reward excellence with financial and reputational incentives. Universities and research institutes should become partners in this effort, moving beyond ad-hoc theses and internships to full academic courses and degrees in procurement.

The report also underlines the potential of data. Estonia’s e-procurement Register, aligned with EU eForms in 2024, is a powerful tool for transparency, producing quarterly dashboards and annual reports. But because buyers self-label their procedures, underreporting is inevitable, especially in social and innovation categories. Compliance with mandatory green criteria is inconsistent, particularly in small municipalities. Automating templates, sharpening definitions, and benchmarking performance publicly could both improve accuracy and encourage compliance.

Green procurement remains the most advanced area, thanks to mandatory criteria in select categories, but life-cycle costing is underused even though it would demonstrate how greener products often pay back in long-term savings. Social procurement is weakest, hampered by legal uncertainty, GDPR concerns, and a lack of enforcement tools in contracts. Innovation procurement remains rare, despite funding programmes such as InnoFond and the designation of a voluntary central purchasing body for innovation projects. Across all three domains, the OECD highlights the need for clearer guidance, better case studies, and hands-on coaching for procurers.

The overarching message is clear: Estonia has the laws, strategies, and data systems to turn procurement into a driver of national goals, but practice lags behind ambition. Buyers still fall back on the lowest price, and suppliers face procedures that feel cumbersome and punitive. To realise the vision of Estonia 2035, the country must invest in its procurement workforce, reassure leaders and auditors, build stronger partnerships with markets, and raise the ambition of both buyers and suppliers. In doing so, the billions spent every year can become a force not just for reliable public services but for a greener, fairer, and more innovative economy.