CIPS L4M1

4.2 Analyse the impact

of the public sector on
procurement or supply
chain roles

ALMAHI SULIMAN
PROCUREMENT CONSULTANT
Analyse the impact of the public sector
on procurement or supply chain roles:
You will understand:
◦ Objectives of public sector organisations such as
improving services, communities and corporate social
responsibility
◦ Regulations that impact on procurement and supply
chain operations
◦ Need for competition, public accountability and value for
money.

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Contents
Objectives of public sector organization

Improving service

Communities

Corporate social responsibility

Regulations that impact on procurement and supply chain operations

Procurement procedures in the public sector

Need for competition, public accountability and value for money

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Objectives of public sector organisation
The public sector has a number of objectives which include:
1. caring for its citizens,
2. Providing and improving services
3. Enhancing and operating facilities,
4. Interacting with communities
5. Promoting corporate social responsibility

A large proportion of public sector money spent on:

1. Healthcare and emergency services
2. Criminal justice system and local authorities and rehabilitation of people who have
committed crimes or who have experienced alcohol or drug and substance abuse.
3. Provision of social services
4. Pensions, benefits or supportive payment to help people during financial difficulties

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 Improving service
1. improving the services that required by people to make them satisfied. This can be done
through:

2. Monitoring, enhancing and improving the services to meet the needs and expectations
of the public

3. Availing the budgets to the public sector and manage them carefully

4. Obtaining cost savings and work on cost avoidance without impacting value for money

5. Longer opening hours, a better standard of care or more availability

6. Enhance and improve service

7. Ensuring the service provided is fit for purpose

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Communities
The public sector has to interact with local communities as people and organisations within the community
are its main stakeholders. Organisations and individuals fund the public sector (through taxation) and also
use the services provided.

An objective of the public sector is to work with and alongside the community in order to keep
stakeholders satisfied.

Information about the sector as a whole, its financial situation, plans for the future and personnel should
be available to the public

Public sector funding can be used to help communities in many ways, such as the following:
1. Investing in social housing
2. Providing safe places for children to play
3. Crating centres for the elderly to meet

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Corporate social responsibilities
The public sector has a duty of care to the people and the environment. Because of this the
public sector has a stringent corporate social responsibility policy which should be upheld at all
times, as one of its main objectives.

CSR opportunities within the public sector include the following:

1. Sourcing and evaluating suppliers for sustainability
2. Initiating projects that give something back to the community
3. Regenerating waste land or cleaning up polluted areas
4. Undertaking business in an ethical way
5. Promoting the interests and employment of disadvantaged members of society

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Regulations that impact on procurement
and supply chain operations
The regulations imposed on the public sector within procurement and supply chain operations
are considerably stricter than those on the private sector. This is because the public sector
must justify and be accountable for the way in which tax payers’ money spent.

The over-riding procurement policy requirement is that all public procurement must be based on
value for money, defined as “the best mix of quality and effectiveness for the least outlay over
the period of use of the goods or services bought”

Regulations have common themes such as the following:

1. Non-discrimination
2. Free movement of goods
3. Equality of treatment
4. Transparency

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Ethical good practice in public
procurement
Ethical good practice is very important. The regulations which apply to public sector procurement promote
this and aim to prevent any breaches.

Public sector spending is regulated with thresholds which apply to different categories. Example of
different categories within public sector procurement are listed below:
1. Advertising, marketing and communications
2. Commercial
3. Technology and Digital service delivery
4. Consultancy and Civil service learning
5. Property
Buyers in the public sector have a duty to be aware of the regulations which apply.

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Procurement procedures in the public sector
Public sector buyer are presented with guidance on almost every choice that
they have to make. Within public sector procurement there are four types of
procurement procedures to choose from when tendering or making a contractual
decision:
1. Open
2. Restricted
3. Competitive dialogue
4. Competitive procedure with negotiation

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Open procedure
The open procedure is a single-stage process. It gives any supplier organisation wishing to bid
the chance to do so.

Open procedures may be suitable in case of:

1. Standard items

2. High value contract

3. When there many suppliers can compete openly

4. No time constraints

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Restricted procedure
The restricted tender procedure is a two-stage process:

The first stage involves advising potential suppliers about the available
contract and asking them to submit a completed questionnaire which will be
analysed and evaluated to see if they meet the criteria. A small number of
potential suppliers will be shortlisted from the questionnaire responses
received.

In the second stage of the restricted process, the small number of potential
supplier who have been shortlisted receive full information on the contract and
are able to submit a bid.

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Competitive dialogue
The competitive dialogue involves the following process.
1. Suppliers indicate their interest in bidding for a contract, then the
successful ones are shortlisted.
2. Shortlisted suppliers are invited to enter into communication or dialogue
with the buyer
3. Potential suppliers will be eliminated throughout the dialogue process based
on pre-determined criteria and their suitability to meet it.
4. When the required number of suppliers has been reached, the tender
process will continue then full details of the contract are issued and
suppliers are invited to submit their bids.
Dialogue procedure is suitable when there is:
1. Incomplete scope
2. Complicated requirements
3. High risk in supply market
4. High value contract

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Competitive procedure with negotiation
The competitive procedure with negotiation has the added element of negotiation. This
procedure allows negotiation to take place with the winning bidder.

All these procedures have regulations that must be followed in keeping with public sector policy.

Negotiation is suitable when:

The most acceptable bid is over the budget.

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Procurement policy notes
Regulations within the public sector are displayed as procurement policy notes (PPNs). They are
prepared and maintained by the Crown Commercial Services (CCS) in UK. With the aim of
helping the public sector procure goods and services fairly and transparently.

These notes are regularly reviewed and updated and are always available to view or download on
the gov.uk website.

The public sector tendering process is limited by set threshold. Regulations govern how contract
over certain thresholds are dealt with.

The PPN regarding thresholds is known as Legal Requirement to Publish on Contract Finder, This
PPN states that any potential contracts going out to tender over a certain value, currently
£10,000 should be published on site called Contract Finder.

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Public procurement audit:
When a public sector organisation is audited, compliance with these regulations will be assessed.
Independent consultants visit the organization to review how it spend money and whether it is
meeting its objectives.
The choice of suppliers should be evaluated and those suppliers investigated to ensure that they
are performing to the required standards and meeting contractual obligations.
The audits in this sector are more rigorous than for the private sector. This is because of the
need to ensure that the public’s money is being spent in an efficient, ethical and effective way.
Private sectors companies can win contracts within the public sector, but these companies have
to be ethical, good value and sustainable – and auditing bodies should check this is the case.

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Advantages and disadvantages of
public sector regulations:
Advantages of regulations Disadvantages of regulations
Promote uniformity of processes Suppresses innovation
Enhances control May reduce competition
Reduces risk Time consuming
Provides accountability and traceability Costly
Can open up contracts to wide market Strict evaluation process may remove best
supplier
One regulation does not always suit all genres
Inflexible

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Need for Competition
Competition increase value for money by encouraging suppliers to compete
against each other, to lower prices and to offer added value with their bids.
Without competition, organisations would be monopolies and could set prices
which would leave buyers little or no room for negotiation.
The public sector frequently holds a monopoly on the provision of creation
services and private companies trying to compete to open up competition is a
growing trend.
The levels of competition in the public sector are considerably lower than
those in the private sector. The strict regulations often discourage new
entrants to the public sector.

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Need for Public Accountability
Public accountability relates to the obligations on organisations that provide services on behalf of the
public sector to take responsibility for their actions and justify them. The suppliers who win contracts
from the public sector have to be accountable.
Public accountability is about providing the government and the public with a clear and undistorted
view of how things happen, and the outcomes and issues that may present themselves.
Public accountability includes the following:
◦ Transparency
Any organisation supplying services to the public sector should be honest, open and
◦ Efficiency transparent.
◦ Responsibility Public accountability is about the freedom of speaking out, giving open feedback and being
◦ Integrity able to voice and address concerns in a professional way.
◦ Trustworthiness Organisations that do not promote public accountability are unlikely to have their contracts
renewed, may receive negative media coverage and could even have their contracts
terminated.

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Need for Value for money
Obtaining value for money in the public sector is paramount. Value for money in the public
sector is audited in the UK by the National Audit Office (NAO).

The NAO refers to the 4Es as following:

1. Efficiency,
2. Economies,
3. Effectiveness
4. Equity

To help it establish whether value for money is being obtained.

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