INSTITUTE OF CONTINUING AND

PROFESSIONAL STUDIES(ICPS)
ZANZIBAR.
MODULE NAME : PRINCIPLE OF
PROCUREMENT
CODE : PST05208
PROGRAMS: (DAC,DPSI, DBM - II).
TOPIC: DIFFERENCES BETWEEN PUBLIC AND
PRIVATE PROCUREMENT.
 PUBLIC AND PRIVATE
PROCUREMENT.
Public sector and private sector procurement
organizations are designed to acquire goods and
services. The main difference between these two
types of organizations is the purpose for
acquiring those goods and services. One is
focused primarily on a social benefit, the other is
profit centric.
 Cont.……….
Private sector procurement activities are for supporting the
principal business objective of a organization, which is to
make a profit. This does not rule out the fact that private
entities may also seek social benefit; however, it is not their
primary business objective. In the public sector, the two
main reasons for acquiring goods and services are: (i) for
supporting government operations, and (ii) to provide public
services. Therefore, the above are the major differences on
that types as :
 Cont.………
The procurement activities of the private sector
are for the sole purpose of making a profit. It
doesn't mean that they completely rule out social
benefits, however, it is not their primary objective.
The two main objectives of procuring goods and
services by the public sector are for supporting
government operations and providing public
services.
 Cont.………
Another fundamental difference between these
two sectors is their funding sources. While
private sector procurement is funded by owners
or shareholders of the organization, the funds
for public sector procurement are mainly from
the loans and or taxes acquired by the
government from the citizens of the country.
 Cont.…….
Private sector procurement is governed by a
contract or commercial law. With respect to the
formation of these contracts, it is also governed
by company policy. A private sector company can
get into a contract with another private company
or an individual and their procurement method
can be governed entirely by company policies.
 Cont.…..

Whereas, the public sector procurement

process is governed by public procurement
legal and institutional frameworks. In most
countries, there are laws which govern the
public sector procurement of goods and
services. These laws set the basis for
managing procurement.
 Cont.…….
Stakeholders, Private organization's stakeholders are much smaller
in number than those in the public sector. Stakeholders include
owners, investors, shareholders and customers. Interests are limited
to the product and services or financial performance. Public sector
stakeholders include everyone who is financing or using the services
the public sector is providing, effectively the general public. The
public sector is under far greater scrutiny than the private sector. As
a result, the procurement process has to be managed differently and
is far more transparent than private sector procurement.
 Cont.……
ACCOUNTABILITY
Public Procurement officers are accountable to the
public for their decisions, while in Private, Non-public
officers are not Accountable to public but to their
employers or shareholders.
Budgetary Differences
Transparency
SIMILARITIE BETWEEN PUBLIC AND
PRIVATE PROCUREMENT
o Both seek to:-
Employ or hire procurement and supplies professionals and
technicians who are registered with PSPTB as required by law.
Use competitive and wisely methods of procurement such as
competitive tendering, quotations etc. so that to acquire the best
price.
Develop reliable sources of supply.
Spend funds efficiently in procurement in order to achieve their
goals.
 Cont.………

NB: Private procurement main concern

is to obtain requirements timely and
effectively at best price while public
procurement on top of that must ensure
procurement is fair, Open and
transparent
 Why is the Procurement Function critical for an
organization?

Procurement is a strategic function

that impacts operations, supply
chain, quality, cost and profits of
manufacturing companies. Hence it
is crucial to have a good
procurement strategy in place.
 Cont.….
Procurement Function plays a crucial role in
helping organizations achieve their overall
business objectives such as:
oProcure right quality material at the right price
oImproving Supplier Base & Vendor Relations
o Maintaining Optimum Inventory
o Ensuring a Healthy Working Capital
 Cont.…..
oReduced Purchase Cycle Times
o Savings in Procurement Costs
o Reduction in Manufacturing Cost
Per Unit
o Increase profitability
 ACTIVITIES INVOLVED IN
PROCUREMENT
Here is a brief overview of activities involved in Procurement:
Identify Procurement Needs & Gather Detailed Specification
Purchase Requisition Review by concerned authorities
Selecting appropriate sources of supply
Vendor Development
Sending Request for Quotation (RFQ)
Evaluation of Quotes/ Bids
 Cont.….
Vendor Finalization & Approval process
 Issuing Purchase order to the selected vendor
 Receipt of Material & physical verification/inspection
Invoice Approval after three-way matching
Payment Process as per terms & conditions agreed on
Record-keeping for fulfilling audit, statutory and
compliance requirements
 SUMMARY
Procurement function plays a pivotal role
in the smooth business operations of a
manufacturing organization as it ensures
that all goods, materials, services are
procured at optimal times and prices, an
optimal level of inventory is maintained.
 Cont.….
This will result in optimum
utilization of resources, efficient
production, and ultimately result in
significant savings in money, time
and resources.