Public Procurement

TermiKnowledge - Supply Chain, Procurement and Inventory Terminologies
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Public Procurement is the procurement of specific goods, services and functions on behalf of a public sector, for example a government department. The term, however, also covers any purchase by a private party for the same purpose, with the governments' involvement. In recent years, public procurement has gained increased attention, primarily due to high unemployment rates and a focus by large businesses on cost reduction. While public sector purchases account for over 12 percent of the global gross domestic product (GDP), the costs associated with these purchases can vary greatly. Variation in costs can relate to a range of factors, including the purchasing of goods and services from suppliers, the preparation and management of contracts, and delivery and collection of supplies to customer locations.

Supply chain management is essential for public procurement strategies. This involves the identification, analysis and prioritization of sources of supply and services, and the allocation of resources to produce desired quantities at the lowest possible cost to the government. A key principle of public procurement practices is the use of value based pricing strategies and a flexible supply-to-demand matching strategy. Governments that are able to establish and enforce effective policies that promote competition, increase the range of available products and services, and establish price stability will be most successful in procuring goods and services on a commercial basis. Successful policies must take into consideration the economic, social and environmental drivers of buying.

For companies wishing to engage in public sector procurement, it is important to consider both the costs and benefits of procuring specific goods and services. Companies should develop a detailed business case, identify realistic spending and sourcing scenarios, and conduct an in-depth analysis of potential suppliers and contracts. There are a number of frameworks and laws that apply to this practice, including the Fair Contract Law and the Fair Trading Act for the supply of goods and services. While these frameworks are important, it is important to remember that the legal framework only applies to procurement activities within the European Economic Area (EEA). Therefore, it is necessary to engage with a competent law practitioner who is familiar with the various aspects of UK public sector law, in order to establish a procurement policy that meets your company's legal requirements, as well as its business objectives.

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