Procurement differs greatly between the public and private sectors. If you are new to procurement, trying to understand the difference between public and private sector procurement so you can decide which is right for your business can be difficult. Tracker aims to simplify things with this guide.
We compare and discuss the differences between public and private procurement below.
What is Procurement?
Before we unpack the differences between public and private sector procurement, it is important to first understand what procurement actually is.
Procurement is the process of purchasing goods, works, and services from an external source.
The public sector procurement process often involves tendering or bidding on public sector tender opportunities to allow for fair competition and to ensure the bid proposal meets the tender requirements set out by the contracting authority.
What is Public Sector Procurement?
In order for public authorities such as government departments and local authorities to meet their developmental needs, they need to procure goods, services, and works from external providers (i.e. businesses).
The process these public authorities follow to obtain these goods, services, and works is known as the public procurement process.
A significant portion of tax revenue goes towards public procurement, so the processes and regulations governing public sector tendering are more stringent compared to private sector tendering. Some of the requirements are in place to prevent human rights abuses within the supply chain, while others aim to improve social outcomes by adding social value.
What is Private Sector Procurement?
The private sector procurement process is similar to the public procurement process but is funded and governed differently.
Whereas the public sector is funded and controlled by the government, the private sector is funded by private investors (and other forms of non-government investment) and is owned by individuals who usually own or manage private for profit organisations and enterprises.
Differences Between Public Procurement and Private Procurement
Public procurement, also known as public sector procurement, is typically government-sponsored through public funds such as taxes, be it by central government bodies or local government departments.
Organisations in the public sector support not-for-profit organisations that provide public services such as government healthcare and education services. There is greater transparency within public procurement and it usually addresses problems that go beyond the value for money or basic supply while also placing a larger focus on adding social value to society.
Private sector tendering, also known as supply chain tendering, works differently from public sector procurement. It is governed by fewer regulations, which means it is less restricted. Because procurement activities in the private sector aren’t subject to the same stringent regulations and legislation as public sector contracting, the tendering process is generally considered less complicated.
Procurement professionals in private sector organisations operate for profit and procure with the intention of increasing the returns of shareholders, which puts greater pressure on the private sector to procure with a financially driven mindset.
Comparing Public and Private Sector Tenders
Operating according to distinct legislation and regulatory regimes is, of course, one of the most obvious differences between public and private sector procurement; however, that does not mean that private sector tendering is only very lightly constrained. There remain regulations and policies governing private sector procurement, such as laws for monitoring equality and bribery.
While public sector organisations receive funding from public sector stakeholders and money such as taxes, private sector companies receive funding through private money such as investors, shareholders, loans, and other forms of finance, which allows them to easily move money between departments if business or economic conditions change.
This flexibility makes it easier for private organisations to obtain goods and services based on price and competitiveness even as the market landscape changes.
As there are nevertheless fewer regulations surrounding private sector tendering processes, private businesses do not need to offer an equal playing field to potential suppliers.
Private procurement is typically conducted by for-profit organisations (as opposed to not for profit public organisations), which means that offering the private sector client added value could give your business a decisive edge over the competition.
As private sector buyers tend to be guided chiefly by the profit motive, if you can offer something unique as part of any potential contract agreement the client may be swayed towards selecting your organisation.
This is why it is important to differentiate your business from your competitors.
When you are writing a private sector tender bid, always specify the add-ons which are included in your price. Put yourself in the buyer’s shoes and give them the full picture of what your business can offer.
The Increasing importance of Added Value in Public Sector procurement
Public sector organisations are increasingly favouring suppliers who can demonstrate added value in their bids because public sector budgets are always under pressure, so they are looking for suppliers who can provide goods/services but also something extra.
When procuring goods, public sector procurement teams are becoming more and more interested in value for money and innovation, which tend to be offered as add-ons. While the features of a product or service are important, the evaluator will also be looking at how a supplier can help them save money and/or time, contribute to innovation in the procurement process or supplier relationship, generate new revenue streams, and improve efficiency.
As added value becomes an increasingly more important metric in the public sector procurement process, suppliers will need to demonstrate their ability to add that something extra if they want to stand a chance of winning high value public contracts.
How can Tracker Help?
We work with both the public and private sectors. The Tracker service is the only end-to-end online business development solution powered by unique intelligence that can help public and private companies find, bid for, and win more business across both sectors!
Whether you are looking to find public sector tenders or private sector tenders, request your personalised demo from Tracker now.
Commercial Tenders: Tracker’s Private Tenders Tool
Private sector tendering is extremely lucrative. If you are looking to boost your procurement possibilities, supply chain procurement is a great place to start. Find private sector opportunities using our Commercial Tenders tool.
Commercial Projects can help your business find and win private tenders. Gain complete access to over 400,000 planning contracts and 10,000 non-planning projects every year!
If you are currently a Tracker customer, get in touch to find out more about our Commercial Tenders tool. Email a member of our Customer Growth Team or call 0141 270 7666 to get started.
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