E-PROCUREMENT: the difference between the Public Sector and the Private Sector

E-PROCUREMENT: the difference between the Public Sector and the Private Sector

Introduction

There is a growing consensus that e-Procurement is the single most important area of development in procurement.

Within the public sector context e-Procurement has been widely embraced by governments seeking the administrative and cost reductions experienced in the private sector. As a result a number of ‘proven’ private sector e-Procurement solutions such as e-marketplaces, desktop purchasing systems, and tendering platforms have been employed by various public sector organizations.

However, public e-Procurement differs from the private sector in various aspects mainly because of its economic and social considerations. These differences result in a number of specific regulations and standards that have been developed for public e-Procurement.

Public vs. Private e-Procurement

Public e-Procurement

In a public sector context, e-Procurement is a collective term for a range of different technologies that can be used to automate the internal and external processes associated with the sourcing and ordering process of goods and services. Across the EU, e-Procurement is very much at an evolutionary stage. However, despite the variations in the adoption of e-Procurement across Member States, the trend towards its acceptance is strong, with the majority of national governments developing strategies to expedite the implementation of e-Procurement projects. This diversity of government implementations reflects the variety of commercially available technologies, business models, and product coding (classification) schemes.

It is clear that the public sector benefits from the use of e-Procurement solutions. Those benefits are both tangible and measurable with direct or indirect effect on cash flow such as price savings, and intangible such as cultural change and enabling e-Business into public sector.

However, public sector institutions have different objectives towards the implementation of e-Procurement and those cannot be seen simply as extensions of commercial e-Procurement applications because government institutions pursue a wide variety of goals due to their different nature. Within this context the political and legislative environment that public sector institutions operate requires conformity to a range of requirements that have little or nothing to do with economic output.

 Differences between private and public e-Procurement

Unlike procurement in the private sector, public sector procurement requires a bureaucratic procedure to be followed due to the nature of the institutions. A major characteristic of the public sector is the regulation of the procurement process by local, regional, national and international authorities. Regulation embraces “audit, accountability and compliance with national and international rules ensuring competition for supply and transparency in the award of contracts”. For example, public procurement in the UK must be consistent with EU procurement directives, which provide a framework of rules for the procurement activities. These rules prevent EU member states from distorting competition in public procurement and discriminating on a geographic or nationality basis. Moreover, they facilitate the achievement of value for money for the taxpayer as well as promoting the single European market. In addition, public procurers in the UK must also adhere to the government’s Value for Money (VfM) policy. This requires that procurement decisions must be based on an assessment of whole life cost and quality rather than lowest price alone.

The second priority of the public e-Procurement adoption refers to that of the social responsibility of government through sustainable procurement. Sustainable procurement relates all “policy-through-procurement” issues – where public procurement is seen as a lever to achieve wider policy objectives. These include environmental or “green” issues; the creation of job places and wealth in regeneration areas; opportunities for Small and Medium Enterprises (SMEs) and Ethnic Minority Businesses (EMBs); fair trade and the inclusion of developing countries; adult basic skills; disability, race and gender equality; innovation; and the promotion of ongoing and contestable supplier markets. Policies aimed at meeting social objectives should be legal, transparent and effective within government. 

Undoubtedly government agendas are typically more extensive and complex than those of private organizations where efficiency, cost reduction and time savings are sufficient justifications for e-Procurement adoption. The significance of this reality means that one of the first challenges for an e-Procurement policy and standards framework is to recognize that within a public sector context e-Procurement is more complicated than in the private sector.

Public e-Procurement represents an on-line environment involving the complex interactivity of public-private, private-private and public-public sectors rather than just a simple interface between government buyers and private sellers. These considerations have the potential to substantially influence the development of government e-Procurement systems as well as its policies, legislation and standards roles. Within this context a main objective of government policy in relation to its interactions with the business and community sectors should be to seek to promote and enhance efficient and affordable connectivity and interoperability.

 Conclusion

A driving force for e-Government in general has been the idea of bringing successful private sector ICT solutions and respective business practice to the public sector in order to reduce costs and improve services.

This approach was also taken in public e-Procurement by employing e-marketplaces, desktop purchasing systems, and tendering platforms for conducting procurement processes. However, public e-Procurement differs from the private sector in various aspects mainly because of its economic and social responsibilities. These differences result in a number of specific policy and standards frameworks that have been developed for public e-Procurement.