Assignment-1

Global Procurement Strategies

GSCM1004

Vatsal Dinesh Kumar Patel

200587687

Professor- Dr. Jafar Razmi

Date of Submission: 18 February 2024

Assignment 1 1

An analysis of Private sector purchasing versus public sector purchasing

 Differences and similarities

Differences:
1.1 Target:

Private Sector: Private sector procurement is the main contributor to profitability. Businesses seek to obtain

goods and services that increase competition, increase efficiency, and increase profitability. The primary

objective is to optimize sales processes to maximize shareholder value and sustain business growth.

Public Sector: In contrast, public sector procurement focuses on meeting the needs of the communities and

members served by government agencies. Its main objective is to buy goods and services that support public

services, ensure citizens' well-being, and achieve social goals. The principles of accountability, transparency,

and value for taxpayers guide public sector procurement. money

1.2 Legal Scope:

Private Sector: Private sector purchases are made within market limits and company policies. Although

there are laws that regulate business activities, such as contract law and industrial laws, private sector

organizations have more autonomy in purchasing decisions. There is a low level of oversight in the public

sector, which allows flexibility and flexibility in supplier selection and contract negotiation.

Public Sector: Public sector procurement is subject to legal and regulatory requirements to ensure

transparency, fairness, and accountability. Public procurement processes are governed by laws, regulations,

and procurement policies to prevent corruption, reduce risks, and protect public funds. Recruitment practices

are often scrutinized by regulators, regulators, and the public, so recruitment policies and procedures must

be strictly followed.

1.3 Budget Constraints:

Private Sector: Private sector budget constraints are determined by financial performance and strategic

priorities. While revenue targets determine budget allocations, private sector organizations are more flexible

Vatsal Patel 18 February 2024

Assignment 1 2

in adjusting spending based on market conditions, revenue forecasts, and business strategies. Acquisition

decisions are often tied to strategic goals aimed at strengthening competition and driving growth.

Public Sector: Public sector organizations operate within a budget set by government expenditures and

revenues. Purchasing decisions must be based on financial constraints and financial conditions. Public sector

financial constraints exacerbate competitive bidding for assets, requiring careful attention to pricing and

procurement processes to ensure value for money and efficient use of public funds.

2. Similarities:
2.1 Supplier Evaluation: Public and private sector organizations use similar strategies to evaluate potential
suppliers and assess their suitability to meet procurement requirements. The main factors considered in the
evaluation of the supplier are:
Quality: Assess the quality of the goods or services provided by the supplier to meet the specified standards
and requirements. Method: Assess the supplier's reliability and performance in delivering products or
services on time.
Cost: Compare costs and assess profitability to determine the best value proposition.
Compliance: Ensures suppliers comply with legal, regulatory, and contractual requirements, including
environmental and social responsibility standards.
The vendor evaluation process may include vendor surveys, prequalification questionnaires, vendor audits,
and performance reviews to gather relevant information and assess vendor capability and accuracy.
2. 2 Negotiation:
Negotiation is a common practice in the public and private sectors for procurement to obtain favorable
terms, prices, and conditions from suppliers. Trading strategies can vary depending on factors such as
market strength, marketing power, and the nature of the goods or services being sold.
The main objectives of negotiations are:
Price reduction: Establish lower prices, reduced prices, or better price terms to achieve cost savings and
improve sales results.
Risk Management: Addresses contractual, warranty, and liability issues to reduce risk and protect the
interests of the contracting organization.
Value optimization: looking for value-added benefits such as additional services, customizations, or
innovations to improve the value proposition offered by the supplier.
The negotiation process may include face-to-face meetings, requests for proposals (RFPs), competitive
bidding, and contract negotiations to reach mutually beneficial agreements with suppliers.

Vatsal Patel 18 February 2024

Assignment 1 3

 strategies used by each to find the best supplier.

3.1 Private Sector:
Private sector organizations use a variety of strategies to identify and select the best suppliers to meet their
strategic objectives and procurement requirements.
Key strategies include:
Market Research: Conducts market research and vendor assessments to identify potential vendors, assess
market conditions, and assess vendor capabilities and performance.
Supplier Relationship Management: Develops and maintains strategic relationships with key suppliers to
promote collaboration, innovation, and continuous improvement.
Competitive Bidding: Use a competitive bidding process, such as a request for proposals (RFP) or request
for prices (RFQ), to solicit bids from multiple suppliers and compare bids based on price, quality, and other
criteria.
Supplier Performance Evaluation: Monitor and evaluate supplier performance against pre-defined metrics
such as quality, delivery reliability, responsiveness, and customer satisfaction to assess supplier satisfaction
and identify areas for improvement.
Collaboration: Work with suppliers to optimize supply chain processes, improve efficiency, reduce lead
times, and improve supply chain performance.
3.2 Public sector:
Public sector organizations use specific strategies to ensure fairness, transparency, and accountability in their
selection and recruitment processes.
Key strategies include:
Open Competitive Bidding: An open competitive bidding process is used to solicit bids from multiple
suppliers and ensure equal opportunity to participate. Competitive tenders help promote competition,
increase value for money, and increase transparency in purchasing decisions.
Supplier Diversity Program: Implement a supplier diversity program to promote the participation of small
businesses, minority-owned businesses, and women-owned businesses in government procurement. Supplier
diversity initiatives aim to promote economic inclusion, create opportunities for minority groups, and
increase competition in the marketplace.
Qualified Suppliers: Suppliers are certified based on established criteria such as financial stability,
technical capability, and past performance to ensure that qualified and capable suppliers can supply contracts
to the government. Pre-certification helps to streamline the procurement process, reduce the risk of non-
compliance, and ensure that suppliers meet minimum performance and reliability standards.
Framework agreement: conclude a framework agreement or several agreements with pre-selected
suppliers to clarify procurement conditions, achieve economic benefits, and expedite the procurement of
goods and services. Framework contracts provide a structural framework for procurement, facilitate
procurement planning, and promote consistency and efficiency in the procurement process.
Transparency and Accountability: Increase transparency and accountability of the procurement process by
disclosing procurement procedures, evaluation criteria, and contract award decisions to stakeholders and the

Vatsal Patel 18 February 2024

Assignment 1 4

public. Transparency fosters public confidence in public procurement, improves competition, and prevents
corruption and embezzlement.

 Identify the pros and cons of each buying in a private sector vs public sector business.

4.1 Private Sector:

Pros:
Flexibility: Private sector organizations have greater flexibility in procurement decision-making, budget
allocation, and contract negotiation, allowing them to respond quickly to changing market conditions and
business needs.

Innovation: Private sector procurement fosters innovation and entrepreneurship by encouraging

competition, rewarding performance, and incentivizing suppliers to develop innovative products, services,
and solutions to meet evolving customer demands.

Efficiency: Private sector procurement processes are often more efficient and streamlined compared to the
public sector, enabling faster decision-making, shorter lead times, and improved responsiveness to customer
needs.

Cons:
Risk of Ethical Lapses: Private sector procurement may be susceptible to ethical lapses, conflicts of
interest, and favoritism due to the pursuit of profit motives, competitive pressures, and incentive structures
that prioritize short-term gains over long-term sustainability.

Lack of Transparency: Private sector procurement decisions may lack transparency and accountability,
especially in privately held companies or industries with limited regulatory oversight, making it difficult for
stakeholders to assess the fairness and integrity of procurement processes.

Limited Social Responsibility: Private sector procurement may prioritize cost savings and profitability over
social responsibility and sustainability considerations, leading to adverse environmental, social, and ethical
impacts, such as exploitation of labor, environmental degradation, and disregard for human rights.

4. 2 Public Sector:
Pros:
Transparency and Accountability: Public sector procurement processes are characterized by transparency,
accountability, and integrity, ensuring that procurement decisions are made in the public interest and are
subject to scrutiny by oversight bodies, auditors, and the public.

Fairness and Equity: Public sector procurement promotes fairness, equity, and equal opportunity by adhering
to principles of competition, non-discrimination, and inclusion, enabling small and disadvantaged
businesses, minority-owned enterprises, and women-owned businesses to participate in government
procurement and compete on a level playing field.

Social Responsibility: Public sector procurement prioritizes social responsibility, sustainability, and ethical
considerations, such as environmental stewardship, labor rights, and community engagement, to ensure that
procurement activities contribute to broader societal goals and promote the well-being of citizens and
communities.

Cons:
Bureaucratic Processes: Public sector procurement processes may be characterized by bureaucratic
procedures, complex regulations, and administrative burdens, leading to delays, inefficiencies, and increased
costs for both buyers and suppliers.
Vatsal Patel 18 February 2024
Assignment 1 5

Compliance Burden: Public sector procurement is subject to legal requirements and compliance
obligations, imposing administrative burdens and costs on buyers and suppliers and creating barriers to entry
for SMEs and vulnerable businesses.

Political risk: Public sector procurement decisions are vulnerable to political influence, influence peddling,
and cronyism, especially when political considerations outweigh economic or technical considerations, or to
administrative action, which compromises the integrity and fairness of the process of recruitment.

Vatsal Patel 18 February 2024

Assignment 1 6

REFERENCE:

1. Pros and Cons of Collaborative Procurement in the Public Sector - Public Spend Forum

2. Private and Public Procurement Differences | The Procurement School

3. Public and Private Sector Procurement: A Detailed Comparison | GEP Blogs

Vatsal Patel 18 February 2024