In Public Procurement there are generally three procurement categories: goods, works and services.
Definition with examples
The term ‗goods‘ applies generally to all articles, material, commodities, livestock, furniture, fixtures, raw material, spares, instruments, machinery, equipment, industrial plant etc. purchased or otherwise acquired for the use of Government but excluding books, publications, periodicals, etc. for a library. Goods are physical products purchased or manufactured on request. There is usually an element of service involved, such as when the agreement is for the purchase of goods to be assembled and/or installed. However, the extent of the service provided is directly related to acceptance of the goods purchased. Typical examples of goods are: office supplies and equipment, furniture, IT equipment, books, vehicles, medical supplies and other commodities.
Works are related to civil works; this includes new construction of structures of all kinds (buildings, highways, bridges, etc), renovations, extensions, and repairs. This category can also include, water and sanitation, transportation and electrical plant infrastructure.
Services are classified as (i) consulting services and (ii) non-consulting services. In some cases, they are simply classified as services because of the difficulty, at times, in clearly determining the difference. The distinguishing factor between the two, however, is the degree of importance of the measurable physical output of the requirement.
- Consulting services are usually intellectual in nature and are considered technical services the output of which is not equipment intensive. Advisory and project related services are typical consulting services; which includes: feasibility studies, project
management, engineering services, finance and accounting services, training and development, to mention a few.
- Non-consulting services, on the other hand, usually involve the used of equipment and specific methodologies to achieve their objectives. Some typical examples of non consulting services are: equipment maintenance and repair, operation and maintenance services, utility management, installation and maintenance services, surveys and field investigations, and similar.
Difference between goods and services
The below mentioned points help you in noticing how goods and services differ.
1. Ownership is not transferred – When buying a service, the service ownership is not transferred to the end customer. If you buy a car then the car is yours. But if you buy a ticket for an airline, then the airline is definitely not yours.
2. Intangibility – A good is a tangible object used either once or repeatedly. A service is intangible. The tangibility differentiator indicates the ability to touch, smell, taste and see which is absent in services. For example, How do you measure service? In a restaurant, the dish can be measured, but the efforts gone in making the same dish by two different chefs cannot be measured from the customer end. Same goes for large service corporates Safaricom and Airtel. The time and effort gone for giving service to the customer is intangible. Both ownership and intangibility are old school differences between goods and services.
3. Involvement of customer – When comparing the difference between goods and services we have to look at the involvement of customer as well. In services involvement of customers is much more than in products. For example – ATM‘s are services wherein customer has to use the machine. The same goes for vending machines as well as for self service restaurants.
4. Quality – On the quality front, with goods it is homogeneous, once produced the quality is uniform across all line of products. They can be separated from the seller/ provider and not dependent on the source for its delivery to the purchaser. With regard to service it is inseparable from the service provider and heterogeneous, where each time the service is offered it may vary in quality, output, and delivery. It cannot be controlled and is dependent on the human effort in achieving that quality hence is variable from producer,
customer and daily basis. For example – The major challenge of food chains like, Pizza is to give the same quality over and over again, whereas in local restaurants the quality of food may vary time to time from the same restaurant.
5. Evaluation of services is tougher – As quality varies from time to time and the involvement of customer is maximum, evaluation of different services becomes tougher. For example – SAFARICOM has more number of MPESA than AIRTEL. Thus we can
evaluate that MPESA service is better because they have more reach to the end customer. But how do we evaluate how a barber cuts your hair.
6. Inventories are absent – Production and consumption of services happens at the same time. This does not mean that the raw material is not present to provide the service. For example in a restaurant, a dish is made only after you order it. The raw material and the chef might be present. But the production does not begin unless and until there is a customer to consume the service.
7. Time is very important in services – Because inventories are absent in services, and because production and consumption is at the same time, time is a very important difference between goods and services. The keyword here is ―delay‖. There should be no
delay in providing the service. Thus the cab should arrive on time, the food should be prepared by time and the trains should run on time. Because time is important.
8. Another key distinction is perishability of services and the non-perishability of goods. Goods will have a long storage life and are mostly non-perishable. Whereas services are delivered at that moment and do not have a long life or cannot be stored for repeat use.
They do not bear the advantage of shelf life as in the case of goods like empty seats in airlines. With the production and consumption taking place simultaneously in services, it differs from goods on simultaneity and the provisions for quality control in the process.