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Contrasting Procurement Practices between the Private and Public Sector

Procurement involves a list of activities and processes that are necessary for an organization to acquire necessary products or services from the best suppliers at the best price. In commercial procurement terms is the act of obtaining something for business purposes and can cover a whole range of things including assets, supplies, skills and services for the business to continue its smooth operation for procurement.

Large public and corporate organisations like to promote choice and greater competition with procurement and acquisition programs. Choice and quality go a long way in business, which everyone can benefit.

The most basic distinction between private and public entities is ownership. The public sector is controlled by the government, while the private sector is headed by individuals that lead and manage corporations. The private sector encompasses all for-profit companies that are not owned or operated by the government. Because of this distinction of ownership, there comes many different practices and policies regarding on the procurement process.

Transparency Differences

Public sector organizations are run by a higher government entity. Everything that they do must be easily visible to the public. There must be a distinct audit trail, and all information should be open and accessible.

Information such as a contract opportunity, contract award, pricing, and timing are all included in reports made as a standard procedure. There must be equal opportunity provided by the government to each entity that wish to do business with them that meets the requirements. Bid openings and public events.

Private sector transparency is not as clear cut. While private entities do have complete visibility requirements placed upon them, private entities do not need to provide equal opportunities, and will often withhold information that is not necessary to the bidding suppliers. They do not reach out to every company, and also do not need to publish their contract awards in the same way that public entities do.

Public Procurement Practices

Public procurement refers to the purchase by governments and state-owned enterprises of goods, services and works. Their main funding comes from tax revenue, fines and tariffs. Governments are expected to carry it out efficiently with high standards to ensure high quality of service delivery and safeguard the public interest.

This means that public organizations don’t have as much control over the procurement process. They must wait until the funding institution has collected the required revenue and then disbursed it properly before engaging in procurement activities. If the disbursement is overdue, the organization may need to delay payment or further procurement practices.

Other common delays in the process include the use of background checks on potential suppliers, contract negotiation practices, and various other investigations and research which add a minimum of 30 days to the procurement process. Moreover, public organizations may belong to multiple jurisdictions, and their procurement practices must be approved by multiple governmental entities.

Public entities are permitted to use “preferred suppliers,” or suppliers who have a reputation with the government. These suppliers may cost more money on the surface, but they save time in the investigations portion of the procurement process. Saving time and money on background checks and various other things can counterbalance the extra cost of the vendor.

Private Procurement Practices

Private organizations draw their revenue from sales, investments, and other business-related areas. Their money is more centralized, and this speeds the procurement process along. Privately owned businesses can seek out different suppliers to find the best deal because they have more time and resources to do so. Their focus is more on saving the most money and getting things done quickly.

Private organizations will still often use preferred vendors, for similar reasons to those utilized by the public organizations. While private entities do not take nearly so much time in research, they do a thorough job of understanding their suppliers before signing a contract (by conducting simple reference and credit checks, site visits, and sample reviews, for example). Using preferred vendors and simply renewing contracts is an easy way to decrease time spent in the procurement process.


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References:

Fleshman, Benjamin. (2016) ‘Private vs. Public Sector Procurement Practices’. Retrieved from http://www.concordnow.com/private-vs-public-sector-procurement-practices/, accessed 01/09/2017.

Green, Alison. (2017) ‘Difference in Public Vs Private Procurement’ http://work.chron.com/difference-public-vs-private-procurement-28985.html , accessed 01/09/2017.

Surbhi S (2015) ‘Difference Between Public Sector and Private Sector’ http://keydifferences.com/difference-between-public-sector-and-private-sector.html, accessed 02/09/2017.

Tiffany Lau, DPSM
Tiffany Lau, DPSM
Tiffany Lau has several years of experience specifically in the food manufacturing industry. She is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). She is currently completing a course on Diploma in Procurement and Supply Management (DPSM) at SIPMM Institute.
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