Everything You Need to Successfully Navigate the Procurement Industry
No matter what your sector or industry, procurement is procurement, right? Well, not quite. There are definitely some aspects of procurement that remain the same whether you’re involved in public procurement or private procurement, but there are also some pretty significant differences between the two.
If you’re stumped when you try to figure out what those differences might be, you aren’t alone. The difference between public and private sector procurement is something I have often been asked about at conferences and events and even private conversations over the years. Sometimes people want to know about the differences in process, or the regulations and policy “rules” that govern procurement. Sometimes they’re more interested in the skills and knowledge either needed or generally possessed by the people who work in each sector.
In this article, we’ll cover everything you need to know to really understand the difference between public and private sector procurement:
- Some important definitions
- Why the difference between public and private procurement isn’t as straightforward of a question as it might seem
- Bureaucracy in the procurement field
- A word on skills and personalities in public and private sector procurement
The definitions of private and public sector procurement are a good place to start, but they don’t tell us everything we need to know about the relationship between the two.
The Dictionary Difference Between Private and Public Sector Procurement
Call me old-fashioned, but whenever I need to understand something thoroughly I always like to start with the dictionary. Here’s what the generally-accepted definitions of public and private sector procurement look like.
Public Procurement: “This is procurement that is completed within the context of not-for-profit organizations (NFP’s). Also known as the public sector, the procurement that occurs in this context is typically government-affiliated, which can be central, state, or local.”
Private Procurement: “This is procurement that is completed within the context of for-profit organizations (FP’s). Private procurement happens within privately-owned companies; also known as the private sector”
Now, that’s a great start to understanding the differences between public and private sector procurement, but there’s much more to it than that. Now that we have a basic idea of what public procurement and private procurement are, we can dig a little bit deeper into the more nuanced (and interesting!) differences between the two.
It might be easy to make generalizations about private procurement and public procurement, but to really understand the difference between them we have to look a little deeper.
This Question Isn’t As Easy to Answer as You Might Think
From the time we’re children, we’re taught how to pick out the differences between things. A square is different from a circle. Up is different from down. But when it comes to defining the differences between public and private sector procurement, it’s a little bit more complex.
Why? The question of how public and private procurement differ from one another lends itself to generalizations, and making generalizations can be dangerous. There are huge differences in procurement even between companies within the same sector. Take, for example, a large international food manufacturer and a purely national IT service company. Both of these companies operate in the private sector, but procurement means very different things for each of them. Similarly, all public bodies are not the same.
Public procurement is known for being bureaucratic and slow, but is that accurate?
Understanding the Role of Bureaucracy in Public Procurement
The other problem in answering the question is that there is a difference between how often procurement could be undertaken in the public sector as opposed to how it often is undertaken. 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. 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.
Is private procurement where all of the creative and entrepreneurial procurement specialists end up?
Private Procurement and the Entrepreneurial Spirit
Similar to the way people associate public procurement with bureaucracy, private sector procurement and the people within it are often viewed as 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.
What do you think the real difference between private and public procurement is? Join the conversation!
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!