Public versus Private Sector Procurement – Why Private Is Better (Maybe …)

In our first article last week on this topic, we suggested that there are four fundamental differences between public and private sector procurement and that all the other differences we see flow from those. So, do look at that article first if you missed it first time round.

In expanding that thinking, we want to look at what those differences mean for procurement practitioners in each sector, perhaps with a view to helping people decide if they would like to work in the “other” sector from wherever they are now. And just to make it more interesting, we will present it as opposing sides of a debate, making the argument that private is “better” than public today, to be followed by why public is better than procurement in the next article.

So, today, this is why private sector procurement is better than public procurement

The private sector has more flexibility, because of the lack of regulation. That flexibility extends throughout the procurement process, from how sourcing and category strategies can be developed, to supplier selection processes, what can be included in contracts, how suppliers are managed, incentivised and punished … basically, as long as you operate within certain wider regulations (such as the Bribery Act or Modern Slavery), and you don’t break whatever internal rules or policies that are in place, you can do what you want.

There is more ability to negotiate – one key aspect of this flexibility is the ability to negotiate at all and any stage of the process. While public sector regulations have relaxed somewhat in recent years, there are still constraints on negotiation that can restrict the ability of buyers to drive for the very best agreements.

The private sector can keep things confidential – you can keep matters out of the public eye when something goes wrong! That is not always the case for the public sector, which faces media attention, freedom of information requests, and reviews from the National Audit Office. These are all aspects that private firms do not need to worry about.

Long-term relationships are easier to nurture and develop  – this is another specific example of the flexibility mentioned above, and a very important one. The need to regularly compete contracts in the public sector means that there is a potential barrier to developing closer, strategic, long-term relationships. However much you collaborate with a key supplier, that contract must go back to the market and competition after a few years. So naturally, suppliers may be cautious about committing effort or giving away too much value, knowing they might still be out after the next round of tendering.

It is easier to experiment (e.g. piloting technology) – trying new ideas in the public sector is not always easy. Constraints include both regulatory and also perhaps a cultural reluctance to experiment, and the need to engage with many different stakeholder groups. So, for instance, while the public sector has embraced eSourcing in its relatively simple manifestations, it is not generally using the most cutting edge procurement technology (optimisation, risk mapping and management, SRM tools …)

Procurement professionals have more “business mobility” – we decided not to include reward as a factor here because in some parts of the public sector at least, the “salary gap” has narrowed considerably. But from a career point of view, our observation is that a procurement professional has more chance of moving into wider business roles – other functions, line and senior management – than they do in the public sector. There is another whole discussion to be had about why this is the case, but evidence suggests this is an issue.

So, the private sector is better, yes? Well, maybe not. These are arguments in favour of that proposition, but in our next article we’ll explain why public procurement is arguably “better” than private!

First Voice

  1. Musa Kacheche:

    am honestly impressed, as a student of procurement, this eye opening and value adding to me

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