The Danish National Procurement Ltd. (Statens og Kommunernes Indkøbs Service A/S – SKI) How can we get more money for those that it’s really all about?

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

How can we get more money for those that it’s really all about?

Innkauparáðstefna RíkiskaupaGrand Hótel Reykjavík, 8. nóvember 2005Modernization of public procurement.By Søren Jakobsen, CEO.

2.


Modernization of public procurement.Agenda.

• A few facts about the company SKI

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

• SKI in an European perspective

• Our electronic tendering system; ETHICS

• The future strategy of SKI

• Comments and questions

3.


A few facts about the company

Established in 1994 as a limited company.

Business modelA percentage (typically 1%) of turnover on contracts from vendors

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

Number of employees: 43

Number of framework agreements: approximately 55

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

The company is situated in the heart of Copenhagen

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% 2004

Total turnover: 5.100 + 1.000 = 6.100 m. DKK = 880 m. EURResult: 9,1 m. DKK

Est. 2005Ordinary turnover:>+25%

5.128+23,3%

+24%

+36%

+37%

+13%

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

IT-outsourcing

Scanning of construction

drawings

7.


The company’s current 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.

8.


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

• By securing attractive framework agreements the Danish 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.

10.


The company’s current 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

11.


The company’s current strategy (as from Dec. 2002). SKI’s primary goal.

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

– Exact knowledge concerning the demands and needs of the customers 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.

12.


The company’s current 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

2004

13.


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

14.


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.

15.


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

16.



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

17.



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.

18.


SKI in a European perspective.SKI’s characteristics.

• The business oriented strategy has resulted in 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 from time-consuming political accounts.

19.


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

[inno:vasion]

20.


The future strategy of SKI. Primary focus points.

1. wave 2. wave 3. wave

•Marketorientation

•Revitalisation of the organisation

•Processes and systems

•Building up of competences

•A deepening and broadening of partnerships

•Knowledge sharing & value-based leadership

Today 2007

21.


Comments and questions …

Documents

The Danish National Procurement Ltd. (Statens og Kommunernes Indkøbs Service A/S – SKI) How can we get more money for those that it’s really all about?