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Public sector procurement is the process by which government agencies and other public bodies choose and contract commercial companies to provide goods and services. This will be done as an alternative to the agency or body carrying out the service itself. The main advantages are reduced costs and the ability to benefit from specialist expertise. In most capitalistic countries, these benefits are almost taken as read, meaning any argument is usually about the scope and procedure of public sector procurement.
The logic behind public sector procurement is two-fold. The first main advantage is that it allows a public body to choose between multiple suppliers. This should establish price competition, thus reducing the cost to the agency and ultimately the taxpayer.
The other main argument for this type of procurement is that it allows for the use of specialists, rather than work being carried out by in-house employees. This can simply be a matter of expertise; a commercial company will often have a better ability to identify, hire and train staff for a particular role than an agency that handles a range of tasks. There are also economies of scale. A public body that only needs to carry out a particular task on a limited basis won't always find it worth investing in the type of specialist machinery that a commercial company will buy, or benefit as much from bulk discounts on materials.
Some benefits of public sector procurement are disputed. One is the idea that being able to choose the cheapest supplier will always be the best option. There is a debate about whether this could lead to a supplier performing poor quality work, or compromising safety standards. As a result, many public agencies use procurement policies known by terms such as "Best Value." This requires the body to assess potential suppliers on a range of criteria, such as expertise and quality, rather than merely price.
Another potential limit to the benefits of public sector procurement is the loss of control and accountability. It is possible that a private contractor hired to carry out a task will fail to do so on time. If this happens, the public body will have some financial comeback in terms of penalty clauses, but this will not change the fact that the project is not complete. In turn, this may have political consequences for elected officials.
The idea of public sector procurement is a great one, but it would appear that many major construction projects, for example, suffer from some of the same negative consequences as discussed in this article.
Recently, the San Francisco Bay Bridge underwent a major renovation. As it turned out in the end, some of the steel purchased from an overseas country was sub-standard, and it cost the city many millions plus an investigation into CalTrans, the state agency charged with overseeing the project. As well, the company hired to do the construction had apparently never built a bridge before.
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