Procurement: Transitioning from the private sector to the public sector
Transitioning from a private sector procurement environment to a public sector one can and will present differences in the form or practice, and execution. After settling in the public procurement space at one of the world’s largest government contractor firms, I’ve been able to utilize skills and implement practices from my experiences with one of America’s largest private manufacturers. However, these transferable skills/practices had to be modified to be used in this environment. The following are just a few observations that come to mind when comparing both sectors:
- The private sector allows for more creativity and is less constrained by regulation. This may be the most obvious difference, but it certainly worth pointing out. In the private sector, though you must have reasonable basis (cost, quality, capability) to select a source during sourcing activity, the opportunity for risk and innovation tends to be more welcome in the private sector. Theoretically, the creativity used in sourcing decisions should align with organization-wide corporate goals. For example, an automotive purchasing organization may source to a supplier with brand new technology, or source lighter metal commodities to achieve adaptation to changing technology or to meet environmental fuel standards. These decisions may drive additional cost, but they align with organization-wide corporate goals. In the public sector, rigidity tends to create more of a transactional environment with suppliers and sourcing approach. You’re almost more concerned with compliance, procedure, and rules and the environment tends to be more risk averse. Though rules exist in both environments, the ability to be able to veer from them or modify them are higher in the private sector.
- The public sector comes with more bureaucracy than most private sector environments. Again, this point may be obvious as public sector procurement deals with the world’s most important entity; the United States Federal Government. Federal Acquisition Regulation(FAR) and the protest process are prime examples of the added amount of stakeholder input to a public procurement process. FAR guidelines act as a set of laws that govern any procurement related activity by the Federal Government. Of course, this impacts downstream activities of government contractors to their subcontractors. All parties must comply with all provisions to participate in any way. These provisions deal with contracting requirements and methodology, as well as conflicts of interest and disputes/protests. I’ve had the “honor” of witnessing the protest process during my time dealing with pubic sector procurement. The protest process allows any of the bidding suppliers/contractors to disrupt the sourcing process due to an objection to the results. This immediately halts the sourcing allowing a protest hearing process to take place. The government has to prove through copious documentation that their source selection was made accurately and fairly. Typically, supplier relationships are important in the private sector, so there may be “post mortem” conversations when a supplier loses a bid, but suppliers aren't usually empowered to stop the sourcing process in the form of a protest in the private sector.
- Lastly, procurement in the private industry appears to be more closely valued by senior management. Sourcing decision rationale is to be presented to senior level leadership and warrants their involvement; supplier relation issues that are both commercial and technical in nature warrants cross functional leadership involvement to improve strategic decision making. As mentioned before, the value of an optimized supply chain and efficient procurement process is prioritized more in the private sector. In the public sector, the priority lies with the mechanics of the process, not necessarily the strategy behind it. Some may argue that is for good reason, due to the public interest involved on the public side.
Both public and private procurement processes have the same overarching goal...to get the right supplier in place for the job. What differs is the method in making this selection, and the tactics used to execute. Though they present stark differences, it is important to look at them individually and judge them appropriately.