The Difference between Private and Public Procurement

If you’re a business owner looking for contracts to boost your business it is important for you to understand the basic yet subtle differences between public and private procurement. The complexities of the business world make it important to realize the unique points of public and private procurement in order to decide on a market entry strategy and the contracts that your business would want to chase for. Each of these procurement has its own set of regulations and timelines which must be fully understood in order to narrow down on the business and target the customer accordingly. In this article, we shall explore these differences and understand the type of procurement companies must chase for and the strategy for doing it.

Fundamentally, the difference between public procurement and private procurement is the entities involved who want to make a purchase. In case of a public procurement, the entity making the purchase is a public organization; usually a government entity or a government affiliated organization whereas a private procurement usually happens when private organizations issue a tender. The purpose and objectives of a private procurement differs from a public procurement which is why it is important to understand the nature of purchase. A public procurement is usually conducted for the welfare of the people and ensure transparency of the tax payers money so it has more compliance issues, accountability fairness and value for money. A private procurement on the other hand may be focussed on profit maximization, cost efficiency and gaining competitive advantage. The similarities of course are that both the types of procurement require some products/services to be purchased at the best possible rates and offering the most value added component to their armoury.

One of the important distinctions to understand between a public and private procurement is the nature of compliance involved. Procurement services can help companies understand the nature of compliance required and the laws by which they are governed. For instance, a European public procurement is usually governed by the EU laws whereas Asia and Middle East have their own compliance regulations. Tender aggregator services like Tender Impulse can help accumulate all information onto one stop saving time and energy in doing the legwork surrounding tenders. An international tender website on procurement information services also helps in monitoring the various procurement ongoing in the global market.

With the advent of e-procurement, transparency is ensured in a public procurement process. While some private procurement companies too use electronic procurement in their purchasing process, it is more prevalent in the public domain. A notable difference between public and private procurement is that the key decision making is usually made at individual level where as a public procurement uses centralized purchasing process to make a purchase. This allows for better coordination and transparency of tax payer’s money being spent. On the other hand, a private procurement is simply put out so that the company can maximise its profit by leveraging the purchase onto their business contracts and serve their customers. It can certainly be conceded that private procurement is more efficient at times than public procurement simply because of the volume and compliance level that goes into public procurement process.

A Private procurement is at the hands of a few individuals making it easier to take decisions swiftly. Moreover, private procurement happens in a short period of time as they need to take care of deadlines to meet their end customers where as a public procurement is usually a long term game where authorities plan for the future and betterment of the society and hence is a time consuming process. It is also argued that private procurement offer a more level playing and competitive space for businesses to compete rather than a public procurement. With evolving technology and time, public procurement too is turning eyeballs to attract smaller and medium sized business to offer a more level playing field. Companies are now able to compete in public procurement process from the comfort of their home/offices through digitizing all of their processes.

Both public and private procurement are lucrative contracts for businesses. Whereas a public procurement involves a lot of compliance and volume, a private procurement is usually short lived and has a very short turnaround time. Businesses tend to favour public procurement for long term goals and attaining immunity from bankruptcy as government business assures them of repeat, long term and volume based business. On the other hand, private procurement is a good option for smaller companies looking to sell their product/service in a short time. Irrespective of the type of procurement, both public and private procurement are important business leads for every company. With the introduction of electronic procurement, even public procurement processes are competing to match the advantages offered by private procurement opportunities so as to increase competition and provide a more level playing field for businesses to compete in.