Exploration of market competition in governmental procurement on the basis of supplier segments

Abstract

Since the 1980s, policies related to outsourcing have steadily emerged in both the private sector and public sector. Indeed, the topics of procurement and outsourcing attract a lot of attention from practitioners and researchers alike. In the private sector, there are many studies discussing how to develop an efficient supplier-buyer relationship in order to optimize an outsourcing strategy; however, few studies discuss similar topics for the public sector. In this paper, we discuss the supplier-buyer relationship in public procurement and outsourcing based on four different role expectation segments of private suppliers: operator, agent, professional, and partner. While the role expectation for an operator is emphasized in the execution of a public buyer's request, a role expectation for a partner is more collaborative and involves risk sharing. While the role expectation for an agent is based upon business outsourcing, a role expectation for a professional is based upon a specific task. In addition, the paper also investigates market competition in Taiwan's public procurement and outsourcing based on supplier segmentation. The results show that in the four segments of private suppliers, the market competition for the operator segment is the most competitive because it has the most tenderers in the tendering process; on the other hand, in the cases of finding an agent or a professional, the contract price is positively related to the number of tenderers.These results can help managers in the private sector and officers in the public sector to understand the market competition of governmental procurement and outsourcing, and also help them optimize the outcome by developing an appropriate public-private relationship.