Insights

Risk Management

Supplier concentration risk in public contracts

The structural vulnerabilities created by over-reliance on single suppliers in critical service delivery.

The Procurement Perspective™ · By D. Ricardo Bailey · 7 min read

Supplier concentration risk arises when an institution depends heavily on one supplier, or on a very small group of suppliers, for goods or services that matter to delivery.

The risk is not limited to a contract that is already in difficulty. It begins earlier, when the market is assessed, the procurement strategy is selected, and the institution decides how much resilience it needs from its supply base.

A concentrated market does not automatically mean that a procurement decision is weak. Some markets have few capable providers. The practical question is whether the procuring entity understands the dependency it is creating and has made a proportionate plan for it.

For critical services, that plan may include market engagement, realistic qualification requirements, phased competition where appropriate, transition planning, performance information, and clear contingency arrangements. Each measure should fit the requirement and the market evidence.

The lesson is simple: value for money is not only the price and quality of one award. It also includes the institution's ability to continue delivering when a supplier cannot perform, chooses not to compete, or becomes the only practical option.