1.1: Overview of Public Procurement
The public sector comprises government departments and public entities, such as roads, transport, communication systems and health services. Public funds are collected through taxes and must be spent in a transparent and accountable manner. Public procurement plays a key role in the service delivery and performance of government departments and public entities.
Public procurement is the process by which governments and state-owned enterprises purchase goods and services. Public procurement represents a significant portion of a country’s GDP. The Government of Canada purchases approximately $22 billion worth of goods and services every year, making it one of the largest public buyers in the country. In the United States, government procurement amounts to nearly $2 trillion annually.
This massive scale of procurement gives governments substantial leverage in influencing supply chain practices. By setting criteria for their suppliers, governments can enforce sustainable practices, dictate who they will procure from, and even shape the broader market dynamics (Shah, nd).
The extensive list of public purchases can include standard items such as stationery to more complex expenditures such as the construction of roads and delivery of key services to citizens such as healthcare or education.
Public sector organizations provide services to improve citizens’ standard of living by ensuring access to essential services such as health, education, water and sanitation, electricity, and transport. Public sector organizations comprise ministries, departments or other divisions of government or statutory bodies, and local (both regional and federal) authorities.
Because of the importance of public procurement, the public procurement process in most countries is governed by public procurement laws and regulatory frameworks. The major challenge has been the failure of procurement officials to comply with multiple regulations and policies. However, the public sector is facing pressure to deliver more effective and efficient services to stakeholders despite the global and regulatory challenges that governments are facing.
The public sector works with private sector organizations when private businesses work on a specific public project contract. Private individuals or entities control private sector organizations, but if they want to conduct business with the government, they must adhere to legislations of public administration.
As mentioned earlier, the public procurement process is represented by rules, policies and procedures that specify how government procurement activities should be carried out.
Public Services and Procurement Canada (PSPC) plays an important role in the daily operations of the Government of Canada. The Supply Manual (Canada Buys, nd), with its policies and procedures, is written for the use of contracting officers and regional acquisitions offices to assist them in providing procurement services while following rules and regulations. Canadian government procurement is carried out in a decentralized manner. Individual departments award contracts under their own authority for services and under certain authorities for goods and construction as delegated by the Minister of Public Works and Government Services Canada (PWGSC). The Supply Manual is to be read in conjunction with other government policies and directives.
Emphasis on Sustainability
Public procurement accounts for a large portion of purchasing in Canada and worldwide. By procuring sustainable goods and services, governments can reduce greenhouse gasses, encourage the use of renewable resources and help with environmental conservation. Sustainable procurement also promotes the use of local vendors and services, which reduces the carbon footprint and encourages social responsibility. Here are some examples of how the Canadian government encourages sustainable procurement practices.
- Multiple policies, guidelines, and government legislation govern Canada’s public procurement. The federal Canadian Content Policy from the Department of Public Works and Government Services Canada encourages industrial development in specific circumstances by limiting procurement opportunities to suppliers of Canadian goods and services.
- In 2022, the Standard on Embodied Carbon in Construction became effective, setting the requirements for the procurement of design and construction services to disclose and reduce the embodied carbon of major construction projects. This is in accordance with the commitments in the Greening Government Strategy.
- Canada’s Net-Zero Challenge encourages businesses to develop and implement transition plans to net-zero emissions by 2050. The Government of Canada is committed to reducing Canada’s emissions by 40-45% from 2005 levels by 2030 and putting Canada on a path to reach net-zero emissions by 2050. The federal government rewards such businesses by purchasing from them where possible.
In Canada, the objective of government procurement is to acquire goods, services and construction services in a manner that
- Facilitates access
- Encourages competition
- Treats suppliers fairly
- Results in the best value for Canada
Public procurement must be conducted in a manner that will accomplish the following:
- Stand the test of public scrutiny and reflect fairness in the spending of public funds.
- Respect operational requirements.
- Support long-term industrial and regional development and other appropriate national objectives, including Indigenous economic development.
- Comply with the government’s obligations under the trade agreements.
Essential Reading
Read Chapter 1, Introducing Public Procurement | SpringerLink. (Sections 1.1 Introduction, 1.2 The Public-Private Continuum, 1.3 What Is Public Procurement?)
Learn how public procurement differs from private purchasing by understanding the public-private continuum. Apply the 3P model to the public procurement process. Recognize how public procurement has developed from an executive management function aimed at fulfilling a demand to a policy instrument to create public value.
Checkpoint 1.1
Attribution
The multiple choice questions in the Checkpoint boxes were created using the output from the Arizona State University Question Generator tool and are shared under the Creative Commons – CC0 1.0 Universal License.
The strategic process of sourcing and acquiring goods and services for operations.
The government’s process of purchasing goods, services, and works from suppliers.
Tangible items purchased to support organizational operations.
Intangible tasks procured from external vendors to meet organizational needs and goals.
