Procurement in the construction industry is the process of acquiring goods, services, or works – and it is a key function for both public and private.
The approaches taken by these sectors can vary significantly, influenced by factors such as:
- Regulations
- Objectives
- Stakeholder dynamics
But what exactly are the differences between public and private sector procurement? Let’s find out. Read on for our blog all about public and private sector procurement, including their differences and similarities.
Understanding Public Sector Procurement
Public sector procurement refers to the process by which government entities acquire goods, services, or works to fulfil their obligations to meet governmental obligations to citizens, operating within a structured framework of laws, regulations, and policies.
Every year, the public sector spends roughly £300 billion on public procurement, from hospital beds to schools and social care.
The public sector operates within a framework of laws, regulations, and policies designed to ensure transparency, fairness, and accountability when it comes to managing and spending public funds.
For example, the Transforming Public Procurement programme, which is reforming the current Procurement Rules.
These mechanisms aim to uphold transparency, fairness, and accountability in the allocation of public funds, ensuring optimal utilisation for the benefit of society.
Regulatory Framework
One of the key distinctions in public sector procurement is the stringent regulatory framework governing the process.
Government agencies must adhere to a range of laws and regulations, such as the Public Contracts Regulations (PCR) in the UK or the Federal Acquisition Regulation (FAR) in the United States.
These regulations provide a protocol for tendering, evaluating, and awarding contracts. They ultimately help to promote competition, prevent corruption, and ensure compliance.
Emphasis on Transparency and Accountability
Transparency and accountability are extremely important in public sector procurement. Government agencies are required to conduct their procurement processes openly and transparently, allowing for fair competition among suppliers.
Additionally, procurement decisions must be documented and justified to ensure accountability to taxpayers and stakeholders. The bottom line is that when you’re spending public money, you have to be completely transparent and compliant.
Social Value and Sustainability Considerations
The Social Value Act 2021 states that any public body needs to think about how their actions may improve economic, social and environmental well-being – although many public bodies may choose to do more than ‘consider’ social value.
Government agencies may prioritise suppliers who offer social benefits, such as employing local workers or supporting minority-owned businesses.
Furthermore, there is an increased emphasis on sustainable procurement practices, including environmentally friendly sourcing and reducing carbon footprints.
Exploring Private Sector Procurement
Private sector procurement, in contrast, is usually driven by the objectives and priorities of individual businesses. These goals can vary widely depending on:
- Industry
- Market conditions
- Organisational culture
Private-sector procurement doesn’t have the same regulatory and legal constraints as the public sector might. However, it still operates within a framework of efficiency, cost-effectiveness, and value creation.
Focus on Efficiency and Cost Savings
Private sector procurement often focuses on cost-savings – it is driven by the needs and goals of the business. However, public sector procurement considers the needs of society. This means that the private sector may be more flexible in their budgets and have higher purchasing power.
Private businesses often try to optimise their procurement processes to reduce expenses while maximising value for shareholders.
This could involve seeking better contracts with suppliers, making the supply chain more efficient, or buying in bulk to save money.
Flexibility and Innovation
The private sector is much more flexible when it comes to procurement, as there are fewer legal requirements. This means private companies and organisations can utilise their own strategies without worrying too much about legal compliance.
Due to the lack of legal constraints, businesses can adapt quickly to changing market conditions and customer demands.
Companies can explore innovative procurement strategies to gain a competitive edge in the marketplace, such as:
- Strategic partnerships
- Outsourcing
- Collaborative sourcing arrangements
Increased Profits
As we’ve established, private sector procurement is pretty much driven by profit maximisation. Businesses aim to procure goods and services at the lowest possible cost without compromising quality or reliability.
This focus on profitability may lead to more aggressive negotiation tactics, supplier consolidation, or the pursuit of cost-saving innovations. It can also lead to bidders not being treated fairly, which could potentially lead to legal ramifications.
Collaborative Procurement Models
Collaborative procurement models (for example, framework agreements and joint procurement consortia) allow both public and private sector organisations to combine their resources and expertise to achieve a common goal. This can benefit both parties – some benefits include:
- Cost savings
- Increased efficiency
- Improved outcomes for all stakeholders
Ultimately, collaboration across public and private bodies can result in fewer tendering exercises, which can lower costs and allow public bodies to focus their efforts on more specialised purchases.
Innovation and Continuous Improvement
Procurement in the construction industry ultimately promotes a culture of innovation and continuous improvement in procurement practices. It brings together a range of perspectives to achieve the best outcome.
Public and private sector procurement may operate within different contexts and constraints, but they share a common goal of acquiring goods, services, or works in a cost-effective and value-driven manner.
While each sector faces its own unique challenges and opportunities, frameworks like the Procure Partnerships Framework offer a platform for:
- Collaboration
- Innovation
- Best practice sharing
This can benefit stakeholders across the board. Collaborating and utilising the strengths of both sectors can lead to positive outcomes, and provide value for society at a whole.
Find Compliant and Accredited Contractors
So, public and private sector procurement have distinct differences, but there are opportunities for collaboration and knowledge sharing between the two domains.
We can give you peace of mind knowing that compliance is all taken care of. You can choose between single-stage, two-stage procurement, or direct award options – and make the most of continuous project delivery support beyond procurement.
We can ensure that measurable social value is achieved throughout all stages of the project, adhering to relevant regulations such as the Social Value Act 2012.
We aid public sector organisations in achieving end-to-end project success by implementing proactive, efficient, and resilient procurement methods.
Trust our passionate and committed team of procurement and project delivery experts to assist you in securing contractor partners local to your area.
We are dedicated to making a meaningful impact on the communities where they operate and reside, leaving a lasting legacy through their work.
You’re in good, experienced hands with Procure Partnerships. To get started, download our user guide today! Alternatively, if you’d like more information, don’t hesitate to contact us to find out more.
