What is the Difference Between Public and Private Procurement?

The main difference between public and private procurement lies in their objectives, funding sources, and the level of scrutiny they face. Here are the key differences between the two:

1. Objectives: Public sector procurement primarily focuses on social benefits, while private sector procurement is profit-centric.
2. Funding Sources: Private sector procurement is funded by owners or shareholders, while public sector procurement is funded through loans and taxes acquired by the government.
3. Scrutiny: Public sector procurement is subject to more scrutiny and public reporting of procurement activities due to the use of taxpayers' money. Private sector procurement may still come under internal scrutiny and occasional external scrutiny, but it is not as intense as in the public sector.
4. Legal Framework: Public sector procurement is governed by public procurement laws, which ensure that public funds are spent in a fair and equitable manner. Private sector procurement is governed by contract or commercial law and is influenced by company policy.
5. Contract Awarding: In the public sector, contracts are awarded through a competitive bidding process to ensure the best value for money and to select the best supplier for the job. In the private sector, contracts are usually awarded through a negotiation process.
6. Flexibility: Private companies can easily transfer money between departments if business conditions change, while public organizations face a longer process to change their budgets. This can lead to delays in disbursement of funds and suspension of procurement activities in the public sector, which can negatively impact both the organization and its suppliers.

In summary, public and private procurement differ in their objectives, funding sources, level of scrutiny, legal framework, contract awarding processes, and flexibility in budget allocation.

Comparative Table: Public vs Private Procurement

Differences between public and private procurement can be summarized in the following table:

In summary, public procurement is primarily focused on addressing public needs and providing social value, while private procurement aims to maximize profitability. Public procurement is subject to strict regulations and transparency, with funding coming from taxes and government departments. In contrast, private procurement is less regulated, with companies having more flexibility in their strategies and funding.