Public vs Private Sector Procurement
Updated: Sep 24, 2022
I have worked in both public and private sector procurement. If you are interested in entering the procurement profession, you should consider the differences to make the best choice for you. Please be aware that this is in the Canadian context and other jurisdictions may have differences.
Public procurement includes procurement for all levels of government (Federal, Provincial, and Municipal) and crown corporations. While bidding and contract laws are the same as private businesses, it has additional compliance requirements for various trade agreements and regulations. I have provided examples of a trade agreement and public procurement policies below.
An example of a trade agreement is the New West Partnership Trade Agreement which applies to the Canadian western provinces of British Columbia, Alberta, Saskatchewan, and Manitoba. The aim of this agreement is to increase interprovincial economic activity while aligning standards.
Information on Canadian Federal procurement policies can be found at https://www.canada.ca/en/services/business/doing-business/how-to-sell/procurement-policies.html . It is a good idea to have an understanding whether you are a procurement professional or a business looking to do business with the Federal government.
Strategically, because accountability is to the general public, the procurement process is focused on fairness, transparency, and risk mitigation. In British Columbia, the Freedom of Information and Privacy Protection Act (FOIPPA) gives the general public (including bidders and other third parties) the right to access procurement information of public institutions. As a public procurement professional, you will likely have to balance the interests of multiple internal and external stakeholders when you create a sourcing event. Processes and requirements are more explicitly and thoroughly defined thereby reducing the uncertainty of the procurement process. The downside is that the time to complete the process is likely longer. If you like structure and want to serve the public interest, public sector procurement is a good choice. It will also provide you with a deep understanding of various stakeholder interests, contract law, and governmental regulations and initiatives.
Private procurement is procurement for any private business. The business can be privately owned or publicly traded. Traditionally, businesses are accountable to the shareholders. However, as societies evolved, we have also come to understand that businesses should serve the interests of other stakeholders such as employees, customers, and vendors as well.
In the private sector, there are more opportunities for different procurement strategies through sole sourcing and by-invitation only sourcing events. You have the option of building longer-term relationships with vendors because you are not required to bid out large purchases. This is an advantage because it may not make sense from an operational perspective or there may be a lack of a competitive supplier market to obtain quality bids. Strategic alliances with vendors can also provide you with the continuity to develop efficiencies or innovative projects. The downside of this is if a vendor becomes too intertwined with you, you may lose control or leverage in the relationship.
Furthermore, because bidding is not a requirement, you may choose vendors that do not appear to be the best choice. This would be done if you see potential capability and technology, strategic synergy, or even if you feel a certain vendor has too much market power and you want to develop the market's competitiveness for the long-term. In general, fairness is less of a factor in business transactions, contract law only requires procedural fairness of the bidding process and that contracts are entered without misrepresentation and in good faith.
Private procurement is typically focused on Total Cost of Ownership (TCO) and Return on Investment (ROI) and efficiency of the procurement process. Compared to public procurement, private procurement has higher uncertainty in the process but allows for more flexibility in your procurement strategy. In the private sector, make sure you align well with the values of the organization and its management as they ultimately have control of the direction of the procurement process.
In summary, I am appreciative of having done both types of procurement and have taken lessons from both. The truth is that you would be a stronger procurement professional if you apply the strength of each type and incorporate it into your skillset.