The differences between Polish and British Public Procurement. Mariusz Turek Partner, PROFITIA Management Consultants Manager, CIPS Institute

Transcription

1 The differences between Polish and British Public Procurement Mariusz Turek Partner, PROFITIA Management Consultants Manager, CIPS Institute London, 17th November

2 AGENDA A. A few words about PROFITIA B. Public procurement in Poland and UK facts and figures C. Why is Polish public procurement so unique? 2

3 PROFITIA stems from an international management consultancy but has passion and focus of a specialized consulting boutique PROFITIA at a glance High Professionalism OUR VALUES STRATEGIC PERSPECTIVE Top-level people, structured approach, expert network, holistic view, international perspective Low International management consultancies Low Niche consulting companies ELASTICITY AND ENTREPRENEURSHIP High Tangible and sustainable results, working hand in hand with the Client, thinking Client needs not off-the shelf products, passion and fresh look of the start-up We combine strategic consulting experience with sourcing focus, being professional in all that we offer Innovativeness We don t use off-the-shelf solutions but pick our brains to deliver innovative ideas for sustainable implementation meeting Clients needs Integrity We have a strict code of conduct which enables us to successfully steer change in difficult and turbulent environment Result orientation Instead of reports labeled by a consultancy, we prefer providing tangible results and being paid only for them! PROFITIA IS THE ONLY MANAGEMENT CONSULTING COMPANY OF POLISH ORIGIN WITH STRATEGIC BACKGROUND AND FOCUS ON PROCUREMENT OPTIMIZATION Source: PROFITIA Management Consultants 3

4 We support Polish and international market-leading organizations in implementing the best procurement practices Selected references in the area of procurement Entities using the Public Procurement Law Source: PROFITIA Management Consultants State-controlled entities not using the Public Procurement Law 4

5 Four pillars of BATNA MED. purchasing groups ensure required scale and expertise necessary for effective purchasing groups for hospitals Pillars of purchasing groups for hospitals BATNA MED BATNA Group and PROFITIA BATNA Group operator of B2B purchasing groups, performed 3 biggest group tenders for hospitals in Poland PROFITIA Management Consultants leading procurement consultancy in Poland exclusive representative of CIPS Customers biggest Polish companies ad organizations (including public sector), SMEs Healthtrust purchasing group 4000 members Joint purchases for over $ 41 bln in 2014 Supports BATNA MED with access to world benchmarks and international supplier market Purchasing Groups BATNA MED. Polish Hospital Federation The most representative hospital organization in Poland with 150 member hospitals On of objectives of Federation s strategy organization of purchasing groups BATNA MED is the official and exclusive partner of the Federation for constructing purchasing groups Hospitals group members We encourage all Polish hospitals to participate in BATNA Med. purchasing groups Joining groups is done by sending data for benchmarking Source: PROFITIA Management Consultants 5

6 AGENDA A. A few words about PROFITIA B. Public procurement in Poland and UK facts and figures C. Why is Polish public procurement so unique? 6

7 The value of public tenders in Poland exceeds 150 mld PLN - the EU's expenditure statement confirms the expected upward trend Public Procurement in numbers 1,8 trillion EUR 19% GDP of the EU The average annual amount of the expenditures in the EU by the public procurement excl. Utilities, billion EUR 12% GDP The average annual amount of the expenditures in Poland by the public procurement in billion EUR 14,5% GDP The average annual amount of the expenditures in UK by the public procurement in milion The number of contracting authorities in Europe The number of contracting authorities in Poland The number of contracting authorities in the UK The average annual number of contract awards Source: Public Procurement Indicators 2013, European Commission 7

8 Key targets for British public procurement system according to the study Improving government procurement (2013) Targets for the British public procurement Highest value of products and servises Value for money, whole-life cost Savings through integrated proceedings and innovativeness Knowledge, expertise, deep market understanding Buying more from SME (target: 25%) Source: Improving government procurement 8

9 Best practices in public procurement according to empirical research: Improving government procurement (2013) Areas of concentration of the British public procurement Source: Improving government procurement 9

10 AGENDA A. A few words about PROFITIA B. Public procurement in Poland and UK facts and figures C. Why is Polish public procurement so unique? 10

11 New (BIG) directive DIRECTIVE 2004/18 / EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 31 March 2004 on the coordination of procedures for the contract awards 65 pages + attachments in total 163 pages - Preambule p. 13 (parts / motifs 51) DIRECTIVE 2014/24 / EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 26 February 2014 on public procurement 279 pages + attachments in total 486 pages - Preambule p. 90 (parts / motifs 138) Source: CIPS & BATNA Group 11

12 1. Case 100% compatible with the specification of essential terms of the contract, although "non-optimal" Source: PBSRG / Arizona State University / NEVI / Best Value Group 12

13 2. Case 100% compatible with the specification of essential terms of the contract, although "non-optimal" Source: PBSRG / Arizona State University / NEVI / Best Value Group 13

14 In accordance with the Directive the trend in public procurement is a partnership with economic operators, economical efficiency and procurement categories An overview of the most important summaries of EU directive in the context of current challenges TYPICAL PROCUREMENT CHALLENGES Competition between suppliers on the basis of the dominant price criteria DIRECTION FOR CHANGES Strategic partnership with suppliers, support for innovations, relationship management Lack of strategic procurement planning and its aggregation Documentation in paper version, long proceedings, insufficient transparency of the process Respective verification of criteria fulfilment by individual econimic operators The lowest price as the "dominant criteria Single purchases, gradual implementation of aggregate procurement models for similar source categories eg. Electricity purchase Planning and calculating TCO framework contracts as an effective and well-established procurement technique Electronization of public procurement, implementation of e-catalogues and defining electronic approval paths, reducing transaction costs European Single Procurement Document (ESPD) - to simplify the qualification process for economic operators The most advantageous economically tender as the dominant criteria Categorization, definition of central procurement bodies (administrations/ local government/ entities "unrelated"); implementation of Category Manager Source: PROFITIA Management Consultants 14

15 Award criteria, the best (most advantageous economically) tender Price or cost? DIRECTIVE Art. 67 Award criteria 1. Without prejudice to national laws, regulations or administrative provisions concerning the prices of certain supplies or the remuneration of certain services, contracting authorities shall base the contract awards on the most economically advantageous tender. 2. The most economically advantageous tender from the point of view of the contracting authority shall be determined on the basis of price or cost, using an approach based on cost efficiency, such as cost life cycle costing in accordance with Article. 68; It shall include the best relation value for money, which is estimated on the basis of criteria including quality aspects, environmental or social related with the subject-matter of the contract. Such criteria shall include eg:... "(quality, technical, social, environmental aspects, innovation, service, delivery time and operating costs). Źródło: BATNA GROUP Source: PROFITIA Management Consultants PUBLIC PROCUREMENT LAW Art. 91 para. 1 The contracting authority shall select the best tender on the basis of contract award criteria laid down in the specification of essential terms of the contract. Art. 91 para. 2 Contract award criteria shall be price or cost or price and cost and other criteria linked to the subject matter of a contract, in particular: quality, including technical specifications, social aspects, environmental aspects, innovative aspects, method and time of delivery. Art. 2. para 5 For the purpose of this Act: 5) the best (most advantageous) tender shall mean the tender: a) providing the most advantageous balance of price or cost and other criteria relating to the subject-matter of the contract, in particular in the case of public contracts within the scope of creative or research activities ( ) or a tender that satisfies the criteria different than price or cost, when the price or the cost is constant, or b) with the lowest price or cost if the only award criteria is a price or cost. 15

16 Organization is faced with a choice of procurement strategy with price or costbased approach, focused on the total cost of ownership (TCO) Pros and cons of price and cost-based approach PRICE-BASED APPROACH PROCUREMENT DECISIONS IN THE COMPANY COST-BASED APPROACH Threat to the quality of purchased goods/services Failure to recognise all costs associated with a purchase risk of hidden costs Moral hazard relating to suppliers Underrated estimations problems with execution of contracts by suppliers problem of abnormally low price Many details and long time of implementing the TCO Comprehensive look at purchases Costs other than the purchase price possible at up to 60% of total cost of a purchase First heralds of shift from price criterion in public contracts Amendment of the Public Law Procurement Act of 29 August 2014 Popularization of non-price award criteria Approach enabling ROI calculation of investment/ purchases Wider spectrum of possible savings initiatives Increasing effectiveness of cooperation with suppliers Cost-based approach is a basis for the strategic implementation of procurement function within the organization Source: PROFITIA Management Consultants 16

17 Primacy of cost based approach! End of lowest price dominance. THE IS ALWAYS SOMEONE WHO CAN DO IT CHEAPER 17

18 Purchase price represents only the peek of the iceberg implementation of the cost-based approach eliminates risk of hidden costs Division of costs hidden under a purchase price Purchase price Price-based approach, limited view at a purchase I. Cost of purchase II. Cost of exploitation II. Cost of liquidation Identification of need Market research Expert consultancy Tendering process Negotiation process/ concluding contracts Delivery Duty/taxes Complementary materials Accessories/spare parts Service and maintenance Technical maintenance Energy Integration with the environment Employee training Extension of warranty Cost of operating device Liquidation with possible participation of technical experts Disposal Utilization Changes in work environment Adaptation to new conditions TCO approach, comprehensive look at a purchase divided into purchase, exploitation and liquidation phase Source: PROFITIA Management Consultants 18

19 Best practices (in light of new EU Directive) the most economically advantageous offer, TCO Average share of particular costs in TCO for printing devices SHARE OF EACH CATEGORY OF COSTS IN TCO (IN%) 46% 41% COST OF TONERS 46% TCO Wide range of basket regarding number of types of toners which increases the cost of purchase SELECTED CHALLENGES IN PARTICULAR COST GROUPS COST OF PAPER MAINTENANCE AND SERVICE 41% TCO 9% TCO Lack of monitoring use of paper and type of printed documents result in high share of cost of paper in TCO Cost of repairs and maintenance of devices varies depending on size and functionality of devices form of optimization is outsourcing 1% 3% 9% Toners Paper Service and maintenance Depreciation Electricity DEPRECIATION OF DEVICES 3% TCO Cost of devices depreciation dependent on the degree and length of exploiting and type of printing devices ELECTRICITY 1% TCO Electricity consumption depends on type of device and way of exploiting Values for printing on a mass scale Source: BATNA Group analysis 19

20 Electronisation of purchases. Example of electronic auction. Auction for medical gloves for a group of 8 hospitals (value ,64 zł) Creating a purchasing group (signing Powers of Attorney) Technical dialogue Analysis and negotiations with a purchasing group Approval of the common subject of purchase (signing annex to the Power of Attorney) Announcement of a two-stage procedure Open tender Electronic auction in tasks, with minimum of 3 valid offers submitted Selection of most price-attractive supplier In the auction stage we gained 8% of savings in the amount of ,08 zł Benefits Transparency of offers Greater competitiveness possible Obtaining lower prices compared to the traditional method Limited success in cases when bidders do not decide about significant discounts Source: PROFITIA Management Consultants 20

21 Directive/Act encourages and enables efficient execution of transnational joint purchases Preamble to Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 (73) Despite the fact that Directive 2004/18/EC implicitly allowed for cross-border joint public procurement, contracting authorities are still facing considerable legal and practical difficulties in purchasing from central purchasing bodies in other Member States or jointly awarding public contracts. In order to allow contracting authorities to derive maximum benefit from the potential of the internal market in terms of economies of scale and risk-benefit sharing, not least for innovative projects involving a greater amount of risk than reasonably bearable by a single contracting authority, those difficulties should be remedied. Article 39 Procurement contracting authorities from different Member States 1. Without prejudice to Article 12, contracting authorities from different Member States may act jointly in the award of public contracts by using one of the means provided for in this Article. 2. A Member State shall not prohibit its contracting authorities from using centralised purchasing activities offered by central purchasing bodies located in another Member State. 3. The provision of centralized purchasing activities by a central purchasing body located in another Member State shall be conducted in accordance with the national provisions of the Member State where the central purchasing body is located. Source: CIPS & BATNA Group 21

22 If you want to bid successfully in Polish tendres, you need to understand the peculiarities of our system Key aspects of Polish public procurement system - summary Public procurement is a challenge for the majority of buying organizations (know-how, resources etc.) usually they juts want to select the first acceptable offer and don t go for an extra mile Mutual trust (public, private) is very limited and it hinders supplier relations Anti-coruption organizations are strict and suspicious toward out-of-the-box approach to procurement Having said that, recent changes to public procurement are a positive sign for suppliers (e-auctions, technical dialogue, non-price criteria) not quite yet as it should be but we are going in the right direction! Source: Improving government procurement 22

23 We encourage you to contact us- thank you for your interest Mariusz Turek Partner tel: (+48)