The Danish National Procurement ltd. (Statens og Kommunernes Indkøbs Service A/S - SKI)

The Danish National Procurement ltd.(Statens og Kommunernes Indkøbs Service A/S - SKI)

EU Public Procurement Learning LabParis, March 7th 2005The Danish Experience - presentation by Mr. Søren Jakobsen, CEO

Søren Jakobsen, CEOwww.ski.dk / [email protected]

Page 2

The Danish Experience .Agenda.

• A few facts about the company SKI

• The company’s new strategy (as from Dec. 2002)

• SKI in an European perspective

• Co-ordinated purchasing

• Pro-active supplier policies, the local purchasing dilemma and SME’s

• The future strategy of SKI

• Our electronic tendering system; ETHICS

• Comments and questions

Page 3

A few facts about the company

Established in 1994 as a limited company.

Field of activity

Contributing to greater efficiency in the area of public purchasing by establishing and maintaining attractive framework agreements

Number of employees: 40

Number of framework agreements: approximately 45

Owners• Ministry of Finance (55%)• KL, the National Association of Local Authorities (45%)

The company is situated in the heart of Copenhagen

Page 4

A few facts about the company. SKI’s turnover.

0

1.000

2.000

3.000

4.000

5.000

6.000

1998 1999 2000 2001 2002 2003 2004

Regions Semi-public companies Municipalities Central authorities

2004

47%

30%

10%13%

1998

56%

25%15%4%

(million DKK.)

2.7483.082

3.7124.027 3.886

+12,2% +20,4%

+8,5% -3,5% 4.112+5,8%

2004+45% Estimate 2004

Total turnover: 5.100 + 900 = 6.000 m. DKK = 805 m. EURResult: 9,5 m. DKK

Budget 2005Total turnover:5.500 m. DKK = 740 m. EURResult > 1 m. DKK

5.128+23,3%

Page 5 -30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0 500.000.000 1.000.000.000 1.500.000.000 2.000.000.000

Turnover 2004 (DKK)

%-g

row

th f

rom

’03

to

’04.

XY= 342 m.DKK/23,3%

Travel services

Telephony & datatrans.

Cars

IT

Furniture

Auditing serv.

Cover articles

Kilde: Regnskab 2004

Energy

Food

Electrical articles

Lab. equipment

Kicthen hardware

PaperClothing

Office supply

A few facts about the company. Turnover breakdown by product areas, 2004.

Page 6

A few facts about the company. SKI’s focus on products and services.

Potential turnover

Le

vel o

f S

tan

da

rdiz

ati

on

Large

Hig

h

Small

Lo

w

SKI’s focus in 2003




IT-standard hardwareIT-standard software

Tele- and data communication

Vehicles

FoodTravel services

Office stationary

ElectricityGas

IT- and management consultancy services

Open Source

Printed matters

IT for education

Building and construction

Roadwork

Cleaning

Craftsman services

Hospital articles

Medicine

Eldercare

Special software

Special hardware

Ambulance-service & patient transport

IT operation

Clothing

Window-cleaning

Lawyer- and accountant-service

Handicap aid

Cleaning articles

White goods

Financial services

Newspapers/magazines

Advertising

Office machines

8 billion DKK

4 billion DKK

125 billion DKK

Furniture

Fuel

Hospital equipment

Administrative IT-systems

Scanning of construction

drawings

Page 7

The company’s new strategy (as from Dec. 2002).Mission.

• National Procurement Ltd. creates increased returns of scale in public procurement to the benefit of its customers and the welfare of the Danish citizens.

• The advantages are secured by maintaining close ties between customers as well as suppliers, but at the end of the day National Procurement Ltd. acts primarily in the interest of the public sector.

• The customers are secured a more attractive price and quality than they would be able to obtain themselves, procurement expenses are held to a minimum as there is no need for them to carry out own tenders and electronic procurement systems secure efficient buying.

• The suppliers are secured lower costs due to reduced public tendering and reduced marketing costs due to National Procurement Ltd.’s centralised marketing and e-procurement systems.

• National Procurement Ltd acts in accordance to commercial principles and at the same time promotes green and energy saving procurement.

Page 8

The company’s new strategy (as from Dec. 2002).Vision.

• By securing attractive framework agreements National Procurement Ltd. wants to play a central role in contributing to greater efficiency in the public procurement.

• By establishing close partnerships with the public procurement agents National Procurement Ltd. wants to establish and maintain framework agreements that are in demand, make a difference for our customers and strengthens the company.

• National Procurement Ltd. wants to improve the professional dialogue and cooperation with public procurement agents, suppliers to the public sector and consultants.

• National Procurement Ltd. is committed to a policy of acting as an innovative and committed employer with the capacity for attracting maintaining and developing skilled and motivated staff.

Page 9

The company’s new strategy (as from Dec. 2002).Vision.

Product oriented

Introvert

Customer focus

Framework contracts

Passive

Defensive

Operator

A place to work

Market oriented

Extrovert

Partnership focus

Framework contracts andservices in demand

Proactive

Active

Developer and integrator

An effective and challenging job

In other words; SKI is in the midst of a fundamental restructuring of the company …

Page 10

The company’s new strategy (as from Dec. 2002).Strategies and specific action plans.

1. Attractive framework agreements

1. Attractive framework agreements

4. Focused marketing activities

4. Focused marketing activities

5. Focus on profitability5. Focus on profitability

6. Active supplier-policy6. Active supplier-policy

7. Dissemination of e-procurement

7. Dissemination of e-procurement

8. Strengthen closepartner-relationships

8. Strengthen closepartner-relationships

• Discontinue unsatisfactory framework agreements• Strengthen analyses and follow-up• Strengthen user-involvement• Extend co-ordinated purchasing • Dissemination of knowledge

• Meetings for procurement agents• New marketing strategy• Partnership programmes• Education and training of customers• Offer consultancy• Publish guides to public procurement

•Adjustment of the organisation•Project-groups regarding tendering•Further improvement of qualification •Involvement of employees•Further improvement of management•Benchmarking of efficiency•Secure key qualifications • Customer prioritisation

• Differentiated targeting of customers• Prioritise use of resources to match

potential turn-over• Partnerships with consultancy firms

and architects• Commercial use of ETHICS• Strengthen financial control

• Strengthen debtor control• Strengthen employees knowledge of

expenditure

• Create benefits for suppliers• Marketing in cooperation with

suppliers• Consultancy regarding choice of

supplier• Precision of demands to suppliers• The Public Procurement Portal

must function according to demand• Development of an e-procurement

catalogue that is independent of e-marketplaces • Establish close relationships to:

• Shareholders• Interest groups• Trade organisations• Consultants• Media

Why? How?

Priority

•By securing attractive framework agreements National Procurement Ltd. wants to play a central role in contributing to greater efficiency in the public procurement

•By establishing close partnerships with the public procurement agents National Procurement Ltd. wants to establish and maintain framework agreements that are in demand, make a difference for our customers and strengthens the company

•National Procurement Ltd. wants to improve the professional dialogue and cooperation with public procurement agents, suppliers to the public sector and consultants

•National Procurement Ltd. is committed to a policy of acting as an innovative and committed employer with the capacity for attracting maintaining and developing skilled and motivated staff

2. Partnerships with public procurement agents

3. Revitalising the organisation

Page 11

The company’s new strategy (as from Dec. 2002). SKI’s turnover and result.

-6,000

-4,000

-2,000

0,000

2,000

4,000

6,000

8,000

10,000

3.000.000 3.500.000 4.000.000 4.500.000 5.000.000 5.500.000 6.000.000

Yea

rs r

esu

lt (

in m

illio

n D

KK

)

Total turnover from framework contracts (in 1.000 DKK)

19992000

2001

2002

2003

Estimate 2004

Page 12

SKI in a European perspective.A study of 12 central procurement agencies in 11 countries.

• Belgium

• Denmark

• Finland

• France

• Greece

• Ireland

• Italy

• United Kingdom

• Sweden

• Germany

• Austria

Page 13

Number of employees

2000

250

220

135

59

40

38

15

8

496

800

0 1000 2000 3000

Ireland

France

Italy

UK

Germany

Greece

Finland

Denmark

Austria

Belgium

Sweden

SKI in a European perspective.The size of the procurement agencies.

Relatively small specialised agencies. Consultancy and coordination of tendering and purchasing

Focused on framework contracts.All three agencies in this group are limited companies.

A more varied group.UK resembles the above group in most aspects.Greece concentrates on consultancy services.

Ireland has many other responsibilities – and is therefore a very large organisation.Ireland and France are characterised by a large degree of decentralisation.

Page 14

Turnover in prop. to population in 1000 €

0 0,05 0,1 0,15 0,2

Ireland

Denmark

Sweden

Austria

UK

Finland

Greece

France

Germany

Belgium

Italy

Yearly turnover in million €

0 500 1000

UK

Sweden

Ireland

Denmark

France

Germany

Austria

Greece

Italy

Finland

Belgium


2.749

DK has the second largest turnover if compared to the size of the population

Page 15


Number of framework contracts

1300

570

400

300

177

67

45

30

0 500 1000 1500

France

Germany

Sweden

UK

Austria

Belgium

Denmark

Italy • SKI has relatively few framework contracts

• In comparing one must remember that there is a difference in the breadth of the framework contracts

Ireland has not supplied data

Page 16


Average turnover per framework contract in million €

12,3

9,2

5

2,1

1,9

0,7

0,7

0,4

0 5 10 15

Denmark

UK

Italy

Austria

Sweden

Belgium

Germany

France • SKI’s relatively high turnover and few frame-work contracts results in a high average turnover per framework contract.

Page 17

SKI in a European perspective.SKI’s characteristics.

• The business oriented strategy has resulted in earlier framework contracts that had modest turnovers, were time-consuming or complicated have been unrolled.

• The companies’ status as a limited company and the actions of the companies’ board means that the strategy is very focused and that political considerations are reduced to a minimum.

• SKI has been spared time-consuming political accounts.

Page 18

Co-ordinated purchasing SKI’s primary goal.

• SKI’s main challenge: How can SKI secure attractive framework contracts, that are better than the contracts that each of it’s customers in the public sector can obtain themselves?– Exact knowledge concerning the customers

demands and needs through their active involvement in SKI’s process of generating framework contracts

– Co-ordinated purchasing where the customers before and during the tendering process are invited to pool their expected turnovers on the different framework areas

– Secure an effective competition amongst the potential suppliers.

Page 19

Co-ordinated purchasing.Basic principle.

One or more customers

Total turnover

Dis

cou

nt

fro

m s

up

plie

r










Additional discount th

rough co-ordination

Large and small SKI-customers both obtain larger discounts and/or lower prices through co-ordination than they could obtain themselves

Page 20

Co-ordinated purchasing. Co-ordination - before and after the tender.

Attractive framework contracts – pooling of expected turnovers

• Binding turnover expectations are

collected• Customers are

invited to join the process

Before thetender

• Market-analysis• Customer- and supplier- analysis

During thetender

• Turnover expectations are distributed between suppliers

After thetender

• Co-ordination with other customers

Page 21

Pro-active supplier policies, the local purchasing dilemma and SME’s.Goals.

• Purpose of the pro-active supplier policies:– Coordinate mutual expectations.– Secure that each and every collaboration between

supplier and SKI creates value for the customers.– The suppliers must be secured a benefit from the

collaboration.• SKI must be able to ”move customers” between suppliers.• Joint marketing of products and services.• Guidance in choice of supplier.

– Emphasize each suppliers special advantages.– Spill over-effect on the public procurement market, and the

private procurement market.– Provide an effective and long-term, viable competitive

situation on all of SKI’s framework contract-areas.• Involve both local/regional and international suppliers.• Reduce experienced barriers in relation to bidding on SKI’s

tenders.

Page 22

Pro-active supplier policies, the local purchasing dilemma and SME’s.The local purchasing dilemma.

• Attractive prices in relation to quality

• Economical savings

Economically most advantageous in a narrow sense (tied to the product or service)

Economically most advantageous in a local community sense

• Jobs• Effect on the local

community• Maintaining a high level

of service in the local community

• Tax-base• Preventing depopulation

It is tempting to favour the local business sector, but is it really worth it?

Is it appropriate to mix policies regarding local business and procurement?

The answer is no, because ”wrong” prices result in inappropriate arrangements and adaptations within the public sector as well as amongst the local suppliers.

SKI provides this SKI provides this alternativealternative

Page 23

Pro-active supplier policies, the local purchasing dilemma and SME’sThe local purchasing dilemma: EU.

• As a member of the EU, Denmark believes that an intensified competition and specialisation within The European Union will increase the welfare of the citizens.

• Notice from the Commission dated 11th of March 1998.– ”(…) The Scoreboard confirmed that public procurement is one of the key

areas of the single market where results do not yet meet expectations.(...)”– ”(…) Community-wide competition for public contracts will lead to an

efficient allocation of resources and thus enhance the quality of public services, improve economic growth, competitiveness and job creation. (…) (…and…) will help create a system which minimises opportunities for corruption.(…)”.

• From an article in the Danish magazine Økonomisk Ugebrev dated 23rd of February 2004.

– ”The EU-countries will miss the opportunity to harvest savings on large public procurement spendings, because the internal market is not functioning, when it comes to public procurement. Each country tends to its own national interests, and only in 1.5 percent of all the EU-tenders is it a supplier from a foreign country, that gets the contract. This figure is an estimate by the Commission … but nothing indicates that Denmark is a pioneer in this respect…”

Page 24

Pro-active supplier policies, the local purchasing dilemma and SME’sThe challenge of the SME’s.

• Many SME’s have been recently established and will therefore not be able to document years of stable economic development.

• It is difficult for SME’s to keep up with announcements concerning new tenders.– Tenders under the threshold amounts of the EU directives are not publicised

• Potential suppliers have difficulties in understanding the EU directives in principle and in practise and find it difficult to enter bids that are of the required quality.

• The public tendering process is perceived as long-drawn-out, complex and costly.

• Many technical specifications are either inaccurate or too detailed.

• The marketing resources of the SME’s are often limited, and the SME’s therefore find it difficult to make the public sector aware of them.

• It is often difficult to identify the public decision-makers.

• The public sector often has long-standing partnerships with existing suppliers, which means that the willingness to change supplier is often perceived as limited.

• The public sector continuously tries to reduce the number of suppliers in an attempt to make the public procurement more efficient, and this makes it more difficult for the SME’s that are met with tenders for larger and larger amounts.

• When bids are turned down the response from the public sector is often either non-existent or not very helpful.

SME’s are in a EU-context defined as:

• Small enterprises< 50 employees

• Small and medium-sized enterprises (SME’s) < 250 employees

Page 25

Pro-active supplier policies, the local purchasing dilemma and SME’sWhat can SKI do to ease access to public procurement contracts?

• More precise sourcing-strategy

– An active attitude towards local/ regional- and international suppliers roles and possibilities

• Wider publication of tender notices

• Increase communication regarding forthcoming tenders

– A plan of forthcoming tenders for the next 24 months will be published on SKI’s homepage.

– Meetings will be held with trade organisations and their members where schedules and selection criteria can be discussed.

• Strengthen confidence in the contract awarding system

– Keen compliance with the rules of treating bidders equally and non-discriminatorily

– SKI offers elaborate explanations to all bidders – whether chosen or not

– A complaint from a bidder shall not influence the possibilities of the supplier in question in later tenders

• Counselling regarding bidding

– Courses– Printed information

Before the tender

• Tender material made easy:– Better and easier comprehended

tender material and guidance– Focus on limiting size of material– Questionnaires with more multiple-

choice questions and fewer written answers.

– Precise and balanced selection criteria (relevance evaluated)

• Effective phase regarding hearing for comments

• Avoid lengthening or stopping the tender process.

• Shorter contract periods

• Package bidding for lots divided into for example geographical segments.

• As supplier can bid as itself, as a supplier with connected distributors or as part of a consortium.

• Assistance in bringing the contract to market

• E-commerce– SKI offers help in distribution of e-

commerce catalogues to all relevant portals.

• The new EU-directives– An electronic portal for publication

of tenders under the threshold amounts of the EU directives is planned

During the tender After the tender

Page 26

The future strategy of SKI. Primary focus points.

1. wave 2. wave 3. wave

•Marketorientation

•Revitalisation of the organisation

•Processes and systems

•Buildingup of competences

•A deepening and broadening of partnerships

•Knowledge sharing & value-based leadership

Today 2007

Page 27

Our electronic tendering system.

ETHICSETHICSElectronic Tender Handling, Information & Communication System

[inno:vasion]

Page 28

Modernising National ProcurementEuropean Union Procurement Focus

• eProcurement is seen as a driver towards eSociety

”In view of the rapid expansion of electronic purchasing systems, appropriate rules should now be introduced to enable contracting authorities to take full advantage of the possibilities afforded by such systems...”

”In view of new developments in information and communications technology, and the simplifications these can bring in terms of purchasing contracts and the efficiency and transparency of procurement processes, electronic means should be put on par with traditional means of communications and information exchange.”

”The use of electronic means lead to savings in time. As a result, provisions should be made for reducing the minimum periods where electronic means are used ... ”

EU draft proposal dated May 14, 2002 [inno:vasion]

Page 29

ETHICS Background:The Challenge: IT Tender in 1995

• More than 30.000 pages from 36 vendors

• Highly varied formats

• Decision process manual – discussing and voting

• Contract terms only in paper archives.

• ... Extremely cumbersome

[inno:vasion]

Page 30

Scope of ETHICS:

• All phases of the Tendering Process– Contract administration, market analysis, requirement assessments,

planning, announcements, questionnaires, execution and evaluation

• Best Practices – based on practical experience

• Ease of use – intuitive user interface

• Based on Standard Software Tools – flexible implementation

• Easy Integration with existing System through Open Standards

Supplier

Info

Supplier

Info

Collect

ion

Collect

ion

Tender

Info

Tender

Info

Dis

sem

inati

o

Dis

sem

inati

o

nn

Tenderi

ng

Tenderi

ng

Contr

act

ing

Contr

act

ing

Tra

nsa

ctio

n

Tra

nsa

ctio

n““Buyin

g”

Buyin

g”

Delivery

Delivery

Logis

tics

Logis

tics

ETHICSETHICS Buying Buying phasephase

TheThe Procurement Process

[inno:vasion]

Page 31

Benefits of ETHICS: Net based Tender Execution

• Browser based clientsBrowser based clients• Multiple, concurrent language Multiple, concurrent language

supportsupport• On-line announcementsOn-line announcements• XML based questionnaire design XML based questionnaire design

tooltool• eTenderingeTendering

- Document repositoryDocument repository- Off-line capabilitiesOff-line capabilities- Digital SignaturesDigital Signatures- Encryption and Time stampingEncryption and Time stamping

• Browser based clientsBrowser based clients• Multiple, concurrent language Multiple, concurrent language

supportsupport• On-line announcementsOn-line announcements• XML based questionnaire design XML based questionnaire design

tooltool• eTenderingeTendering

- Document repositoryDocument repository- Off-line capabilitiesOff-line capabilities- Digital SignaturesDigital Signatures- Encryption and Time stampingEncryption and Time stamping

• Transparent decision supportTransparent decision support• Collaboration Tools for Collaboration Tools for

evaluatorsevaluators• Results based on Gap analysisResults based on Gap analysis• Transparent and precise feed Transparent and precise feed

back to vendorsback to vendors

• Transparent decision supportTransparent decision support• Collaboration Tools for Collaboration Tools for

evaluatorsevaluators• Results based on Gap analysisResults based on Gap analysis• Transparent and precise feed Transparent and precise feed

back to vendorsback to vendors

Client Features

Internal Tools

Page 32

Experiences using ETHICS:

• Productivity doubled with Productivity doubled with same Head Countsame Head Count

• 50% change of Staff50% change of Staff• Easy involvement of new Easy involvement of new

usersusers• No Complaints or legal No Complaints or legal

Issues with VendorsIssues with Vendors• Double-digit growth in Double-digit growth in

turnover on contractsturnover on contracts• Highly effective Highly effective

management overviewmanagement overview• Effective knowledge Effective knowledge

management toolsmanagement tools

• Productivity doubled with Productivity doubled with same Head Countsame Head Count

• 50% change of Staff50% change of Staff• Easy involvement of new Easy involvement of new

usersusers• No Complaints or legal No Complaints or legal

Issues with VendorsIssues with Vendors• Double-digit growth in Double-digit growth in

turnover on contractsturnover on contracts• Highly effective Highly effective

management overviewmanagement overview• Effective knowledge Effective knowledge

management toolsmanagement tools• No ComplaintsNo Complaints• Easy to use/no training Easy to use/no training

neededneeded• Easy to adapt to own Easy to adapt to own

working working stylestyle

• More effective tender More effective tender procedureprocedure

• Re-use of documentsRe-use of documents• Trusted on line serviceTrusted on line service

• No ComplaintsNo Complaints• Easy to use/no training Easy to use/no training

neededneeded• Easy to adapt to own Easy to adapt to own

working working stylestyle

• More effective tender More effective tender procedureprocedure

• Re-use of documentsRe-use of documents• Trusted on line serviceTrusted on line service

National Procurement

Vendor Feedback

Page 33

ETHICS users outside SKI:

• The National Association of Danish Municipalities: Tender for Electronic Document handling – Autumn 2003

• County of Funen Denmark: Electronic patient Journal System – Spring 2004

• Association of Counties + 4 counties in Denmark: Medicine Module for epj – Spring 2004

• UMIC – Digital Task Froce for Portugal: 6 months contract for ETHICS signed April 2004 [inno:vasion]

Page 34

Our electronic tendering system.ETHICS is a central element in our new strategy.

EfficiencEfficiencyy

CompliancCompliance with EU e with EU rulesrules

TransparenTransparencycy• Internal productivity

•Development and re-use of knowledge and legal terms•Workflow controlled execution•Document Library•Easy involvement of new users•Management overview and control

• Growth in turn-over•Strengthen user-involvement and accelerate use of contracts

• Efficient use of experts in the evaluation phase• Help customers run own tenders

• No complaints from vendors have lead to legal issues

•Ability to handle an increasing number of complaints in the future

• Involvement of users easy and meaningful

Besides being an exciting business opportunity ETHICS offers:

• Complies with thresholds, time frames, methods and standards

Page 36

Comments and questions …

Documents

The Danish National Procurement ltd. (Statens og Kommunernes Indkøbs Service A/S - SKI)