© OECD

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SIGMA Regional Conference on

Public Procurement

Centralised purchasing in a decentralised

procurement environment – a new EU

Member State’s practical experience

Ivana Franjković

State Office for Central Public Procurement, Croatia

Beirut, 3 June 2015

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Content

• Centralised purchasing for products and services commonly used within the public administration – the Croatian example

• Value for money considerations in setting up a centralised purchasing body – economic benefits

• Potential risks of centralisation and how to mitigate them

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Establishment of the CPO

Established in 2010 by the Regulation on CPO (Official Gazette 138/09)

Mission: The Office shall set up an effective system of central public

procurement with responsibilities towards taxpayers, the State Budget,

persons subject to central procurement, and all economic operators involved

in the environment of public procurement with a view to creating savings in

public consumption, while bearing in mind an optimum relationship between

the quality and the price of procured supplies, works and services, respect of

ecological and socially acceptable principles, sustainable procurement and

the encouragement of SME."

Number of civil servants: 16

N° of procurement categories: 17

N° of clients: 34

N° of clients under the Reform

measures (5 categories): 600

www.sredisnjanabava.hr

All bidding documents, FAs available

on-line

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PROCUREMENT CATEGORIES 1. OFFICE FURNITURE 2. OFFICE SUPPLIES 3. EXPENDABLE MATERIALS 4. OFFICE EQUIPMENT 5. COMPUTERS AND COMPUTER

EQUIPMENT 6. TELECOMMUNICATIONS SERVICES

–MOBILE 7. TELECOMMUNICATIONS SERVICES

–/ LANDLINE 8. VEHICLES

9. REPAIR AND MAINTENANCE SERVICES OF VEHICLES

10. CAR TYRES 11. FUEL 12. ELECTRICITY 13. POSTAL SERVICES 14. INSURANCE SERVICES 15. SOFTWARE LICENCES 16. CLEANING 17. MAINTENANCE OF OBJECTS IN

THE OWNERSHIP OF THE REPUBLIC OF CROATIA

In addition, Government may appoint the CPO for a specific

procurement category, or specific users Under the intervention measures of fiscal consolidation in 2014, the Government adopted Decisions related to CPO clients/mandate (additional 600 users for 5 categories)

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Tasks of the CPO

• planning the implementation of procurement procedure;

• establishing procurement requirements for products and services;

• coordinating the activities among the clients;

• market research;

• implementing procurement procedures;

• contracting;

• setting up and managing the database of awarded contracts and framework agreements;

• monitoring the execution of contracts and framework agreements;

• analysing the efficiency of central procurement through continuous monitoring of savings made;

• drawing up proposals of decisions, specifying products and services purchased through central procurement.

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CPO in numbers

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Total number of framework agreements or

contracts 133

Number of currently active FA or contracts 47

Current number of vendors 49

Number of inactive FA or contracts 86

Total value of all current FA (in HRK, without

VAT) 1.367.232.450

Number of appeals in 2013 and 2014

(15 rejected, 9 dismissed, 1 withdrawn, 6

canceled decisions )

29

(in 11

procedures)

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VALUE OF ACTIVE FRAMEWORK AGREEMENTS

CONCLUDED BY CPO

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OFFICE SUPPLIES 8.61%

CLEANING SUPPLIES

1.88%

MOBILE PHONE SERVICES

0.96%

VEHICLES 16.01%

TYRES FOR VEHICLES

2.71% FUEL 25.95%

ELECTRICITY 9.27%

POSTAL SERVICES 18.46%

INSURANCE 3.27%

LICENCES 12.33%

CLEANING SERVICES

0.56%

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Other results

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• Tender documents of the CPO is used as a

template by many CA

• Model of technical consultations

• For most of 600+ new beneficiaries of central public procurement this is the first time to use framework agreements concluded through the central procurement procedure.

• Help desk at the CPO - Support for clients/sharing of experience

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Reorganization & administration capacity

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• Regulation 3/2015

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Value for money considerations in setting up

a CPB – economic benefits

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better prices and economies of scale together with time savings in public authorities.

lower organisational / transaction costs

professionalisation of the implementation of procurement procedures

increased efficiency by creating value-added supply chain management in the public sector

greater use of framework agreements and modern electronic means

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Economic benefits in the context of CPB

• How to measure sucess of the CPB?

• Potential savings based on EU experience…

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Procurement

category

Potential savings

(%) Fuel 5-7%

Cars 10-15%

Car Maintenance 5-10%

Cleaning Services 20-30%

PC / server 10-20%

IT accessories 7-10%

Land-line, Internet 10-20%

Telecom mobile network 6-9%

Telecom hardware 5-15%

Office Supplies 14-22%

Furniture 10-15%

Source: Action plan for the establishment of the central purchasing body and introducing a

system of central procurement; the Government and the Ministry of Economy

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Potential risks of centralisation and how to mitigate them

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• the risk of market concentration and the development of a monopolistic position in the market of an important and powerful bidder

• position of SMEs facilitating and encouraging the participation of the subcontractors or participation in a consortium

• Lack of professional and specialised knowledge regarding the subject matter of procurement of the clients profesionalisation of procurement officers (the CPO and clients)

• Lack of communication with and between the stakeholders causing delay in the implementation of procedures Communications strategy, Advisory Commitee

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Potential risks of centralisation and how to mitigate them

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• Lack of standardisation / catalogues of supplies

• Slowness in implementation of other Strategies (for example Internet for all central state)

• Fluctuations of employees

• Inability for timely completion of procedures (within 50 days of the start of the procedure) due to repeated appeals

• Justifying certain procurement categories

• Complaints

• Lack of modern IT infrastructure for the central procurement system

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Development of a CPO IT system

• 3 modules:

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Phase before conducting

the procedure:

Procurement Planning and aggregation of demand

Tendering phase

Publication of tender,

submission of tenders, analysis,

conclusion of a framework agreement

Phase after the

conclusion of the FA

Monitoring the execution of contracts

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Conclusions & Lessons learned

• Preparation phase might take longer (depends on the quality of input data, way it is organised etc…)

• Specialised knowledge connected to subject matter of procurement / PPA Include external civil servants (from the ministries) to

consolidate requirements and participate in preparation of tender documentation

Increase the involvement of external experts and consultants in order to compensate the lack of necessary knowledge;

Involve different relevant institutions (Audit office, regulatory agencies etc...) and academic institutions

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Conclusions & Lessons learned

• Good communication with clients/bidders

• Knowing the market/needs of clients

• Introducing standards & IT support

• Simple FA to use, better contract conditions, guidelines for clients

• Adopt/Revise Strategy; Code of conduct

• Flexibility of FA

• Introducing standards & IT support

• Step by step approach

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