Question 9

Explanation

Organisations can be categorised by three sectors: public, private and third sector. Each of them is characterized by different features. Procurement should understand the differences and customise their approach so that the organisation achieves its objectives.

Public, private and third sector can be compared based on some criteria, such as:

Ownership: The public sector is owned and controlled by the government, which can be national or local. This impacts on the compliance requirements. Procurement must follow regulated processes and instructions from the authorities.

The private sector is owned and controlled by private individuals or groups, such as sole traders, partnerships, or corporations. Procurement has more freedom and flexibility regarding how they conduct business. They can adopt various advanced management methods, such as Lean, Partnership, Value engineering… as long as they deliver the efficiency.

The third sector is owned and run voluntarily by trustees, who are not paid for their work. Like private sector, procurement in third sector has the flexibility and freedom as long as the practice goes along the organisation’s ethical code and principles.

Funding: The public sector is funded by taxes collected from the citizens and businesses. While the revenue is very large, each public agency must work under budget defined by the legislative branch.

The private sector is funded by private money from shareholders, investors, or bank loans.

The third sector is funded by donations, gifts, grants, or fees for services.

Objectives: The public sector aims to provide goods and services for the benefit of the community, such as health, education, housing, and social work. The private sector aims to survive and make a profit by satisfying customers’ needs and wants. The third sector aims to help a cause or provide a service to members, such as charities, voluntary organisations, or social enterprises.