Public and Private Sector Procurement – what are the real differences?

By Nancy Clinton posted 02-22-2017 19:15

  

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What are the differences between procurement in the public and the private sectors? That is something I have often been asked at conferences and events, and in private conversations, over the years. Sometimes the question is focused on differences in process, or the regulations and policy “rules” that govern procurement, or on the skills and knowledge either needed or generally possessed by people in each sector.

It is not an easy question to answer. Making generalisations is dangerous – there would be huge differences between procurement in a large international food manufacturer, and in a purely national  IT services company, yet both are “private sector.”  Similarly, all public bodies are not the same.

But the other problem in answering the question is that there is a difference between how procurement couldbe undertaken in the public sector as opposed to how it often is undertaken. So, for example, we often hear people saying something like this. “Procurement in the public sector is more bureaucratic than in the private sector. It is much slower and more constrained by rules and regulations, for European, national and even local levels.”

Now that is probably true to some extent, and some of the difference is genuine and unavoidable. There are public regulations – often for good reasons, such as the avoidance of fraud or corruption – so public and private procurement will never be identical because of that particular factor. But on the other hand, much of the public sector bureaucracy and lack of speed that we do often see is not inevitable. It can be avoided if we have the right approach to public procurement, the right skills (in procurement staff but also in other stakeholders) and the right processes and tools.

So there are no regulations that say a routine public procurement should take 9 months or more to execute, or that a tender document must contain 200 questions, or that we must look through 3 years’ worth of the bidding firms’ accounts before even short-listing.

Similarly, people talk about private sector procurement and the people within it being intrinsically more “commercial” or entrepreneurial. Again, we don’t agree that this is necessarily the case. Having worked in both sectors, over the last 30 years, I can say without a doubt that the most challenging procurement projects and contracts I have worked on have been in the public sector, and those projects often require a highly commercial approach to reach a satisfactory contract.

Meeting the business needs in a complex government IT, outsourcing or health services contract for instance, with scope for further development during the contract period, and of course keeping the politicians and senior management happy at the same time, requires a level of commercial skill that few private sector procurement projects require. Where the items bought are not used internally but provided to citizens, there is yet another dimension to the public procurement task.

So there are differences between public and private procurement, but they are certainly not all the obvious ones that people might identify if they aren’t familiar with each sector. This is a topic we will return to here, and we very much welcome views from our readers.  Let’s look at how, why and where public procurement is different; but also maybe explore those areas where it is currently different – but does not have to be!

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