Building a value proposition in public procurement
Suominen, Paula (2018-01-31)
Building a value proposition in public procurement
Suominen, Paula
(31.01.2018)
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Turun yliopisto
Tiivistelmä
Public procurement is a significant government activity and adds up to a distinctive share of public sector's total budget. For private sector organizations, public procurement also offers substantial business opportunities. The legislative environment plays an important role in public procurement: it determines the available procurement procedures to secure efficient spending of public money. In Finland, the Act on Public Contracts, which regulates public procurement, is based on the EU Directive on public procurement. This directive is built on the underlying EU principles, for example fair competition and transparency. Due to the regulated operational environment of public procurement, public tendering should be transparent and efficient.
Although regulation ensures fair competition, there are challenges facing companies participating in public tendering such as distinguishing from the competitors. Thus, low price is the most common criteria when selecting a supplier in public procurement, though the 2014 EU directive aims to shift focus from the lowest price to the most economically advantageous tender. This study focuses on private companies and their point of view in public procurement, especially in public tendering. The research question in this thesis is: how do private companies participating in public tendering build their value proposition? In order to answer this question, this study will focus on the challenges of public tendering, the influence of the EU legislation, as well as the building of a value proposition. Previous research on public tendering from the private company point of view is limited, especially in terms of a value proposition. Thereby, this study offers a new perspective for existing literature, which can also serve as a starting point for more thorough studies regarding the subject.
In the empirical part of this study, four people working in a private company were interviewed, all of them doing business with the public sector and being familiar with public tendering. In order to answer the research question from a general perspective, the respondents were chosen from different industries. Semi-structured theme interviews and qualitative content analysis were chosen as the method for collecting and analyzing the data. The findings partly support earlier studies, but due to the private sector viewpoint some new findings were also discovered. The challenges facing private companies in public tendering include the significance of price, the difficulty of measuring quality, and the general system of public tendering. Legislative environment is notably different in public procurement than in private, which not only ensures fair competition but also brings additional challenges. For instance, in terms of value proposition the regulation limits the possibilities of building close relationships between the possible supplier and the buyer: companies need to emphasize value proposition based on price and operational excellence.
Although regulation ensures fair competition, there are challenges facing companies participating in public tendering such as distinguishing from the competitors. Thus, low price is the most common criteria when selecting a supplier in public procurement, though the 2014 EU directive aims to shift focus from the lowest price to the most economically advantageous tender. This study focuses on private companies and their point of view in public procurement, especially in public tendering. The research question in this thesis is: how do private companies participating in public tendering build their value proposition? In order to answer this question, this study will focus on the challenges of public tendering, the influence of the EU legislation, as well as the building of a value proposition. Previous research on public tendering from the private company point of view is limited, especially in terms of a value proposition. Thereby, this study offers a new perspective for existing literature, which can also serve as a starting point for more thorough studies regarding the subject.
In the empirical part of this study, four people working in a private company were interviewed, all of them doing business with the public sector and being familiar with public tendering. In order to answer the research question from a general perspective, the respondents were chosen from different industries. Semi-structured theme interviews and qualitative content analysis were chosen as the method for collecting and analyzing the data. The findings partly support earlier studies, but due to the private sector viewpoint some new findings were also discovered. The challenges facing private companies in public tendering include the significance of price, the difficulty of measuring quality, and the general system of public tendering. Legislative environment is notably different in public procurement than in private, which not only ensures fair competition but also brings additional challenges. For instance, in terms of value proposition the regulation limits the possibilities of building close relationships between the possible supplier and the buyer: companies need to emphasize value proposition based on price and operational excellence.