15 Stefan Komazec 1 , Ivan Todorović 2 , Đorđe Krivokapić 3 , Ondrej Jaško 4 1,2,3,4 University of Belgrade, Faculty of Organizational Sciences Capacities of local self-governments in Serbia for compliance with EU directives on public procurement UDC: 658.71:352(497.11) ; 340.137:347.71(497.11:4-672EU) DOI: 10.7595/management.fon.2013.0028 1. Introduction The process of European integrations affects to some extent all entities that are part of the economic sys- tem of a country that is willing to become a full member of the European Union. Through the mentioned process most areas should be harmonized with the EU regulations. At the same time, through various trade arrangements, the EU rules area affects non-member states (Bock, 1993).The European Union’s strategies for strengthening its regulatory impact on non-member states represent the main topic of research dealing with the expansion of the EU to the countries of Central and Eastern Europe (Sedelmeier, 2006). One of the fundamental characteristics of the European Union is a single market among the Member States, which guarantees the free movement of goods, services, labour and capital (Nielsen & Hansen, 2001). A par- ticularly important area is public procurement because future member states have to adapt their regulations to the legal framework of the EU, which aims to create a fully open market for public procurement among member countries (Arrowsmith, 2009). The term public procurement refers to a situation in which a public body procures necessary goods and services by entering into contracts with other entities (Arrowsmith, Linarelli & Wallace, 2000). The European Union is the largest market for public procurement in the world today, with a total value of public procurement contracts of around 1.4 billion euros per year (Trybus, 2007). An extremely important part of the state apparatus are local self-governments, primarily due to their role in organizing the functioning of municipalities, cities or entire regions. Also, depending on the level of decen- tralization of the state, local self-governments’ procurement can significantly participate in the total value of all public procurement. For example, in Germany, the value of public procurement carried out by local self- Management Journal for Theory and Practice Management 2013/69 The Republic of Serbia is facing major challenges in the process of harmonization of its public procurement regulation with the current EU regulations. By signing the Stabilization and Association Agreement with the EU, Serbia devoted itself to harmonizing national legislation in this area with the EU acquis (asquiscommunautaire), as well as to applying these rules. The aim of this study is to determine the ability of local self-governments, as one of the most important parts of the state apparatus, to carry out procurement procedures in accordance with the rules of the European Union. For this purpose, a research was conducted in several pilot municipal- ities of different sizes and development levels. As a result, the research determined that local self-governments are to a large extent able to carry out procurement procedures in accordance to the rules defined by the EU Directives, but there is a need for further capacity building of the personnel, organization, and especially of the technical capacity, in order to ensure effective and transparent public procurements. The limitation of this study is the size of research sample, but also a very short period for the implementation of the new Serbian Law on Public Procurement. In the end of the study conclusions were made which can be applied in the prac- tice of public procurement procedures of local self-governments, and therefore they are extremely useful for state authorities of the Republic of Serbia, notably for the Public procurement office. Keywords: Public procurement, Local self-governments, municipalities, EU regulations, EU laws, capacity