Private sector tendering — where the buyer is a private sector organisation — works differently from public sector tendering. Since the private sector and its supply chain do not tend to account for the spending of public funds, it is governed by fewer regulations, which means it is less restricted.
Unlike public sector bodies, private sector businesses do not need to offer an equal playing field to all suppliers in the supply chain. This makes private sector tendering extremely lucrative and an excellent market for small and medium-sized enterprises (SMEs) looking to boost their procurement possibilities.
Supply chain opportunities often have a private sector organisation as a buyer, something that SME businesses interested in private sector procurement should take advantage of.
Ready to access more tender opportunities in the private sector marketplace and learn more about the private sector procurement process?
This article answers questions about private procurement and the supply chain, including the difference between procurement and supply chain management.
How the Supply Chain Works
Many private sector tenders are issued as part of the supply chain process for larger projects. Opportunities for projects like HS2 will be advertised by large private sector companies that require additional or specialist support.
Often, as with HS2, the overall project is in the public sector. A private sector company or companies win the initial large public sector contract but cannot themselves provide every aspect of the works, goods, and services required. The private sector company, therefore, seeks subcontractors and, in doing so, becomes a buyer for a private sector tendering opportunity. Sometimes the subcontractors then need to further subcontract for aspects of the contracts they have won and so on — a procurement supply chain is formed.
At each stage, a private sector company becomes a buyer and becomes involved in private sector tendering to find suitable suppliers to fulfil the procurement function.
The Difference Between Procurement and Supply Chain Management
Procurement and supply chain management are often used interchangeably, but they are not the same thing. The main differences between procurement and supply chain management come down to their place in the overarching procurement supply chain process.
What is supply chain management?
The process of overseeing a supply chain to ensure raw materials (or goods) are turned into finished products and efficiently distributed to the end buyer is supply chain management.
Supply chain professionals (or supply chain managers) are responsible for monitoring and improving the flow of goods and services through the supply chain — from the initial purchasing of raw materials at wholesale warehouses through to delivery and logistics.
They are also responsible for quality control, keeping costs down, and ensuring suppliers and buyers adhere to ethical business practices.
Many UK businesses, particularly larger organisations, use third-party logistics providers to save money and ensure efficiency of their procurement function.
What is procurement?
Procurement is a part of the supply chain procurement process. It is the process of finding and procuring goods, works and services to fulfil a business model. The role of the procurement process in supply chain management is simplyto maintain the supply of goods and services to ensure productivity and efficiency across the supply chain.
Supply chains can differ across the public sector and private sector because procurement professionals have different organisational approaches to the supply chain management process.
Differences Between Public and Private Sector Procurement Supply Chains
Supply chain procurement in the private sector can differ significantly from the procurement supply chain process in the public sector. While private sector organisations profit from the procurement of goods, works and services, the public sector gets funding from the government and public and is responsible for delivering public services.
While both focus on the procurement of goods, works, and services, the public and private sectors have different financial goals and get funded and regulated differently, which affects the procurement process.
Public sector organisations receive funding from government departments and taxes but can also raise revenue commercially, while the private sector gets financed privately from shareholders, investors, or loans. Private sector organisations can move their money quickly, while public sector organisations lack this flexibility.
Public sector procurement and private sector procurement procedures also get regulated differently because the public sector is responsible for spending taxpayers’ money and is, therefore, more constrained by legislation.
While the difference between the procurement process in the private sector and public sector is largely related to how they are regulated, fundamentally they function in the same way. Both involve the sourcing and acquiring goods and services to maintain the efficiency and profitability of a business model. Procurement in the private sector is simply governed by for-profit organisations or professionals while public sector procurement is overseen by the government and not for profit (on the buyer side).
Want a more detailed explanation of ‘What is private procurement?’ PASS (Procurement Advice and Support Service) provides training courses specifically for suppliers to help them understand the public and private sector procurement process.
High Speed 2, more commonly known as HS2, will be a high-speed railway network that will link routes between London, Birmingham, the East Midlands, Leeds, and Manchester.
HS2 contracts worth £6.6bn were awarded to larger companies in 2017. These were large contracts with many elements, making it inevitable that the main contractors would distribute work to smaller companies. This was welcomed by the Trades Union Congress, which said that subcontracting would “maximise the potential benefits of HS2 to the UK supply chain”.
The Crown Commercial Service (CCS) also released an SME Action Plan in 2021 that aims to help small businesses that want to become a part of the public sector supply chain. This will help smaller suppliers that want to be considered for government contracts.
Many SME businesses will benefit from this agreement and from the HS2 project as they will be the best match for specific operations that require experts and specialists.
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Tips for Success: Private Sector Tendering
If your SME would like to win opportunities in the private sector marketplace, there are certain things your business can do to get ahead of the competition.
Offering the private sector added value will give your business an edge over competitors. Private sector buyers tend to be guided by profit and price, but if your business offers something unique as part of the contract agreement, they may be swayed towards your organisation. Make sure that when you are tendering for private sector contracts, you explain how your products or services work completely.
For example, if your business sells furniture, does it also set up the furniture? Do your employees remove and dispose of the packaging carefully? Do you offer a guarantee?
These things are classed as added value and may be the reason why your tender price is more expensive than a competitor’s.
Always mention the add-ons that are included in your price. By giving the buyer a full picture of all that your product or service can offer, you are differentiating your business from the competition, which increases your chances of winning the tender.
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Start Finding More Private Sector Leads
If your business wants to expand, private sector tendering can help you do this.
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Private Sector Supply Chain Procurement Made Simple with Tracker
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“Supply Chain Procurement and Private Sector Tendering” appeared first on Tracker.