Differences Between Procurement And Government Procurement
While public procurement (or government procurement) refers to “the purchase by governments and state-owned enterprises of goods, services and works,”? procurement (or private procurement) stands for “the process of purchasing goods and services from suppliers in a private sector setting.” Read this blog and discover the differences between both concepts, which seem similar but differ significantly.
What is Procurement?
The Procurement ClassRoom said that procurement, or private procurement, is “the process of acquiring goods and services to satisfy the needs of a particular private entity (usually a business, for profit or not)”?
In other words, procurement is a fundamental aspect of business operations for companies and organizations of all sizes. As mentioned, it involves the process of acquiring goods and services from external suppliers to meet the needs of the organization. While it may seem complex at first, understanding the basics of private procurement can empower businesses to make informed decisions and optimize their procurement processes.
This is how the process of procurement goes:?
1. Identifying Needs:?
The first step in private procurement is identifying the needs of the organization. This involves determining what goods or services are required to support the business operations effectively. Whether it's office supplies, machinery, or professional services, a clear understanding of the organization's requirements is essential.
2. Supplier Identification:?
Once the needs have been identified, the next step is to find suitable suppliers or vendors who can fulfill those requirements. This can be done through various means, such as online research, attending industry events and trade shows, or seeking recommendations from peers and colleagues.
3. Supplier Evaluation and Selection:?
With a list of potential suppliers in hand, the organization then evaluates each option based on criteria such as quality, price, reliability, and reputation. This process may involve conducting background checks, reviewing past performance, and obtaining quotes or proposals from suppliers.
4. Negotiation:
Negotiating with suppliers is a crucial aspect of private procurement. This involves discussing terms and conditions, including pricing, payment terms, delivery schedules, and any other relevant factors. The goal is to reach an agreement that satisfies both parties and ensures a mutually beneficial relationship.
5. Purchase Order and Contracting:?
Once the negotiations are complete and a supplier has been selected, the organization issues a purchase order or enters into a contract outlining the terms of the agreement. This document formalizes the transaction and provides clarity on expectations, responsibilities, and deliverables.
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6. Order Fulfillment:
After the purchase order has been issued, the supplier proceeds to fulfill the order by delivering the goods or providing the services as specified. This may involve manufacturing products, sourcing materials, or deploying resources to meet the organization's requirements.
7. Receipt and Inspection:?
Upon receipt of the goods or services, the organization conducts inspections to ensure that they meet the specified requirements and standards. Any discrepancies or issues are addressed promptly to resolve any concerns and maintain quality standards.
What is Government Procurement?
Following the Procurement ClassRoom’s definition, government procurement stands for “the process of acquiring goods and services for the operation of government and to provide public services.” One main aspect that we need to consider is that government procurement “is carried out within a specific legal framework based on certain principles aimed at making the fulfillment of public procurement requirements competitively available to qualified firms and individuals in a transparent and nondiscriminatory manner based on pre-established selection criteria.”?
It’s important to understand the fundamentals of government procurement as it is essential for both suppliers looking to do business with the government and government officials responsible for purchasing decisions.
The process is similar to that of private procurement, but it has some important distinctive characteristics. Let's take a look and identify them:
1. Identifying Needs:?
As private procurement, government procurement begins with identifying the needs of the public sector entities, such as government departments, agencies, and municipalities. These needs can range from infrastructure projects and construction works to purchasing goods and services necessary for public services.
2. Solicitation of Bids:?
The way that the public sector has to search for suppliers is, mainly, solicitations or requests for proposals (RFPs) to invite bids from potential suppliers. These solicitations outline the requirements, specifications, and evaluation criteria for the procurement opportunity.
3. Supplier Evaluation and Selection:
Government agencies evaluate bids from suppliers based on predetermined criteria, which may include factors such as price, quality, past performance, and compliance with regulations. The selection process aims to ensure that the chosen supplier can deliver the required goods or services effectively and efficiently.