It may seem that procurement within the two sectors has a lot of similarities, and this is partially true, because both public and private procurement have one common purpose: maximizing value for money while sourcing products and services from the supply market.
Still, in case you have sold exclusively to private buyers, then your first public tender (and vice versa) will likely feel like a different sport, even though it’s played with the same ball.
Let's take a step back, define and analyze each type of procurement.
What is Public Procurement?
The term "public procurement" describes the process in which governments and state-owned companies acquire goods, services, and works from suppliers.
For example, this can be the purchase of road salt by a city council or a long-term contract that a national health authority signed with an IT company.
Since public procurement is carried out using taxpayers’ money, governments have an obligation to be transparent about how they use that money and guarantee that the goods and services they buy are of an adequate quality.
Naturally, public procurement has some aspects and drawbacks that are either nonexistent or present to a lower degree in the private sector.
- For instance, in public procurement, one can contest tender awards (at least in most countries), which is a form of safeguard mechanism.
- But the major drawbacks include longer waiting times and stricter requirements for publishing.
What is Private Procurement?
Private sector procurement is the process in which privately owned firms and commercial entities buy materials, products, services, or construction work from outside vendors and subcontractors.
The difference between public and private procurement
Public procurement differs from private procurement in four key areas:
- in its purpose.
- in the way it’s funded.
- in the applied rules.
- in the way the acquiring process is administered.
But purpose is the main differentiator:
A private company procures to support its commercial objectives, mainly the ones centered around generating profit, controlling costs, managing risks, and generating value for the owners (often referred to as shareholders).
As for the public body, it procures goods, works, or services, funded by public money held in stewardship, for the purpose of providing public services. This, in turn, means that everything that happens must be transparent and the end result must show that taxpayers’ money was spent fairly.
If you check out the Venn diagram below, you will notice that when you compare public and private procurement, certain distinctions become apparent:
Notice that in public procurement:
1. Tax-funded public services have a direct or indirect positive impact on citizens.
2. Suppliers from the private sector not only carry out these services but are taxpayers as well, and thus, these services are advantageous for them too.
So in the end we get that people expect governmental institutions to make effective use of public finances because of their reliance on taxpayers' money.
Public vs private procurement: five key differences
Public procurement
- Funding source: National and local public budgets.
- Regulations: Strictly regulated by laws, policies, and compliance requirements (e.g., UK Procurement Act 2023, U.S. Federal Acquisition Regulation / FAR.)
- Competition: Open competition. Suppliers are chosen via formal tenders.
- Transparency: High level of transparency, public accountability needed (published notices and award decisions.)
- Supplier selection: Competitive bidding, tenders, and rigorous evaluation criteria.
Private procurement
- Funding source: Company revenue, owners, shareholders.
- Regulations: Fewer regulatory limits, guided by internal policy.
- Competition: Can be limited. Suppliers are selected based on connections or strategic objectives.
- Transparency: Confidential by default, limited public disclosures.
- Supplier selection: Negotiation, direct contracting, or limited competition.
Funding source
Public procurement uses money the buyer doesn't generate itself. This comes from taxes, grants, and government loans, which is why a public buyer must demonstrate it used the funds responsibly.
Private procurement runs on the firm's funds, and therefore companies have fewer disclosure obligations. However, firms still have to follow accounting rules and be ready for auditing.
Regulation
This is where the public and private procurement diverge most sharply.
Public procurement
As the World Bank outlines, in nearly every country there’s basically a force of law behind public procurement that establishes the rules and procedures that must be followed.
In the UK, public procurement is governed by the Procurement Act 2023, which came into force in February 2025 and is overseen by the Government Commercial Agency, while in the U.S., it's the Federal Acquisition Regulation (FAR). In the European Union, public procurement is regulated by several Directives, such as Directive 2014/24/EU, 2014/25/EU, and 2009/81/EC.
Private procurement
This one, on the other hand, is more flexible than public procurement. Even though private companies are subject to contracts and commercial law, there's no outside entity that will tell a private buyer how to carry out a tender (unless the procurement is sourced from a grant and certain conditions are imposed by the donor).
How contracts are awarded
A public contract is nearly always won by companies via formal competitive bidding - all of the qualified suppliers receive an identical brief, all have to perform until the same specified deadline, and the same criteria are used to evaluate bids.
This may take more time, but in the end the process aims to show more transparency.
A private contract is more often the product of direct negotiation: a buyer can discuss details with one or a few suppliers, and in the end the parties come up with the terms that suit everybody involved.
The whole process is faster, and buyers have more room to move on price and timeline compared to a public buyer.
Transparency
When it comes to public contracting, authorities need to publish tender notices and eventually share the information on the winners of the tender with an explanation of why they won. This information is published on official sources, like Find a Tender in the UK or SAM.gov in the U.S.
Suppliers that lost a public bid are free to learn about the reasons for rejection.
As for private buyers, the information about bids evaluation is nearly always kept confidential. Who bid, what the offer was, and why the buyer selected one supplier and not the other remains confidential, as firms prefer to protect data.
Remedies when a bid is rejected
Public procurement
When a supplier loses a public tender and considers that the process was unfair or featured some irregularities, they can request a review of the procedure or file a complaint.
As the Your Europe portal notes (for the EU), the courts or independent review organizations can analyze the contract award decisions where the tender was published.
After the supplier loses a bid, they will be notified about it, and the standstill period will start, during which the contract cannot be signed, and this is the time when the supplier can initiate a review procedure.
No one gets awarded if the review is still in progress, even if the standstill period is over.
What happens when the court or review body decides that the complaint was founded?
They can either reverse the award decision, demand that specific aspects of the evaluation process be rerun, or cancel the whole procedure.
Private procurement
The standard set by public procurement is not applied to private contracting. For private procurement, if a rejected supplier decides to dispute the outcome, their options are whatever the contract allows, be it negotiation, arbitration, or, in the worst case, a lawsuit.
Frequently asked questions
What is an example of public procurement?
A local government wants to purchase road maintenance equipment, and to do this, it launches a competitive tender for suppliers of such equipment.
Another example: City authorities want to buy IT equipment for a local school, so they run a tender inviting suppliers to participate, and the one that offers the lowest bid, or the most balanced bid, wins the contract.
What does public procurement mean?
Public procurement is the process in which a government or public sector body is buying goods, services, or works, using public funds, and complying with the rules aimed at making the entire awarding and purchasing process transparent, fair, and open to scrutiny.
Final word
Public procurement is a major part of how public money is spent in any society, and due to the sums of money involved in it and the high stakes, it carries heightened responsibilities and risks. Private procurement, on the other hand, is more flexible, less transparent, and thus faster to carry out.
With that being said, procurement teams must manage several competing priorities at once: they need to encourage as many companies as possible to participate in the procurement (both large and small) and at the same time prevent fraud.
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