Dyadic capabilities in implementing performance-based public procurement

Purpose This study aims to provide new understanding on operational and dynamic capabilities supportive to the implementation of performance-based public procurement by focusing on dyadic capabilities of a supplier and a buyer. Design/methodology/approach The study is based on the qualitative analysis of 20 interviews with informants representing Finnish public organizations and their private sector suppliers. The analysis is aligned with a theoretical framework connecting the phases of procurement and the capability types studied. Findings The findings of the study present the role of operational and dynamic capabilities of a buyer and a supplier in the implementation of performance-based procurement at public procurement phases. Preprocurement phase is found to greatly benefit from all three dynamic capabilities, while operational capabilities suffice in the contracting phase. Social implications Increased understanding on capabilities needed in performance-based procurement can increase the chances of success in reaching better value for money of public services and developing supplier markets. Originality/value The study contributes to the literature on performance-based public procurement and value-based selling by taking a dyadic approach to the operational and dynamic capabilities needed in business with an emphasis on performance. As the focus in public procurement shifts increasingly from resources to performance, involving a joint effort between buyer and supplier, the study provides insights into role of dyadic capabilities and explains how dynamic and operational capabilities together support the phases of performance-based procurement implementation in the public sector.