Public sector purchasing of health services: a comparison with private sector purchasing

Lian, Paul C.S. and Laing, Angus W. (2004). Public sector purchasing of health services: a comparison with private sector purchasing. Journal of Purchasing and Supply Management, 10(6) pp. 247–256.



Recent research has highlighted the existence of important differences between public and private sector procurement practices. Drawing on established transactional and relational conceptual frameworks, this paper examines whether the differing environments confronting public and private sector organisations affects procurement practices. By focusing solely on occupational health services as an example of a complex business service, the research allows the influence of environmental factors, notably policy drivers, to be considered across both public and private sector settings while service specific factors remain largely constant. Utilising a combination of questionnaires and in-depth interviews the research suggests that policy drivers had a major bearing on procurement practices adopted in the public sector, resulting in a very different pattern of engagement with service providers from that prevailing in the private sector. Specifically whereas private sector organisations utilised a range of approaches, which can broadly be classified as relational in nature, public sector organisations almost exclusively relied on transactional-based approaches. The nature of these services suggests that relational based procurement constitutes the optimal approach to the acquisition of such services. However, for public sector organisations the perceived restrictions imposed by public policy on procurement practices resulted in the adoption of an approach which can be viewed as resulting in sub-optimal outcomes.

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