The terms ‘procurement’ and ‘purchasing’ are so close together in meaning that they’re often used interchangeably. In many business fields and industries, this might be perfectly ok, but the public sector is different. Semantics count in the public sector, where the difference is slight but distinct.
For instance:
Purchasing is transactional. Buyers typically purchase goods (wholesale or retail) for their business’s use or resale. They’re most often short-term B2C (Business to Consumer) transactions. Price is the determining factor in purchasing.
Procurement is strategic and is most often used in the B2G (Business to Government) markets. Procurement is a long-term process where procurement buyers source external suppliers to provide goods, works, and services that enable them to meet their business objectives. Value is the determining factor.
In this article, we’re going to look at the differences between buyers (purchasing) and procurement. And, because the two are so closely intertwined, we’re also going to take a brief look at the differences between the private and public sectors.
What Is The Difference Between Buyer and Procurement?
Let’s take a quick look at some of the primary differences between the two before going deeper.
Procurement
Procurement is an end-to-end (start to finish) process that governs the acquisition of goods, services, or works from external suppliers. Suppliers can be local or global, it depends on who offers the best value for money, or as the UK Procurement Act puts it, the most economically advantageous tender (MEAT).
The overall procurement process includes:
Creating a list of ongoing needs within your public sector organisation, for instance, restocking cleaning supplies on the 27th of every month. Then you identify potential suppliers to meet those needs, for instance, those who can consistently provide high-quality, value-for-money cleaning products to government departments.
The tendering process follows by publishing a contract notice on a procurement portal or platform. Automation software collects and evaluates proposals and can even award contracts on behalf of public authorities, depending on the sophistication of the software and how it’s set up.
Instead of opening up the tender to all and sundry, you can use framework agreements to maintain a pre-approved supplier pool, which makes awarding public sector contracts exponentially easier.
Contracting authorities have the option to create long-term contracts for a few years or short-term contracts for about a year. The type of contract you choose depends on your needs and your procurement policies. For example, you use short-term contracts to give more suppliers (especially SMEs) a chance to compete in the public sector market.
Regardless of whether you choose long- or short-term contacts, you need a comprehensive public procurement strategy that includes all of the above, as well as risk assessment, mitigation, and management, regulatory compliance, building good supplier relationships that foster collaboration, and ensuring tenders include relevant and practical social value commitments.
Procurement buyer responsibilities
Procurement buyers’ responsibilities in the public sector include the following:
- Researching the procurement market to identify suitable suppliers
- Researching suppliers more deeply and whittling the numbers down to an approved shortlist
- Determining the needs of public sector organisations and creating purchase orders
- Requesting proposals (RFPs) or invitations to tender (ITT)
- Evaluating proposals and quotes
- Selecting and negotiating with the chosen supplier
- Creating a suitable public contract with all the proper legal requirements, including UK government laws and EU procurement directives.
There is a special focus on compliance with public contracts regulations and supply chain procurement rules to ensure fair business practices, for example, the equal treatment of workers - Obtaining approval and paying suppliers according to the procurement contract
- Conducting three-way matching, which compares the purchase order, receipt, and invoice to ensure all are the same.
- Receiving goods on behalf of the public sector organisation and checking their quality
- Building good relationships with public sector suppliers
Purchasing
Purchasing is one part of the overarching procurement process, as a result, buyers have fewer responsibilities, which include the following:
- Getting a purchase requisition (approval to purchase goods or services on behalf of the public sector organisation)
- Requesting and assessing proposals and quotations
- Sending out purchase orders that contain details of the transaction, essentially confirming the purchase details – the type of items, amount, price, and credit terms
- Receiving items and assessing their quality
- Paying suppliers
Differences
Procurement: The procurement procedure starts before the purchase and continues until after the tender has been awarded.
Purchasing: The process only includes the purchase of specific items.
Procurement: Public bodies emphasise value for money
Purchasing: Emphasises price
Procurement: Tasks related to identifying and fulfilling procurement needs
Purchasing: Specific tasks related to spending and payments
Procurement: Proactively identifies and fills public sector needs
Purchasing: Reactively fills internal needs
Procurement: Values long-term relationships between contracting authorities and public sector suppliers
Purchasing: Values transactions rather than relationships
Procurement: Focus on long-term competitive advantages and alignment with the enterprise’s values, procurement policies, and goals.
Purchasing: Focus on short-term goals according to the five rights:
- Right quality
- Right quantity
- Right cost
- Right time
- Right place
Procurement: Total cost of ownership (TCO) is included in the proposal quotes. TCO takes into account shipping, maintenance, and employee training (if necessary).
Purchasing: The purchasing process is far more straightforward and doesn’t need to take sundry factors into account.
What Is The Difference Between The Public And Private Sectors?
Now let’s have a look at the differences between procurement in the private and public sectors.
The first and biggest difference is that public sector procurement is basically government procurement and covers government agencies, state-owned enterprises, and public services. There are central and local government laws and regulations that must be adhered to to ensure spending is fair, transparent, and entirely above board.
The private sector, on the other hand, has far more freedom with businesses pretty much able to determine their own procurement processes, without interference from the government. However, there is national legislation to consider, as well as national and international regulations that govern private-sector procurement.
Private sector businesses are privately owned and operated and profit is the name of the game. Types of businesses in the UK include sole traders, limited companies, private unlimited companies, partnerships, and limited liability partnerships.
Differences between public and private procurement
Now, let’s look at some of the other key differences between the two procurement sectors.
Contracts
Public sector tender opportunities must be published on a tender portal or platform so that suppliers can submit tenders or bids to compete for the contract. The bid that provides the best value for money, is awarded the contract.
Bidding isn’t necessary for private-sector contracts. Instead, companies negotiate to get the most lucrative or cost-effective deals.
Technology
Central and local authorities in the public sector use advanced technology with sophisticated automation and AI-driven features. The advantages are a quicker procurement cycle, more efficient supply chains, and improved accuracy for real-time informed decision-making.
The private sector doesn’t use as much advanced tech as local and central government bodies because the process is far less complicated with far fewer companies competing for contracts.
Budget
The public sector uses taxpayers’ money to fund contracts, so there’s a fixed amount that can be allocated to different government departments, initiatives, and programmes. Those in public procurement need to keep a watchful eye on public spending because budgets are strict with little or no leeway.
The private sector has much more leeway when it comes to budgets. They are still bound by limited finances, but because they don’t use public money they can determine their own limits and maximum costs.
Social value
Social value is a requirement in the UK’s new Procurement Act. It emphasises the importance of having a positive impact on the local community, especially disadvantaged communities. It can include environmental, social, financial, and economic projects. Critically, it plays a role in awarding public contracts.
Social objectives aren’t a requirement in the private sector, although some businesses have recognised certain advantages. For instance, it can have a positive impact on their reputation. Implementing certain strategies, like energy-efficient lighting, can also have cost-saving benefits.
Employment
The public sector has to deliver certain government objectives regarding things like employment. As a result, public authorities must emphasise job creation, especially for minorities and other overlooked groups.
The private sector is under increasing pressure to follow in the public sector’s footsteps when it comes to job creation. Businesses are also encouraged to do what they can to support local and national economies.
Competing In The Public Sector – The Buyer’s Perspective
The UK public sector is very competitive with opportunities for SMEs and large enterprises to land lucrative public contracts. The government has taken steps to encourage even more competition and attract more SMEs to the public procurement market through the new Procurement Act. The Act simplifies the tendering process and evens the playing field with its MEAT policy.
However, managing public sector procurement can be time-consuming and, at times, confusing. Delta eSourcing provides services to public sector buyers and suppliers that removes pressure and enable public sector organisations to spend more time and energy on their core activities.
Delta eSourcing has an eTendering platform that is used by over 500 UK public sector organisations and over 100,000 public procurement suppliers.
Public sector buyers benefit from the following services:
- Publish contract notices
- Mutually beneficial collaborative projects
- Supplier engagement and management
- Tender and supplier management
- Managing Dynamic Purchasing Systems (DPS)
Contact us to find out how our public procurement specialists can drive your organisation forward. You can also book a free demo to see our public sector procurement services in action.
