Five Fundamental Differences between Public and Private Procurement Practices

by Nancy W
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As the procurement consultants of public procurement sectors have their ways of acquiring various services that they need, the private sectors also have individual ways that provide the flexibility to carry out their external as well as internal requirement. These organizations primarily exist to make huge profits and though there are quite a lot of similarities between the corresponding procedures of private and public organizations, there are certain necessary differences that remain obvious.

Are you exactly familiar with the ways and approaches in which the private procurement processes differ from the public procurement processes? If no, then this context will touch them all. From factors like private funding to legislation and regulations, finding suppliers, opposing motivations and interests to management styles, everything is covered in this context. Read on to know some of the fascinating differences in the private and the public procurement worlds.

Differences in private funding

A major portion of the differences between the private and the public sectors of procurement lies in the various funding methods.

When the matter of fact is focused on the funding processes, private companies have more advantages. Private companies can easily transfer their money in between the departments when their business conditions show a slight change in their initial processes. When there is any change in the business procedures related to events like an increase in price or reduction in supplier prices, private organizations take relatively less time to change their budgets.

On the other hand, if the government decides to decrease the funding to specific public sector areas, it can screw up things for the public sector overnight, putting unjustified pressure on the procurement team in a short period. Likewise, delaying funds disbursement in the public organizations will cause the procurement consultants of public sectors to put any work related to procurement processes on immediate suspension. These impulsive decisions, when taken randomly, can put a negative impact on the procurement team and the suppliers. The streamlined procedures carried out in the private organizations will have no negative effects during the delay of fund disbursement as they have their own controlled and simplified funding process.

Differences in the legislation and the regulations

The public organizations are constrained and defined by the majority of the world by vast forms of legislation at any level, whether at national, local, international, regional, or a combination of all the four. Additionally, when there are wider regulations to be enforced on the public organizations then there is a further tightening of the restrictions for carrying out the public procurement processes.

This is not all the matter with the private organizations as there is much more freedom from the legislation. Although they are subject to a certain level of constraints, specifically in matters of bribery and equality, they are certainly free from the legislative restrictions in comparison.

Differences in the finding suppliers in the public sphere

When it comes to finding the right supplier for providing the goods and services, the sourcing consultants of the private organizations are more open to the opportunities. Private organizations operate mainly under policies that are valuable when it comes to meeting business needs. This means they do not necessarily require entering bids for entering contracts with the suppliers. All they need to do is negotiate about the prices, inquire about the product quality before purchasing any kind of goods. They tend to focus on only those suppliers with whom they can have favorable conditions and terms.

Public organizations are not open to various opportunities and they need to bid before they can enter any contract with the suppliers.

Differences in the motivations and interests

Private organizations mainly focus on the returns for the shareholders’ increase in the profit margins. This makes the owners of such organizations keep every transactional procedure confidential. In this competitive world of businesses, it would be a bad idea to share any information related to saving money with the outside world.

The case with public organizations is completely different as they are required to constantly assure that the money is spent widely for the welfare of the public. They conduct regular audits to maintain compliance regulations while sharing procurement information with other services.

The public organizations focus on reducing the expenditure on time while the private organizations focus on reassessing their profit line to increase margins.

Differences in management styles

Private organizations are answerable to the board of directors before making any decisions. Public organizations are different in this matter. In public procurement procedures, the legislative body takes care of various procurement processes. There is more transparency in the public sector and less transparency in the private sector.

For both private and public organizations, management of the procurement process by the sourcing consultants is quite critical when it comes to achieving heights. Streamlining the procedures can help in going the long way.

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