Procurement in the Public and Private Sectors: Is There Really Much Difference?

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Neboneid Hamoo 29 January 2021
Procurement in the Public and Private Sectors: Is There Really Much Difference?

The short answer to that question is yes, there are big differences. The more nuanced answer is yes, there are differences, but in many respects, they are narrowing, and in any case, the things they have in common are far greater.

One of the reasons that the answer has become so nuanced is that the border between private and public has become blurred , with some public sector organizations being privatized or part-privatized and others adopting private sector methods in areas such as procurement. While for a number of reasons some private organizations have been taken, temporarily or permanently, into full or partial state ownership and have thus become subject to public sector rules on stewardship.

Broadly speaking, public sector procurement is planned and executed by government departments and agencies. These are typically not-for-profit organizations operating at local, regional, national or even supranational levels. We need to say “typically” because there are many large and highly profitable state- owned enterprises (SOEs) around the world . SOEs can have a strong impact on public sector finances, and although they are essentially operating in other sectors, such as utilities, oil & gas and aviation, they are generally bound to a regulatory framework that is specific to the public sector.

On the other hand, regulation in areas such as procurement has grown in importance as a way for the state to exercise control.  The private finance initiative (PFI) is a procurement method that uses private sector investment in order to deliver public sector infrastructure and services according to a specification defined by the public sector. It has been widely used by the UK’s National Health Service (NHS) and for similar purposes in other countries, notably Australia and Spain.

With all that said, the main difference is this: whereas private procurement has a centralized focus on driving revenue and profitability, the public sector is managing funds on behalf of an entire national or local community, so there is an expectation that procurement will address several Issues that are no less real but often less tangible, such as the “public good” or the “public interest.”

Public Sector Network’s Driving Public Healthcare Procurement Capabilities is March 10, 2021 . Registration is complimentary for public sector employees.

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Neboneid Hamoo Data Management & Analytics / Corporate & Shared Services Partnership Director, Public Sector Network