The strategy used may depend on the economic power of the buyer. The buyer’s autonomy is limited if it must depend on certain suppliers. For example, when a public procurement agency is substantially in arrears with its payments, only certain manufacturers will agree to furnish supplies. Or private wholesalers may be owned by certain manufacturers that impose their own strategy. Grants from foreign countries often oblige the beneficiary to buy from designated suppliers in the donor country.
A very small buyer has few options other than blind confidence, although blind confidence in an international supply agency may be justified. A large buyer may use either systematic distrust or cooperation. The strategy of cooperation does not mean that the buyer must be very powerful, as the cost is not important. It does, however, require substantial information and skill, as the rules are less formal than with systematic distrust. Table 8 compares characteristics of each strategy.
Table 8. Characteristics of procurement strategies
Characteristic |
Blind confidence |
Systematic distrust |
Cooperation |
Procedure |
direct purchase |
award of contract mutual agreement open tender |
mutual agreement invitation to tender |
Number of potential suppliers |
very limited |
very large |
limited |
Selection criteria |
no choice |
price |
many |
Level of choice |
no choice |
optimum |
many |
Duration of agreement |
very short |
very short |
long |
Management tools used by purchaser |
none complete trust |
thorough knowledge of the market continual surveillance of transactions |
verification of absence of abuse some trust |
Competence required of purchaser |
very low |
very great |
average |
Transaction costs |
very low |
very high |
average |
Prices |
variable |
very low |
low |
Risks |
variable |
very high |
low |