Public procurement is the process by which government departments or agencies purchase goods and services from the private sector. It takes place at both a national and regional level, and the process will usually be subject to specific rules and policies covering how the relevant decisions are made.
Depending on local laws, the relevant government officials will have to follow a set system for procurement. This system could cover the way they advertise for suppliers, the grounds on which they choose a supplier, and the way in which they measure and enforce the requirements they put on the supplier. The usual aims of such a system will be to take advantage of competition between suppliers and to reduce the risk of corruption.
There are several different approaches to public procurement, and two historical policies from the United Kingdom illustrate the differences that can exist. While these policies are specific to the UK, the underlying principles of each are used in various schemes around the world.
The first policy, which was standard in the 1990s, was known as compulsory competitive tendering. In principle, this meant a local authority had to put purchasing decisions out to tender and then deal with whichever provider offered the lowest price. The main advantage of this was that it kept the authorities expenditure to a minimum. The main disadvantage was that there was a risk of suppliers providing a low-quality service because they needed to keep costs down.
The second policy, introduced in 2000 to replace compulsory competitive tendering, was the “best value” system. This extended the range of factors that local authorities' had to take into account, effectively meaning they considered quality as well as cost. The main advantage of this is that it means there is a better likelihood of the products or services meeting the authority’s needs. The main disadvantage is that it makes the process considerably more complicated and bureaucratic, particularly as it can be tricky to produce quantifiable measures of factors which relate to quality.
Local public procurement policies are increasingly being affected by wider agreements and rules. For example, a department covering a particular area of government in a US state will often be subject to oversight from its federal equivalent. Meanwhile, rules agreed by the European Union mean member countries are not usually allowed to have procurement rules that require authorities to purchase from suppliers in their own country.
