Government/business relationships: insights into contract implementation
| Published date | 01 March 2004 |
| Date | 01 March 2004 |
| DOI | https://doi.org/10.1108/JOPP-04-01-2004-B005 |
| Pages | 84-115 |
| Author | Sijun Wang,Michele D. Bunn |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 4, ISSUE 1, 84-115 2004
GOVERNMENT/BUSINESS RELATIONSHIPS: INSIGHTS INTO
CONTRACT IMPLEMENTATION
Sijun Wang and Michele D. Bunn*
ABSTRACT. Public procurement activities have long been treated as a minor
subset of industrial or business-to-business buying. Consequently, the literature
reports sparse research on the nature of government buying or how commercial
firms can successfully market to the government. While this lack of research
may not have been critical with respect to traditional public buying, recent
procurement reforms and new contracting arrangements suggest our knowledge
of business-to-business buying is inadequate with respect to the new
environment of public buying and government/business relationships. One
important and unique issue is how to handle the relationship with business
suppliers during the contract implementation process. This paper proposes a
taxonomy of government/business relationships as an organizing framework for
understanding the complexities of buyer-seller relationships in government
contract implementation. Archival case studies provide illustrations and
justification for the taxonomy.
INTRODUCTION
A recent, comprehensive review of the business-to-business
marketing literature found very little research on marketing to the
government. In fact, over the past twenty years, only eleven out of 1000-
plus articles concerned issues related to government buying or marketing
to the government (Reid & Plank, 2000). This paucity of research is
reflected in both purchasing management and business-to-business
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* Sijun Wang, Ph.D., is an Assistant Professor of Marketing, Department of
International Business and Marketing, California State Polytechnic University.
Michele D. Bunn, Ph.D., is an Assistant Professor of Marketing, Department of
Management and Marketing, University of Alabama. Dr. Wang’s research
interest is in Relationship Marketing and E-Retailing Management. Dr. Bunn’s
research interest is in Business-to-Business Marketing and Stakeholder
Management.
Copyright © 2004 by PrAcademics Press
86 WANG & BUNN
marketing textbooks. While some textbooks (e.g., Dobler, & Burt, 1996)
have one chapter dealing with the complexities of government buying,
most textbooks have no explicit discussion of public buying.
The government market, however, represents a large volume of
purchases – reaching $1.6 trillion in 1999 or about twenty percent of
GDP in the United States since the 1960s (Thai & Grimm, 2000).
Considering the size of the market and the unique aspects of public
procurement, it is no wonder that both government agencies and
business-to-business marketers are sorely in need of additional academic
research efforts. In response, there is growing interest in research on
government purchasing and government/business relationships. For
example, in 1999, the National Institute of Governmental Purchasing,
Inc. (NIGP) established a partnership with Florida Atlantic University to
promote academic research on public procurement (Thai & Grimm,
2000) and a new research outlet -- The Journal of Public Procurement --
made its debut.
This paper contributes to the literature by focusing on relationships
between government buyers and business sellers (hereafter referred to as
government/business relationships) during the contract implementation
process. First, we investigate the root of the long existing neglect of
public procurement and the misunderstanding of government/business
relationships. Second, we analyze the similarities and differences in
buyer-seller relationships in business-to-business buying and public
buying settings. Third, we establish a framework or taxonomy by using
two critical dimensions to describe government/business relationships:
cooperative norms and information exchange. Fourth, we offer six
propositions to match certain contract situations with each
government/business relationship using archival case studies to illustrate
and justify the propositions. Finally, we discuss several managerial issues
for consideration by government agencies.
Since public buying involves a variety of activities conducted by
various organizations at different levels, addressing all aspects of
government procurement is extremely difficult. This paper addresses the
relationships between federal governmental agencies and commercial
business. The focus is on the relationships developed during the contract
implementation process. We purposely exclude government/business
relationships developed during the contract negotiation process (or
contracting process), which can be extremely complex and influenced by
many political, economical and social factors. Focusing on the post-
purchase process from a relationship perspective can generate insightful
implications to guide future government procurement practices.
The scarcity of studies on public procurement in the business-to-
business marketing literature might be explained by the prevailing
thoughts among scholars. Some scholars argue that buying practices in
the government sector are basically the same as those in the industrial
sector (e.g., Kolchin, 1990). Others claim that government procurement
is simply a subset of business-to-business buying (e.g., Schill, 1980).
Indeed, procurement in non-profit institutions and governments is similar
in many ways to purchasing in industrial organizations (Kotler,
Armstrong & Wong, 1996; Dobler & Burt, 1996). The similarities can
manifest in similar objectives, procurement processes (Kolchin, 1990)
and job descriptions (Muller, 1991). Furthermore, the buyer-seller
relationship-building processes (i.e., awareness, exploration and
expansion stages) in non-profit and government settings are quite
comparable to business-to-business settings (Sheth, Williams & Hill,
1983). It therefore seems reasonable to conclude that the public
procurement process is similar to business-to-business buying and
therefore the buyer-seller relationships in public buying are similar to
those in business-to-business buying (Table 1).
However, as Sheth, et al. (1983) put it, “these generic similarities
exist at the conceptual or process level. They do not, however, extend to
the operating level.” Table 1 shows that public buying differs from
business-to-business buying in several respects. First, the basic
objectives of buying organizations are different. In business-to-business
buying the purchasing process is a source of competitive advantage.
Purchasing organizations aim to build either cost advantage or
differentiation advantage (Porter, 1985) through the buying process.
Therefore, the basic objective of purchasing organizations in business-to-
business settings is profit maximization. In public buying, agencies make
purchases to support the functions of service agencies and to execute
social-economic policies. Government processes are designed explicitly
to prevent favoritism, promote public policy, and ensure proper use of
the taxpayers’ dollars through best-value solutions (Linscott, 1999).
Because the purchasing activities in these two settings serve different
objectives, the buyer-seller relationships have different orientations. In
the business-to-business setting, buyer-seller relationships can be used as
strategic tools to increase competitive advantage (Harrigan, 1985). But in
government settings, buyer-seller relationships basically serve to
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