Public vs private sector procurement: what are the 4 key differences?
What is procurement?
Procurement is quite simply the process of acquiring goods or services from an external source. This process often involves tendering or competitive bidding to ensure that what is acquired is the most desirable.
It’s important to note that procurement initiated by public sector and private sector organisations is not the same, as this blog will explore in more detail.
What is public procurement?
Procurement carried out by the public sector refers to the process by which public authorities, such as national government departments and local authorities, obtain work, goods or services from companies that have been awarded the opportunity.
Often companies, otherwise known as suppliers, will have been awarded the opportunity to support the public sector by being appointed to a specialist framework.
Frameworks contain a collection of appropriate companies that have been selected following a competitive process.
The public sector procurement process is essential in ensuring that taxpayer money is used effectively.
What is private procurement?
Private sector procurement is a very similar process to public sector procurement but is instead available to any business interested in connecting with suitable suppliers.
What are the differences between public and private procurement?
While public and private sector procurement may appear similar on the surface, there are some subtle differences.
Budgets
One key difference is the budgets available to public sector organisations and private businesses. While public sector organisations are not-for-profit and driven by the needs of society, private businesses have greater purchasing power and are usually more flexible.
This often means that public sector procurement is a slower process and dependent on more factors, in contrast to the private sector environment where transactions are fluid and decisions can be made more quickly.
Regulations
Regulations are important in both public and private sector procurement, but the specific legislation is different. The origin of the regulations may be local, regional, national, international or a combination.
In the UK, public sector procurement regulations are based on EU directives and the Crown Commercial Service (CCS) is responsible for the legal framework while leading the development and implementation of new policies for government.
Where public sector organisations answer to government bodies and are subject to intense scrutiny, the number of private business stakeholders is smaller and fewer regulations govern procurement. Those that are still upheld include laws for monitoring equality and bribery, which emanate from the case law of the European Court of Justice.
Motivations
As a general rule, public sector organisations operate in the interest of the general public and therefore must demonstrate sensible and considerate spending. Whereas the private sector is profit driven and involves much higher value transactions that are usually hidden from competitors. As a result, the outcomes generated by procurement for both sectors may often be the same but the reason for doing so is fundamentally different.
The bottom line
In summary, the key differences between public and private sector procurement are budgets, regulations and motivations.
Now, you may be thinking what makes these procurement methods right for construction? All is explained in our next blog .
If you find yourself wanting to learn more about procurement with Pagabo then exploring our list of public sector frameworks is the perfect place to start.
View our public and private sector frameworks:
Discover our frameworks
