HomeOpinion & AnalysisColumnistsParallels and similarities of public, private sector procurement

Parallels and similarities of public, private sector procurement

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A lot of literature focuses on private sector procurement and very few books are available on public sector procurement.

Many view public sector operations as merely a trivial addition to mainstream economic activity carried out by private sector providers.

On the contrary, the spending power of the public sector is enormous and performance of the private sector is normally a reflection of public sector spending. This is so because of the sheer range of public sector goods and services that include construction, law and order, education, health services and many more.

In this article, parallels shall be drawn on the public and private sector activities with particular emphasis to procurement. This is against the implication that purchasing in the private and public sector follows completely different patterns. The comparison below will help clarify the issue.

The main difference is on the objectives of the two sectors. The main influence on the strategic decisions in the private sector is the achievement of commercial objectives.

The objective of the private sector is profit maximisation and managerial decisions are assessed on the basis of the extent to which they contribute to organisational profit.

On the contrary, objectives are usually to achieve the defined service level in the public sector. The varying objectives, organisational constraints and other issues do not necessarily lead to differences in procurement procedures.

Buyers in the public sector would not seek to maximise profits, but have a desire to achieve value for money in order to achieve the desired level of services within a defined budget.

In the private sector, buyers are responsible to directors who answer to shareholders. The public sector buyers are ultimately responsible to the general public.

This is mainly because of the source of funds private sector funding is from the shareholders while public sector funding is from the public. The objectives of procurement are therefore to satisfy the desires of those we are accountable to regardless of the sector.

In Zimbabwe, the private sector is governed by the Companies Act, Labour Laws and Product Liability Laws. The public sector is governed by various Acts of Parliament and Statutes and the procurement is governed by the Procurement Act and Procurement Regulations which require compulsory competitive tendering. Private sector does not make it mandatory to invite tenders.

There is usually strong competition between many different firms in the private sector. In the public sector, there is usually no competition.

Private sector competition is derived from the fact that there are usually many firms offering the same service in the private sector and consumers are free to choose between offerings of a different firm.

Consumer choice in public sector products is somehow limited stifling the desire for competition within the sector.

In relation to publicity, confidentiality applies in dealings between suppliers and buyers in the private sector. In the public sector, confidentiality is limited because of public interest and disclosure.

Private sector investment is constrained only by availability of attractive opportunities, meaning that funding can be sourced if business prospects are good. The public sector operates on budget limits set out by treasury and prioritisation is not on commercial interest, but national interests.

Both sectors have budgetary constraints, but the private sector is more flexible if opportunities are identified.

Buyers in the public sector can freely exchange information on suppliers, processes and costs. In the private sector, because of the desire to maintain trade secrets, buyers cannot exchange information with other firms in the same industry.

Public sector buyers are often constrained to follow established procedures as defined in the laws whereas private sectors buyers can cut corners when speed of action is required.

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