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1 Introduction

Public procurement is facing the dilemma of competing priorities and goals such as cost efficiency, legal conformity as well as the advancement of environmental protection and the promotion of innovation. Politically dominated public procurement strategies focus on these targets increasingly but in most cases an alignment with a business strategy is missing, at least in terms of a business administrational understanding. According to this, the paper analyzes the status quo of public procurement strategies using a systematic literature review. By means of an analytical framework for public procurement the investigation is based on a selection of ten management journals from 2002 to 2012. Only a small number of papers are found that fit to our subject; most of them are classified as normative and political driven, with less elements of a strategy for public procurement. Further, the idea of a strategy process combining normative targets with detailed procurement and awarding activities has almost been neglected so far. Additionally, the paper draws an agenda for further research needs in the field of public procurement in order to align political and functional strategic levels. We conclude with recommendations for public procurement managers in terms of closing strategic gaps of public procurement.

2 Goal Congruence in Public Procurement: Towards the Need of a Procurement Strategy in the Public Sector

The discussion about the relevance of strategic management in the field of industrial procurement started in Germany in the 1970s (Grochla 1977; Grochla and Kubicek 1976; Arnold 1982; Hamann and Lohrberg 1986). Again, in the 21st century the discussion gathered momentum analyzing the strategic influence of procurement (Ramsey 2001a, b) and strategy content (Essig and Wagner 2003).

Just like a mirror image to the restart of the strategic discussion in the field of industrial procurement, public procurement is recently confronted with strategic goals and the dilemma of competing targets. The discourse comprises the sense and transferability of main targets which at least partially compete with each other. Such goals are for example the cost efficiency, the legal conformity with procurement law and the support of superordinate priorities such as the advancement of women in business, the promotion of regional companies or SMEs in general and the protection of the environment. The latter can be understood as strategic (and politically set) goals of public procurement (Schapper et al. 2006). Figure 1 illustrates the necessity of integrating different target dimensions of public procurement into a system of objectives. Procurement is classified as public in the case that the contractor is a public entity fulfilling public tasks and thus bounded to procurement law (functional understanding of the status of a contractor). Consequently, not only public authorities are categorized as public contractors, but also private Ltd. owned by the state.

Fig. 1
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Target dimensions of public procurement

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Foremost, the strategic relevance of public procurement is mirrored in high procurement volumes of the public sector. The contracting volume for goods and services of European member states amounts 16.3 % of the GDP on average and 21.5 % on top (EU 2007). In total, public entities in Europe spend about 1,550 billion Euros, excluding process costs for the fulfillment of public tenders. In Germany for instance process costs for public procurement are estimated to equal 19 billion Euros per year (Kröber et al. 2008). Furthermore, efficiency and effectiveness of public procurement are frequently criticized (Bundesrechnungshof 2012) indicating a promising potential for savings. Because of the high public procurement volumes an increase in efficiency of only 0.5 % would release billions of Euros which are urgently needed for the realization of the above mentioned political goals.

Recent discussions in public procurement practice concentrate on the way of realizing strategic (political) goals through public procurement. According to this, the EU gives several recommendations such as the “EU 2020 Strategy”. A further EU proposal for reform comprises five modernization areas combined with twenty detailed suggestions for improvement. Several advices mention public procurement as instrument for the achievement of political goals. This argument follows the idea of a procurement conception with corresponding objectives, strategies and instruments which in turn are hierarchical organized, but also interrelated to each other (Becker 2009). Consequently, procurement strategies represent the framework for action for goal achievement and the coordinated use of operational procurement instruments.

As a result, the EU proposal for reform focuses on procurement strategy content; procurement strategy process actually appears to be neglected. Further, only a weak alignment of the political-normative level demanding political goals with the management of public procurement and contracting authorities respectively becomes evident. Keeping this initial suspicion in mind, the paper uses a systematic literature review in order to identify the status quo of public procurement strategies. Finally, we seek to disclose strategy dimensions and strategy gaps in public procurement to derive recommendations for future research activities.

3 Method and Analytical Framework for the Analysis of Public Procurement Strategies

The analytical approach of the literature review is twofold: we investigate papers from scientific journals in the field of public administration and new public management; additionally, selected scientific journals in the field of industrial management with a focus on PSM (purchasing and supply management) are also part of the analysis. According to this, ten selected journals are systematically investigated for papers subject to public procurement strategies; five from the field of industrial PSM and five from the field of public administration. The selected industrial PSM journals are International Journal of Integrated Supply Management, Journal of Business Logistics, Journal of Purchasing and Supply Management, Journal of Supply Chain Management, Supply Chain Management: An International Journal. The selected journals in the field of public administration /new public management are Public Policy and Administration, Public Administration Review, Public Administration: Research and Theory, Journal of Public Procurement and Public Administration: An International Quarterly. The literature review concentrates on publications in the time frame from 2002 to 2012; selected papers published before 2002 are also included in the case that public procurement strategies are the main topic (Erridge and Murray 1998; Cope 1995).

The different and combined search strings used for the identification of relevant papers are related to the three dimensions “strategy”, “procurement” and “public sector”. Therefore, we used the terms “strategy”, “strategies”, “strategic” for the first dimension, “purchasing”, “procurement”, “sourcing”, “acquisition”, “contracting”, “materials management”, “supply”, “supply chain” for the second dimension and “public”, “administration”, “defence”, “federal”, “government”, “governmental”, “municipality”, “state”, “regional”, “city”, “cities” for the fourth search dimension. Predominantly, the search strings for journals in the field of public administration concentrated on the dimensions “strategy” and “procurement”. The proceeding of the literature review is based on Levy and Ellis (2006) in combination with Denyer and Tranfield (2011).

The result of the literature search based on the different search strings are 150 papers in total; after a careful investigation of the individual abstracts of the papers only 26 relevant contributions for the systematic review are identified. Even if the number of paper appears to be relatively low, the review includes a few basic contributions on public procurement strategy (Erridge and McIlroy 2002; Matthews 2005) and papers that discuss individual elements of a procurement strategy for the public sector (Fearne and Martinez 2012; Wagner et al. 2003).

The systematic content analysis of the identified papers is based on the integrative approach of Hart (1992), as well as Essig and Wagner (2003) in terms of procurement strategy. According to this, exogenous factors of the environment or the market (procurement environment) are differentiated from endogenous strategy dimensions within the public sector. In this regard, the make-or-buy decision and the contracting authorities respectively represent the main interface to the supply markets (Weiss 1993). Based on the assumption of a procurement conception public procurement strategies are routines for action for the realization of superordinate (political) goals. For this reason, the underpinning approach of the systematic content analysis considers interfaces to the political level and to other functional strategies (HR, Innovation etc.). Moreover, structural requirements in terms of the organization of the purchasing department (supply chain design-strategy) or the purchasing category level and the contract awarding respectively are essential dimensions of a public procurement strategy reflected in the present approach. In addition, strategy process represents the counterpart of strategy content (Miller 1989; Ketchen et al. 1996) aligning and coordinating all available strategy dimensions (Essig and Wagner 2003). Figure 2 illustrates the analytical framework of the systematic literature review; the included numbers for the strategy dimensions refer to the following tabulation.

Fig. 2
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Analytical framework for the literature review

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4 Results

4.1 Essential Findings Regarding the Content

The findings of the literature review are based on a total of 26 papers showing that only a low number of contributions relates to procurement strategies but with a strong focus on strategy content. Topics such as procurement law or macroeconomic strategy dimensions are focal points, while other information remains largely untouched, such as e.g. purchasing categories. An example of a macro-economic analysis is the contribution of Handfield (2004) who examines the impact of a statutory deregulation of the energy market on procurement strategies.

A need of explanatory research becomes evident concerning the problem of strategy development, in particular the coordination of political and functional strategy levels. According to this, the contribution of Khalfan et al. (2007) recommends an “alignment of a coordinated communication” between all stakeholders on the objectives, results and activities of the contract awarding in terms of big (public) construction projects. Breul (2010) discusses the manner in which such coordination should take place. He selectively focuses on individual elements of the procurement strategy such as sourcing policy, competitive sourcing or crowd sourcing from a public procurement perspective. A further topic of the investigated papers is the influence of political action on public procurement. Murray (2007) analyzes the “role of local politicians” in the strategic sourcing process using the example of the UK. He defined the concept of strategic public procurement and derives stages and tasks of a strategic public procurement process. Matthews (2005) describes existing limitations and barriers to public procurement in order to develop a strategic discipline.

A number of authors analyze the awarding of contracts through public authorities with regard to the implementation of policy objectives into contracting agreements. Preuss (2009) examines the realization of environmental, social and economic objectives by local procurement agencies. Fearne and Martinez (2012) discuss the design of sustainability strategies in supply chains in general, while Romzek and Johnston (2005) only investigate social aspects. In this regard, service contracts of public authorities with private providers are evaluated in terms of the inclusion of social performance standards. Thus, social standards have been sufficiently reflected in supplier contracts, but an implementation of adequate measures for assessing social standards is still missing. Cope (1995) examines the impact of a “politically intended” outsourcing decision on employees. A business case of cleaning services is able to clarify that, although from the client perspective, a cost reduction could be achieved, but this was at the expense of socially responsible public procurement representing a strategic goal. Cleaning services are mainly characterized by the cost of manpower. The supplier could only realize an optimization by employing service staff at significantly worse conditions. Malatesta and Smith (2001) analyze public contracts and their design using insights of the resource dependency perspective. According to this, mutual dependencies between customer and supplier require contracts with more flexibility (cost-plus). Very similar is Watts’ (2005) approach of “Strategic Service Delivery Partner-ships” outlining a supplier relationship for public contractors. His approach is characterized by aspects such as long-term, result- or outcome-orientation and risk sharing. He also reflects the implementation difficulty provided by the procurement legislation. Lonsdale et al. (2010) investigate opportunism and exploitation in the context of public procurement using an example of the UK health sector. Thus, the foundation of the Department of Health’s Purchasing and Supply Agency (PASA), which deals with procurement policy in health care, reduced opportunistic supplier behavior and shifted contracts towards a more relational mode. La Noue and Sullivan (1995) examine how the “North American jurisprudence” has responded to a ban on discrimination of minorities in the context of public procurement. They present different programs to encourage minorities within their paper. Nabatchi (2007) describes an administrative reform in North America (Administrative Dispute Resolution Act—ADR) using economic theories. In this regard, public procurement with respect to ADR is analyzed. A further North American reference point represents the work of Nollet and Beaulieu (2003) analyzing “public purchasing cooperation” (here in the healthcare sector). The paper draws an explicit strategy-structure relationship in which the cooperation as a structural element and procurement strategies are in a mutual relation.

The paper of Suárez (2010) is special since it refers to the group of “non-profit organization” as some kind of extraordinary public contractor. Non-profit organizations only possess the status of a public authority if their organization receives public funding. Further, the paper refers to “procurement” as to the acquisition of public funding. He concludes that a high degree of professionalism results in a higher chance of success. Almost similar to Suárez’s paper is the contribution of Wild and Zhou (2011); they concentrate on procurement strategies for specific organization forms for humanitarian enterprises shaping a framework for “ethical sourcing”.

The contribution of Wagner et al. (2003) is highly focused addressing public authorities in the context of “local councils”. According to this, local councils intend to support the implementation of an electronic procurement strategy in SMEs. Even Stanton and Burkink (2008) look at individual aspects of public procurement strategy, here for small and medium-sized farms in the U.S. The derivation of recommendations for the procurement practices also represents a thematic focus of some of the considered publications. Globerman and Vining (1996) develop a valuation approach for outsourcing decisions in the public sector. Herein, transaction costs are determined investigating specificity, complexity of tasks and vulnerability in terms of competitive intensity. The approach of Girth and Hefetz (2012) demonstrates an empirical analysis of management options in “extensive competitive service markets” from the perspective of the public sector. They conclude that different competitive conditions in the procurement market require an individual management by public purchasers. Finally, Yeow and Noble (2012) classify the sourcing of innovation as an “highly complex management task” and demand the use of project management techniques with reference to a case study in the healthcare sector in the UK.

Only the contributions of Erridge and McIllroy (2002), Erridge and Murray (1998) and Kamann (2007) have a business administrational understanding of strategic procurement management. This is especially true for the Erridge and Murray (1998), who try to transfer the approach of “lean supply management” to the public sector. The core of their approach is to achieve the so-called “best value” for citizens as end-customers of public services and therefore public procurement. Politicians carry the interests of citizens; this understanding requires the consideration of political goals (so-called “socio-economic goals”, Erridge and McIllroy 2002). Kamann (2007) attempted to solve the problem of the exchange relationship between citizens and the state using the stakeholder approach, which defines various interest groups for the management of public procurement.

4.2 Matching the Results with the Analytical Framework

Matching the findings with the eight framework dimensions enables an aggregation of the individual observations in order to derive recommendations for action. Table 1 provides an overview of this classification supporting three key statements.

Table 1 Findings from the systematic literature review
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First, strategic priorities of public procurement focusing on make-or-buy decisions and the implementation of political goals become evident. This finding also mirrors the pressure politics is actually facing. Due to existing financial constraints, an increase in outsourcing of public tasks and ultimately rendered by private enterprises is still taking place (Reichard 2004). In addition, politics identified public procurement as an effective lever for the realization of strategic (political) goals (Kahlenborn et al. 2011).

Further, the structured content analysis illustrates that an inclusion of other functional strategies, purchasing category strategies and, astonishingly, the awarding strategy has been neglected within public procurement so far. None of the investigated papers investigates these dimensions as a main topic. Consequently, public procurement still needs to align the procurement strategy with other functional strategies (Venkatraman 1989). In terms of other functional strategies a threat between functional and procurement objectives becomes evident, with significant effects on the performance of an organization. At the same time a missing purchasing category strategy reveals that public procurement products or product groups are not connected with a higher procurement strategy; promising success potentials remain unexploited. A missing awarding strategy demonstrates a strategic gap of public procurement. Although procurement legislation represents a normative framework for public procurement, the existing awarding authorities are challenged to determine a unified procurement strategy for their organization.

The consideration of the methodology illustrated that research in the field of public procurement has a strong focus on procurement practice. Consequently, empirical research methods are used. The structured content analysis is able to show that procurement strategies currently concentrate on outsourcing and the implementation of policy goals as dimensions of public procurement. Finally, all dimensions of the analytical framework are at least explicitly mentioned within the investigated papers, even those dimensions are reflected that currently do not represent a main topic.

5 Deriving a Research Agenda for Public Procurement Strategy

The debate on the strategic importance of procurement and thus on formulating procurement strategies mentioned in Sect. 1 is still ongoing. So far, it is surprising that this discussion is very little referred to, when developing almost the same topic for the public sector. Given the already outlined high empirical relevance (procurement volumes of public procurement agencies), it is imperative not to leave the discussion about anchoring a public procurement strategy exclusively to the political-normative level. Strategy content has to be connected with methods of strategy development in terms of environmental, innovative and socially responsible objectives (Kahlenborn et al. 2011). For the outline of further research this work refers to widely accepted approaches, which distinguish between strategy process and strategy content research (Miller 1989; Ketchen et al. 1996).

5.1 Strategy Content of Public Procurement

Basically, a procurement strategy defines what and how a certain supply need will be met (Nordin and Agndal 2008). This demand fulfillment concerns several dimensions of the applied analytical framework, in particular the make-or-buy decision, the supply chain design, the purchasing category and the awarding strategy (dimensions 2, 5, 6, 7). Recently, the focus of research on (industrial) procurement is on these strategy dimensions. Sourcing concepts, procurement portfolios, etc. provide important insights into the strategy content of the procurement function (Van Weele 2009). Other issues, for example about global sourcing or the design of supplier relationships, etc. play an important role in the outlined “how” procurement satisfies demand. On the one hand, strategy content provides guidance for the operational procurement processes and on the other hand, outlines how the procurement function contributes to the overarching organizational (firm) objectives.

Surprisingly, purchasing category strategies (dimension 4) and awarding strategy (Dimension 6) are hardly discussed within the public sector. Further, the question of the alignment of procurement with other organizational functions (dimension 4), for example, in the context of an Early Purchasing Involvement is also rarely considered.

Instead, the normative political settings dominate strategy content. In Europe—and thus even in Germany, which is subject to the public procurement regime of the European Union—these strategies are clearly defined (Kahlenborn 2011): Public procurement must develop to become more supportive in the dimensions of social responsibility, environmental sustainability and the promotion of innovations. The idea is that public procurement contributes to the objectives of the overarching organization (European Union), which for instance promotes innovation that reduces environmental impacts and increase social standards following the framework of the EU 2020 strategy. A further example is North Rhine-Westphalia, where the federal government achieved the goal of higher social standards. This objective was fulfilled by means of a uniform minimum wage through public procurement initiatives (among other initiatives), as a new law for “tariff loyalty” and “public awards of contracts” was adopted.

5.2 Strategy Process of Public Procurement

From the perspective of business administration, the scientific debate about the development process of public procurement strategies is too much dominated by procurement legislation and the strategy process is hardly discussed in business literature. This corresponds to the analysis of dimension 8 “process strategy”, but also refers to the horizontal and vertical coordination processes (analysis dimensions 1, 3 and 4). The core of the strategy development process includes the decision-making process of an organization to determine the need for products or services, to identify and evaluate alternatives to meet the demand, and to select (Webster und Wind 1972). Already in the 1990s, the strategy process was identified as a central element of strategy research (Pettigrew 1992). In fact, only few sources deal with this issue and combine strategy process with the context of “governance”, which is a necessary structural model to define rules, power and relationships to efficiently and effectively allocate financial, material or human resources (Fearne und Martinez 2012; Gereffi et al. 2005). In the process of strategy formulation it is recommended to form cross-functional teams of all involved stakeholders. Only the stakeholders are able to evaluate the importance of purchasing categories in terms of different areas of the public sector and to discuss and develop objectives or strategic alternatives (Handfield 2004).

6 Conclusion

Summarizing the results of the our literature review on strategy content and process significant deficits are in particular the lack of connectivity between the political strategy setting and the strategic contribution of public procurement, at least from the perspective of business administration. Currently, procurement strategies are defined by the policy and “given” by way of the public procurement law and its procurement agencies. The result is a top-down approach, which is also in political science (at least in its “pure form”) not entirely uncontroversial (Sabatier 1986).

As a result, political strategy objectives are named in the context of public procurement as “awarding-external aspects” (DIHK 2007). These objectives are classified as “awarding-external” to public procurement because they serve the enforcement of general policy objectives. According to this, these objectives are not the primary business or macroeconomic objectives that attend (a) public procurement according to the principle of economy, (b) the restriction of market power of the public sector and (c) the liability of effective competition in the awarding of public contracts.

In fact, however, it is widely accepted that a strategic supply management must contribute to the strategic objectives of an organization (Large 2009). Transferring this understanding of procurement strategy to the public procurement authorities, then formal (economic) goals do not longer dominate tangible (political) goals. So, for example, if the German Federal Government commits to reducing CO2 emissions as a strategic goal, public procurement must also contribute to this objective.

The problem, therefore, is not the existence of strategic (policy) goals and the fact that this must be taken into account by the procurement function. This is also reflected in the analysis dimension (3). The actual dominance of political strategies in the analyzed literature becomes evident. Further research is rather needed on the question of how a process looks like, that leads to the strategy definition.

The sketched top-down approach limits the influence of the public procurement function in terms of self-identified potentials (savings, performance) within the (political) strategy formulation. The deficits in purchasing category- and awarding strategies (dimensions 6 and 7) as well as the lack of alignment with other functional strategies (dimension 4) show the existence of insufficient interaction between the political and the level of procurement management. It is likely that this issue is still largely unexplored, because the analysis of political decision-making takes place in the political sciences. An important step would be the implementation of interdisciplinary research approaches to further explore strategic management of public procurement.