Why is competition in a procurement process important?
This page was updated2 months ago
Procurement processes which encourage competition and deter anti-competitive conduct amongst suppliers lead to lower prices, better offerings and more innovation by suppliers which ultimately benefits the procurer and, in some cases, the wider market. This is because competitive processes encourage firms to successfully innovate, reduce costs and increase productivity.
Competition on price is not the only way suppliers compete. While price is important, competition can also take place in other areas such as service, outcomes to be delivered, quality and innovation. These other factors are also important.
In certain circumstances, promoting competition may encourage the adoption of more sustainable and environmentally friendly production methods and products.
Procurement processes which do not encourage competition do not lead to lower prices and/or better offerings and, in some cases, can attract anti-competitive conduct.
Competition in public procurement is especially important
Public sector procurement often results in the supply of relatively large volumes of goods and services to individual and groups of organisations and can therefore have wide effects on markets in New Zealand. Some of these effects include the number and expansion of suppliers, investment and innovation in the market, supporting the reputation of suppliers and the amount of capacity available in private markets.
It is important that public sector procurement is conducted in a way which encourages competition and deters anti-competitive conduct. This will promote the effective allocation of resources and ensure value for money for the benefit of New Zealand markets and taxpayers.
Public procurers have a special responsibility to be aware of the potential for anti-competitive conduct that frustrates the objectives of government procurement policy. They are expected to be aware of the Commerce Act 1986 and to avoid anti-competitive conduct and arrangements prohibited by the Act.