Purchasing manual Karolinska Institutet. Latest web version:

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1 Purchasing manual Karolinska Institutet Latest web version: 16/12/2016 1

2 Table of Contents 1 Introduction Public procurement How does public procurement differ from purchasing in the private sector? The Public Procurement Act (LOU) in brief When is LOU to be applied? What are the contents of LOU? Fundamental principles The principle of non-discrimination The principle of equal treatment The principle of proportionality The principle of openness The principle of mutual recognition Threshold Procurement procedures Procurements in excess of the threshold Open procedure Restrictive procedure Negotiated procedure Competitive dialogue Procurements below the threshold Simplified procedure Selective procedure Direct award Estimation of the contract's value Grounds for award of contract Shall and should requirements Are there any exceptions to LOU? Agreement

3 4.9.1 Contract Framework agreement Governmental framework agreements Karolinska Institutet's framework agreements What happens if a mistake is made? Procurement review procedure Reviewing the effectiveness of an agreement Procurement fines Damages Bribery and impartiality Is it just about compliance with the law? Other negative effects of non-compliance Other positive effects of compliance Identifying the requirement in good time KI's purchasing organisation The Procurement Unit Purchasing Coordinators The Purchasing Group Purchasing at Karolinska Institutet Planning Defining the requirements of the business Needs analysis Life-Cycle Cost Analysis Involving the end user Consider the requirement from a KI perspective Observing sustainability issues Estimating the value Negotiations pursuant to the Swedish Co-Determination at the Workplace Act (MBL) Duty-free import of certain goods Market analysis Why is a market analysis necessary? Contact several different suppliers

4 Equal treatment Select the procurement procedure Is there a framework agreement? Draw up the contract documents Contract documents "What's done is done" General information regarding requirements and conditions in the contract documents Implementation Publication How does the supplier locate the procurement? Responding to questions and providing additional information Questions and answers Alterations to contract documents Submission of tenders The opening of tenders and confidentiality Correction of tenders The contracting authority decides what can be permitted Only certain corrections, clarifications and supplementations are permitted Reviewing and evaluating the tenders Qualification of suppliers Checking "shall" requirements Evaluation of "should" requirements and price Abnormally low tenders Negotiations within the procurement process What is the aim of negotiation? What can the negotiation cover? Only negotiate with suppliers who satisfy the requirements Neither can new requirements be introduced into the contract documents Points to keep in mind in negotiations Withdrawal of the invitation to tender Award of contract

5 Contract award decision Communication of the contract award decision The procurement ceases to be confidential Standstill period Signing of the procurement contract The content of the procurement contract The time for signing Completion and documentation Evaluation and monitoring Evaluation of the procurement Evaluation of the procurement can encompass: Monitoring of the contract and multiple purchase agreements The distribution of activities and responsibilities Invoice handling Purchasing from a procured supplier Purchasing from a non-procured supplier Some definitions Glossary English English-Swedish glossary of procurement terms Swedish-English glossary of procurement terms Legal acts Acts Ordinances EU directives EU regulations

6 1 Introduction This purchasing manual is intended to serve as a guide for employees at Karolinska Institute (KI) who are involved with the purchasing of goods or services. The latest version of the purchasing manual can be found on the KI intranet. If you want to ensure that you have the latest version, please visit The purchasing manual is a living document, the content of which will be continuously developed and updated by the Procurement Unit Certain sections of the document will be developed following consultation with the relevant users. KI is a public authority and complies as such with the Public Procurement Act (2007:1091) (LOU - hereinafter referred to as LOU). The main implication of this complicity is that KI is obliged to investigate and utilise the competition that exists in the relevant market when there is a purchasing requirement. This allows all interested parties the opportunity to offer KI that which it requires and, as a result of the competition that this creates, KI's financial resources come to be utilised in the best possible manner. Purchasing, acquisition, procurement, ordering or call-offs are some of the terms used when a product is bought from an external supplier. "Product" usually refers to goods or services - everything from advanced measurement instruments or light bulbs to IT consulting or cleaning services. A supplier can be anything from the local newsagent to a multinational IT company. The buying process can be conducted in various ways depending on the nature and value of that which is being bought and, as a result, different terms are used. The Procurement Unit is the unit within the University Administration and the Finance Office that is responsible for purchasing issues at KI. The unit provides all parts of the organisation with advice and support regarding all types of purchasing issues. Much of the unit's work involves the application of the relevant regulations, including LOU which plays a central role. LOU contains criteria for determining the regulations that apply to a particular purchase and for the processes that are to be conducted when purchasing. The text that follows provides the reader with a brief introduction into the context in which LOU arose and how it works. This is followed by a general overview of public procurement, in addition to the provisions of the Act and its areas of application. To conclude, a description is provided of how purchasing is conducted at KI. The purchasing manual is primarily intended to constitute a tool to enable the identification and management of purchasing issues at all levels throughout the organisation, rather than being a manual that the individual user can utilise when conducting of their own purchases. The manual provides a general description of the contexts and processes that characterise public procurement. In future editions, the author also hopes to be able to supplement the content with sections that offer more practical help, as is befitting a document that is intended to be a guide. However, the purchasing manual will always be a tool to complement the collaboration and dialogue that the Procurement Unit hopes to have with all parts of the KI organisation. 6

7 2 Public procurement Every year, the Swedish public sector purchases goods, services and contracts to an estimated value of SEK 500 billion. The State, the county councils and the municipalities purchase everything from office materials, sports arena and consulting services, to health and medical care. These activities have a major impact on the national economy. Public authorities have to follow certain regulations in their purchasing, in order to make the best use of public funds and to utilise the competition that exists in the market. This is regulated by the public procurement regulations. The public procurement regulations are based on EU directives and are largely similar throughout the entire EU. The basic principles that permeate the regulations are grounded on objectivity and openness. According to the regulations, public authorities are to be objective and choose their suppliers based only on that which they are purchasing. Other considerations, such as loyalty to certain or previous suppliers, are not to affect their decision. The choice of supplier is to be made for commercial reasons and will be determined by the supplier that offers the best goods or services on the best terms. The regulations are designed to provide all suppliers with the opportunity to compete on equal terms in each procurement. 3 How does public procurement differ from purchasing in the private sector? The public sector follows different regulations to those of the private sector, since their purchasing is financed by public funds. For example, when a purchase is to be made, a contracting authority cannot directly approach a previous supplier or one which has been recommended. A public procurement implies that all companies who satisfy basic requirements have the opportunity to sell their goods or services to the public authority concerned. The public authority shall at all times remain objective and neutral to the companies wishing to become suppliers and the whole procurement process is to be characterised by openness and proportionality. A public procurement sometimes takes longer to complete than a private sector purchase. In the majority of cases, the public authority will first advertise the goods or services that it wishes to procure and draw up detailed contract documents specifying what it requires and the demands that are to be met by the supplier. Companies submit tenders corresponding to the contract document in which they describe what they can offer and the relevant price. The public authority subsequently qualifies and evaluates the tenders in order to determine which supplier or suppliers will be awarded the contract. Following the decision, a time limit comes into force during which other potential suppliers can appeal the decision. This procurement process is governed, inter alia, by LOU. Minor procurements can be conducted relatively quickly, whilst major procurements can take longer to complete. 7

8 4 The Public Procurement Act (LOU) in brief 4.1 When is LOU to be applied? The Public Procurement Act (2007:1091) (LOU) governs how public procurements are to be conducted. As a general rule, agreements incorporating financial conditions that are entered into by a contracting authority and a supplier must be preceded by procurement procedures. Government agencies, municipalities, county councils and certain bodies governed by public law are classed as contracting authorities. Several municipal and government-owned limited companies must also adhere to LOU. Organisations that comply with LOU are therefore known as "contracting authorities", regardless of whether or not they have authority status outside of procurement issues. 4.2 What are the contents of LOU? The Swedish Public Procurement Act (LOU) contains 240 paragraphs divided into 18 chapters that describe the various types of procurements, when they are to be conducted and the processes and regulations involved when conducting procurements. LOU also contains regulations regarding when a procurement can be reviewed, and when a procurement fine 1 and damages may be applicable. 4.3 Fundamental principles In addition to that stated in LOU, there are also a number of fundamental principles that are always to be observed with regards to procurement: The principle of non-discrimination The principle of non-discrimination implies that suppliers must not be discriminated against due to their nationality (i.e., their citizenship, the country in which they are based or their country of operation). The contracting authority may not specify requirements of which only Swedish companies are aware or which only Swedish companies are capable of satisfying; this applies even in cases when the contracting authority does not expect to receive tenders from overseas suppliers. Tenderers from another town, and those applying to tender shall be treated in the same manner as companies from the "home" municipality. An example of a transgression of the non-discrimination principle would be to require that the supplier has an office in Stockholm The principle of equal treatment The principle of equal treatment implies that all suppliers shall be subject to the same preconditions. For example, all suppliers must have simultaneous access to the same information, so that no particular 1 Procurement fines are a type of penalty that the contracting authority may be obligated to pay. 8

9 supplier has any advantage over the others. For example, the procurer may not accept a late tender, since the same regulations and time limits are to apply to everyone. An example of a transgression of the equal treatment principle would be when a specific supplier receives information, i.e. via a phone call, that is significant for the procurement, whilst the same information is not communicated to other suppliers The principle of proportionality The principle of proportionality implies that requirements and conditions for the conducting of a procurement shall in reasonable proportion to that which is to be procured. Measures undertaken by the contracting authority may not exceed that which is necessary for the procurement in question. An example of a transgression of the proportionality principle would be when the contracting authority makes functional demands of a product for which it has no requirement The principle of openness The principle of openness (or the transparency principle) implies that procurements shall be characterised by openness and predictability. Information that is relevant to the procurement may not be kept secret, the procurement is to be publicly advertised and the suppliers who have participated in the tender procedure are to be informed of the result. The procurements are to be public and the contract documents are to be predictable, i.e., they are to be clearly formulated and state all the requirements that are to be satisfied. An example of a transgression of the principle of openness would be when the contracting authority allows the evaluation of the tender to be affected by a particular circumstance that was not mentioned in the contract documents The principle of mutual recognition The principle of mutual recognition implies that certification issued by the competent authorities in one member state shall also apply in other EU/EEA countries. An example of a transgression of the principle of mutual recognition would be contracting authority's non-approval of a certificate issued by a foreign nation tax authority that is equivalent to the corresponding certificate issued by the Swedish Tax Agency. 4.4 Threshold When goods, a service or a construction contract are to be procured, various regulations apply depending on whether the value falls below or exceeds the "threshold". The threshold is established 9

10 centrally by the EU and is adjusted every other year, most recently on 1 January The total value of the procurement must therefore be calculated before you can see which regulations are to be applied. The threshold for goods and services for government agencies is just in excess of SEK 1.17 million. When calculating the value of procurement, the figure referred to is always exclusive of value-added tax. Whether or not the threshold is exceeded is important in two respects. Firstly, different procedures are applied for procurements above or below the threshold; secondly, procurements that exceed the threshold are advertised so that they are visible to suppliers throughout the entire EU. Procurements below the threshold only need to be advertised so that they are visible to suppliers within Sweden Procurement procedures Procurements in excess of the threshold When the estimated value of goods or services exceeds the threshold, the contracting authority may choose freely between conducting an open or a restrictive procedure. According to LOU, negotiated procedure and competitive dialogue may only be used in specified cases Open procedure In an open procedure, all suppliers may submit a tender. The contracting authority advertises the procurement and interested suppliers request contract documents. Negotiations with suppliers are not permitted. Open procedures occur frequently for procurements above the threshold Restrictive procedure If a contracting authority chooses a restrictive procedure, all suppliers may apply to participate, but only those selected by the contracting authority may submit a tender. Contract documents are then sent out to the selected parties simultaneously. Only tenders from the selected parties may be examined by the contracting authority. Negotiations with suppliers are not permitted. Restrictive procedure is therefore conducted in two stages and can be applied for procurements in a market where there are many players and where a reduced number of final tenders is required Negotiated procedure In a negotiated procedure, the contracting authority invites selected suppliers to tender and then negotiates contract conditions with one of more of them. As with restrictive procedure, there is first a qualification and then a restriction in the number of those applying to tender. The authority 2 Exceptions in this respect apply for the procurement of "Part B Services" which, regardless of their value, can be handled in the same way as if they did not exceed the threshold. 10

11 subsequently invites at least three qualified tender applicants to submit a tender or to negotiate. Negotiated procedures may only be applied in exceptional cases Competitive dialogue In particularly complicated procurements, competitive dialogue may be employed. This type of procurement procedure can be used above or below the threshold. This occurs under the proviso that it is not possible to allocate the contract via open or restrictive procedure, or through simplified or selective procedure. The competitive dialogue procedure implies than an authority that knows the results it wishes to achieve from a procurement, but that cannot decide how this result is to be obtained, can invite suppliers into a process of dialogue, through which they arrive at a solution regarding how the authority's requirements can best be met Procurements below the threshold If the estimated value of the procurement falls below the threshold, the authority can choose freely between conducting a simplified or a selective procedure. These regulations also apply to the procurement of Part B Services, regardless of their value. Part B Services are those that are considered to only be of interest to, or which can only be conducted by, national suppliers. Other services are known as Part A Services. If the value is less than the fixed monetary limit, SEK , a direct award can be made. Competitive dialogue may also be applied below the threshold Simplified procedure If a contracting authority selects a simplified procedure, all suppliers that the right to participate. The suppliers submit tenders and the contracting authority may negotiated with one or more of them. Please note that, despite its title, simplified procedure is restricted by certain regulations and should not be confused with "direct award". In principal, simplified procedure corresponds to the open procedure that applies to procurements above the threshold Selective procedure Within a selective procedure, all suppliers have the right to apply to submit tenders and the contracting authority then invites several suppliers to do so. The contracting authority may negotiate with one or more of them. In principal, selective procedure corresponds to the restrictive procedure that applies for procurements above the threshold, and it can be applied in the same manner if there are many players in the market or where a reduced number of final tenders is required. 3 This monetary limit applies from 1 January

12 Direct award In the case of smaller procurements where the estimated value is less than the fixed monetary limit, SEK (from 1 January 2018), the contracting authority may make a direct award, i.e. make a procurement without publication of a contract notice. This is done in cases where a normal tender procedure would incur excessive administrative costs in relation to the size of the procurement. If the value exceeds SEK 100,000 there is a documentation requirement on what is being procured, why and by whom. Several suppliers should compete for the contract even when procedure is used, at least three (3) if possible. Instructions and a form for documentation are available on the intranet. Direct award can also be used in certain specific situations that are stated in legislation, i.e. if there are "overriding reasons".4 With direct award, the contracting authority should also contact several potential suppliers in order to obtain the most beneficial tender. The importance of the contract's value for the choice of procurement procedure can be illustrated in the following manner: Contract value Form of procurement Open procedure Restrictive procedure Negotiated procedure Competitive dialogue SEK Simplified procedure 4 Overriding reasons refer primarily to unforeseen events over which the authority itself had no control. The fact that the contracting authority finds itself pressed for time as a result of a lack of planning does not constitute a right to conduct a direct award. 12

13 Selective procedure Competitive dialogue SEK Direct award Estimation of the contract's value When estimating the contract's value, attention should be paid to the maximum total amount that will be paid during the contract period. This means that the calculations should be made on the basis that any options and renewals of contracts will be exercised. When assessing whether the value is above or below the monetary limit for direct award, attention should not just be paid to the value of the current agreement but to all procurements of the same type that the contracting authority conducts in the course of a financial year. Attention must also be paid to the authority's future requirements and its needs in other areas. As was mentioned previously, both the threshold and the monetary limit are stated exclusive of VAT. 4.6 Grounds for award of contract The tenderer(s) who offer(s) either the lowest price or the tender that is the most economically advantageous will be awarded the contract. It is to be decided in advance which of these alternatives is to be applied as a basis for the award of contract. The most economically advantageous tender refers to the fact that a combination of several different criteria is taken into consideration. These could include price, quality and delivery time. Naturally, Lowest price refers to the supplier who offers the lowest price. Please note however that the winning tender must still satisfy the specified requirements. This means that it is possible to have very high specified requirements even in a lowest price procurement, which would mean that only those suppliers who satisfy the requirements would be eligible for award of the contract. But from these tenders, the lowest price wins. If the contracting authority has a very good level of knowledge of the relevant market, if it knows exactly what it wants and is not interested in any "extras", then it may be appropriate to have the lowest price as the grounds for award of contract. 13

14 4.7 Shall and should requirements A procurement's contract documents often contain both "shall" and "should" requirements. All "shall" requirements must be unconditionally satisfied by the tenderer; if not, the tender will not even be considered. The "shall" requirements normally refer to certain fundamental prerequisites, such as the tenderer's credit-worthiness, technical and professional capacity and the minimum levels that the tenderer is capable of providing. "Should" requirements refer to that which the contracting authority desired, but which do not have to be satisfied; a value is attached to them however in the evaluation of a tender. As an example of this, there might be a requirement that a car shall have an engine that produces at least 100 hp, whilst there may also be a requirement that the same car should produce 150 hp. In the evaluation process, all cars producing less than 100 hp are disqualified. The remaining cars are allocated points in relation to the amount by which their engines exceed 100 hp, where maximum points are allocated when 150 hp is reached. If price is also a factor in such procurements, a less powerful car can have a greater value attached to it than a more powerful one, if the tenderer compensates for this lack of power with a lower price. The contracting authority therefore decides what they "need to have and what would be "nice to have. A rule of thumb when deciding whether the requirements for a product or services should be expressed as "shall" or "should" requirements is that the contracting authority could potentially sign a contract with any of those suppliers who satisfy all the "shall" requirements. 4.8 Are there any exceptions to LOU? In certain situations, procurement does not need to be conducted in accordance with LOU regulations. The Act provides for a number of provisions that are described in more detail in preliminary work and case law. Provided that certain criteria are met, situations where exceptions are allowed might involve the following: certain research and development services certain goods used for research and development purposes technical reasons exclusive rights overriding urgency overriding reasons unforeseen additional services Decisions regarding exceptions from LOU shall always be made in consultation with the Procurement Unit. 14

15 4.9 Agreement Each procurement results in an agreement between the contracting authority and the supplier(s) who won the procurement. In accordance with LOU, the agreement shall be made in writing and it may either be a contract or a framework agreement Contract When the procurement that has been conducted is an object procurement, i.e. the procurement concerns a specific volume of goods or services, a contract is drawn up. The contract contains conditions for the purchasing of goods or services such as, for example, a description of the quality of the goods, delivery times and price. In other words, placing a regular order is not sufficient Framework agreement An agreement can also take the form of a framework agreement. A framework agreement is signed either with one or more suppliers and aims to establish the conditions for a subsequent award of contract within a stated time period that may not normally exceed four years. When a need arises for something that is covered by the framework agreement, a contract is signed with regards to what has now become a concrete requirement. This is known as a call-off from the framework agreement (and from the contract sometimes, in the case of multiple purchase agreements or delivery agreements). If the procurement is aimed at a framework agreement with several suppliers, it is decided in advance whether call-offs from the framework agreement are to be made using suborders or via renewed competitive tendering. For framework agreements using suborders, a ranking order of the suppliers who submitted the best tenders in the procurement procedure is created. The supplier who obtained the most points in the evaluation of tenders is ranked at the top, and so on. For call-offs from the framework agreements that are made using suborders, the contracting authority's inquiry always goes to the highest ranked supplier. If they cannot, or do not have the opportunity to respond to the inquiry, it passes on to the next supplier down the list, and so on. Framework agreements can also be designed so that call-offs are brought about via "renewed competitive tendering". With this type of call-off, the contracting authority directs its inquiry to all suppliers involved in the framework agreement. The suppliers may submit new tenders in respect of the "concrete order" and one supplier is awarded the contract, based on the content of their tender. This is, in other words, a type of "mini-procurement" where "the market" consists solely of the suppliers involved in the framework agreement Governmental framework agreements For goods and services frequently procured by public authorities in large amounts or that amount to large sums, Kammarkollegiet has, on behalf of the Government a central responsibility for providing framework agreements for this type of procurement (the coordination of governmental purchasing). KI and other public authorities can then make call-offs from these governmental framework agreements. 15

16 Procurement framework agreements are assembled in a database that can be found at Approximately 1,100 government framework agreements are assembled here involving 700 suppliers in over 60 product areas and around 90 underlying sub-areas. With the help of the database, public authorities can find out whether the goods or services that they need to purchase can be called-off from an existing governmental framework agreement Karolinska Institutet's framework agreements As a complement to the governmental framework agreements, KI also uses its own framework agreements for procurement. The details of KI's own framework agreements can be found in an agreement catalogue on the KI intranet under The agreements contain information regarding their scope and instructions on how to make a call-off. There are also supply agreements which are call-offs from government framework agreements and apply for the whole of KI. 5 What happens if a mistake is made? For a long time it has been possible to conduct public procurement incorrectly without any noticeable repercussions for the contracting authority in question. Since 15 July, LOU has however been supplemented with a number of regulations that increase the scope for the administrative courts and the Swedish Competition Authority 5 to take action when contracting authorities contravene the regulatory framework. 5.1 Procurement review procedure If the contracting authority has in the course of its procurement contravened any of the provisions of LOU, and this has resulted in a supplier suffering damages, the Administrative Court can decide that the result of the procurement is to be corrected or that the whole procurement process should be repeated. Only suppliers have the right to apply for the review of a procurement. A review procedure may be relevant if, for example, the contracting authority, in its evaluation of a tender, approved a supplier who did not satisfy the "shall" requirements; or if the authority took into consideration circumstances that were not described in the contract documents and which subsequently affected the results of their evaluation. 5.2 Reviewing the effectiveness of an agreement In certain cases, a supplier may also apply for a contract resulting from a procurement to be declared ineffective. Declaring a contract to be ineffective may be relevant if, for instance, the signing of the contract was not preceded by publication of the procurement in accordance with LOU, something that is known as "illegal direct award of contract". The consequences of an agreement being declared 5 The Swedish Competition Authority is the supervisory authority for public procurement. 16

17 ineffective are that the parties no longer have any obligation to complete that which is stated in the agreement, and that any work already undertaken shall be cancelled. 5.3 Procurement fines In certain situations, the contracting authority can be ordered to pay a procurement fine. Application for payment of a procurement fine is made by the Swedish Competition Authority to the Administrative Court and can be relevant if, for instance, a contracting authority has made an illegal direct award of contract. Procurement fines are a type of penalty fee that is paid to the government. Ki has been ordered to pay such a fine on one occasion. 5.4 Damages If a contracting authority has not followed the regulations of the Swedish Public Procurement Act (LOU), a supplier can, in certain circumstances, demand compensation for damages that have resulted from this. This option may be available to a supplier who has not been awarded a contract following a procurement process, but also for the supplier who entered into a contact with the contracting authority which was later declared invalid by the court. 5.1 Bribery and impartiality All business must be characterised by honesty. All forms of bribes are prohibited. This also applies to gifts and presents that may appear to have a low financial value. Warning signs Special caution should be observed in the event of any of the following: the benefit is not insignificant in value or is given frequently, the benefit has no clear connection with the recipient s work or assignment, the benefit is not a natural and useful part of the work or assignment, the benefit is offered or handed to the recipient (or a closely-related person) in close conjunction with a decision that affects the bribing party, the employee or supplier is invited to an event with a guest, relative or friend, the benefit (in the nature of an event or similar) is targeted at specially selected people, the benefit is not given openly, the benefit deviates from generally accepted forms of society between industry and public organisations, or the benefit is initiated by the recipient Everyone who takes part in a public procurement needs to remember not to have personal commitments that may be in conflict with Karolinska Institutet s interests. As an example, it could be a 17

18 person who is a co-owner of a company and has bid for a service in procurement to become one of KI s suppliers. Various forms of family ties are included here. Read more at: 6 Is it just about compliance with the law? As was described under point 5, both suppliers and the Swedish Competition Authority have, with the assistance of various legal remedies, the opportunity to object to a procurement that has been conducted incorrectly. These options are aimed at the particular procurement or contract in question and should be treated as very real risks associated with conducting a procurement that contravenes the regulations of LOU. 6.1 Other negative effects of non-compliance In the longer perspective, there are however other disadvantages associated with a failure to apply the regulations. Through its failure to apply the structured procedures that public procurement entails, KI could potentially lose a tool which it could otherwise use to continuously control and improve both its contract documents and its agreements. The organisation as a whole, as well as the department in question, could therefore forego the opportunity to improve its agreements. By not taking an inventory of requirements, or due to a lack of communication with other parts of the operation, the opportunity to coordinate business goes to waste, resulting in double the work and higher prices. Another effect of disregarding the working methods that KI is obliged to apply in its procurements is the attitude that such actions may generate in KI's external suppliers. Repeated violations mean that KI risks losing credibility as a contracting authority and as a contracting party. This could have the effect that certain suppliers regularly call on well-known purchasers within the organisation in the hope that a formalistic procurement will not be conducted, or that procurements already agreed upon can be relinquished. Suppliers who have been procured in the correct manner may lose their incentive to submit tenders in subsequent procurements; they may even feel compelled to search for other routes into the organisation. 6.2 Other positive effects of compliance The response sometimes given to the question of why LOU must be applied within a procurement unit is that it is not desirable for the unit to become the subject of a review, or that the procedure that preceded the purchasing should not be open to criticism in any other way. It is of course true that a procurement can become the subject of a review, and there is therefore a risk of the economic and time losses associated with a new procurement having to be conducted. In order to avoid this risk, it is therefore important to conduct procurements in accordance with the regulations and the fundamental principles mentioned in this document. 18

19 However, to avoid reviews can never be the main reason for applying the relevant regulations. The primary objective must be to bring about good business. LOU is not just a system of regulations but also a description of a procedure which, correctly applied, constitutes a quality assurance that the procurer "gets everything right" - from correctly stated tender requirements to correct contract terms and conditions. Through application of the regulations and internal directives, the procurer can ensure that the requirement is well thought-out and correctly formulated. By notifying the market of the requirement, there is a greater chance of obtaining higher quality at a lower price. By deciding on the content of the agreement, it is possible to avoid being subjected to unfavourable terms and conditions. As is mentioned in the paragraph above, public authorities that have a good level of supervision and control of their purchasing also have a greater capacity to continually control and improve their organisation's agreements. 6.3 Identifying the requirement in good time Within every organisation there is often a core business activity. For KI, this core activity is, naturally, research and education. Other activities are aimed at providing the preconditions for us to be able to operate our core activities. Regardless of the activity concerned, whether it be a core activity or otherwise, there is an on-going requirement for goods, services and contracts that need to be purchased from external suppliers. In the majority of cases, these external purchasing requirements are governed by the public procurement regulations. The various projects and activities into which the business is divided generally have a set goal, a deadline for when this goal is to be achieved and, consequently, a time by which the project should have started. In order to ensure that the activity can commence and be operated as planned, it is important that those responsible for the project, both for its preparatory work and when the project is up and running, identify at an early stage those requirements that involve external purchasing, and that they communicate these so that any potential procurements can be initiated. It should be emphasised that the time that a public procurement requires does not just comprise the statutory time limit that the supplier has for the submission of their tender following the publication of the procurement, but also, especially, the preparatory work to identify requirements and draw up the contract documents and the subsequent work to evaluate the tenders submitted. The following diagram provides an example of the time schedule for a procurement that is conducted using open procedure: January February March April May Week Create contract documents Create agreement 19

20 Publication of contract documents Final date for submission of tenders Evaluation Contract award decision Standstill period Agreement 7 KI's purchasing organisation 7.1 The Procurement Unit At KI, the Procurement Unit has the central responsibility for purchasing matters. The unit is part of the Finance Office and the University Administration and its areas of responsibility include: the procurement of goods and services the coordination of KI's purchasing KI's framework agreements expert support in purchasing and procurement issues administration of support tools such as e-commerce tool Agresso providing training and information in purchasing and procurement issues global surveillance of the market for goods and services that are important to KI sustainability issues connected with purchasing the monitoring of agreements that have been entered into supervision of the business's procurement needs central invoice management incl. addition by suppliers in Agresso 7.2 Purchasing Coordinators Each department has its own Purchasing Coordinator. The Purchasing Coordinator is the department's contact point for the handling of internal purchasing issues and for communication with the Procurement Unit. The Purchasing Coordinator's areas of responsibility include: fundamental knowledge of regulations and processes support and information with regards to call-offs from framework agreements information concerning other purchasing issues communication with the Procurement Unit 20

21 representing their department at inter-departmental meetings First Line Support for their own department control of terms of payment and suppliers' tax clearance certificates, etc. acting as an intermediary in the contact between the departmental purchaser and the Procurement Unit helping the department with e-commerce issues regarding placing orders. 7.3 The Purchasing Group The Purchasing Group consists of the various departmental Purchasing Managers and representatives from the Procurement Unit. The Purchasing Group holds regular meetings that constitute a forum for, inter alia: information regarding on-going procurements (of mutual interest) identifying mutual acquisition needs information regarding new framework agreements training E-commerce other purchasing and procurement issues 8 Purchasing at Karolinska Institutet The following section describes how procurement and other purchasing is conducted at KI. The section is divided under the headings Planning, Implementation and Monitoring. The processes found under each heading are described in the order in which they normally occur within a procurement. However, certain processes do not necessarily occur in all procurements. At the end of the section there is a matrix that specifies the people within the organisation who are responsible for each process. 8.1 Planning Defining the requirements of the business Needs analysis The planning stage starts with definition of the business's requirements, in order to identify potential acquisitions, and when and during which period the requirement will arise. Procurement is never an end in itself but rather a means of satisfying existing requirements. If the procurement replaces a previous agreement, the needs analysis should include an evaluation of the pros and cons of the previous agreement. Such an evaluation can examine, for example, whether the new agreement should be more comprehensive, or whether, quite simply, it maybe covers something 21

22 that is not required. It is also possible to look in closer detail at price models that have worked well and whether deliveries have been made in accordance with the wishes of the purchaser. By ensuring that the users have a real, established need for that which is to be procured, the probability of a successful procurement with good contract compliance is increased Life-Cycle Cost Analysis A Life-Cycle Cost Analysis is a tool for environmental requirements. In a needs analysis, the contracting authority can use Life-Cycle Cost Analyses as a method for implementing different requirements. The method can be used for clarifying the total cost for a product for the period it is in use, including wind-up costs. One of the primary applications for conducting a Life-Cycle Cost Analysis is when procuring energy-consuming goods such as vehicles and electronic products Involving the end user The end user must be involved in the procurement at an early stage. If this does not occur, there is a risk that the procured items do not correspond to the requirements of the business. There is also a major risk that the procurement will need to be followed by further procurements. However, the fact that the end user is aware of the requirement does not always mean that he/she also knows the best way to satisfy this requirement. The focus of the needs analysis should therefore be on clarifying the requirement and not trying to find the solution to it Consider the requirement from a KI perspective When the need has been identified, you should ask whether this need may also exist elsewhere within the department and, in the future, maybe even elsewhere within KI. A procurement can then be coordinated to satisfy the requirements of several parties simultaneously. A coordinated procurement can, but need not, require more time. If it is likely that the volume to be purchased will increase as a result of a coordinated procurement, this is an incentive to the suppliers to lower their prices. KI could also be coordinating procurements with other universities or, occasionally with Karolinska University Hospital Observing sustainability issues According to the Swedish Public Procurement Act (LOU), contracting authorities should take environmental and social considerations into account within the public procurement process, if the nature of the procurement justifies this. Examples of social considerations could be the requirement on respecting basic human rights in the production of goods, a requirement on social integration or ethical trading principles. Examples of environmental considerations might be requirements on energy efficiency, choice of materials or preventing the use of environmentally hazardous or dangerous chemicals in a product. A well-formulated environmental requirement is generally a requirement that 22

23 reaches beyond applicable law. Whether requirements are to be set with regard to environmental considerations such as these should be decided on a case to case basis via a prioritisation model where purchase volumes are weighed against environmental impact. Social consideration is determined via an analysis of the risks for human rights violations in the supplier chain, or shortcomings in the working conditions in combination with purchased volumes. In the work involved with considerations such as these, attention should be paid to the following points: requirements set must be consistent with the fundamental principles requirements must be deemed reasonable and have a natural connection with that which is to be procured requirements must be quantifiable and the contracting authority must be able to control monitoring of them The procuring body is responsible for assessing the procurement from a sustainability perspective (a specific method exists for this) and decides when the sustainability requirements should be imposed. The procuring body shall also, in consultation with the purchaser, decide which sustainability requirements should be included in the procurement. Guidance is available at the Environmental unit at the Facilities Office Estimating the value The needs analysis should also include an estimation of the value of that which is to be purchased. The aim of this is primarily to be able to decide the most appropriate procurement procedure. As was previously mentioned in point 4.4, attention should be paid to the maximum total amount that will be paid during the contract period. If the contract is to include an option, i.e., the opportunity for KI to purchase something extra, which can be decided upon at a later stage, the value of this should also be estimated and incorporated into the calculation. If it is a framework agreement that is to be procured, the calculation may be based on an estimation of future orders. If the framework agreement replaces a previous agreement, the estimation can be based on previous details. All estimations refer to amounts exclusive of VAT. It is not permissible to "subdivide" a procurement so that it ends up below the threshold Negotiations pursuant to the Swedish Co-Determination at the Workplace Act (MBL) The right to hold negotiations in the Swedish labour market is based on the co-determination regulations in MBL. The right of trade union organisations to have insight into and influence an operation is clearly regulated in the law and jusdicial practice. This can affect public procurements mainly in turnkey contract procurements and also when procuring consulting services and procurements where a change of employer is possible. The rules for this are outlined below. Right of negotiation 23