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Quality in the publicprocurement process

Asa RonnbackViktoria Institute, Gothenburg, Sweden

Abstract

Purpose The purpose of this paper is to investigate four dimensions of how to integrate quality inthe public procurement process from three perspectives. The study was carried out in the publictransportation industry where service provision has been outsourced.Design/methodology/approach An explorative case study was carried out using two datacollection methods. The first involved a document study that considered the integration of quality inthe public procurement process. This led to the second method, which involved conducting in-depthinterviews to follow up on the procurement and the role of quality with the participants.Findings The findings provide insights into how quality can be included in the public procurement

process and, in particular, how self-assessment can be used to evaluate the best quality practice. Thequality maturity of the industry also has an influence on three dimensions: the choice of quality model,the weighting between price and quality and how the tenders perform their self-assessments.Research limitations/implications The study focuses on one case and presents explorativefindings. This has implications for future research, for which the set of procurement decisionsregarding the integration of quality must be analysed.Practical implications The integration of quality in the public procurement process involveschoosing a future business partner according to the best quality practice, not just the lowest price.Including quality in the public procurement process can help facilitate the delivery of high-qualityservices to customers when service provision has been outsourced.Originality/value This study contributes to the service quality literature by empiricallyinvestigating how quality can be integrated in the public procurement process, which is a prerequisitefor contracting a desired service supplier.

Keywords Sweden, Public services, Public procurement, Transport management, Outsourcing,Service quality, Self-assessment, Public transportation

Paper type Research paper

IntroductionThe Swedish public transportation industry is facing the challenge of providinghigh-quality service for its customers with limited resources (Donnelly, 1999; TheSwedish Government Official Reports 2001, p. 106; 2003, p. 67; Enquist et al., 2005;Ronnback and Witell, 2009). There are a number of explanations for this situation. TheSwedish law of public procurement regulates how the public transport authorities(PTAs) conduct their procurement of services. The law favours the bidder with thelowest price and does not allow previous relationships with certain suppliers/operatorsand their former experiences to affect the outcome of the procurement process. Anothercharacteristic of the public procurement is that the relationship has a distinct startingpoint and end. Furthermore, the contract is written in advance by the purchasingauthority, so there are few possibilities to negotiate about the contract and adjustits contents after it has been signed (see e.g. The Swedish Public Procurement Act,Swedish Code of Statutes 2007a, 2007b). These conditions have been shown to hinderthe development of inter-organisational business relationships and trust (Erridge andGreer, 2002). Also, the PTAs have become focused on cost rationalisation, which hasled to reduced profitability of their service suppliers (Enquistet al., 2005).

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1754-2731.htm

Received 22 November 20Revised 24 May 20

Accepted 30 August 20

The TQM Jour

Vol. 24 No. 5, 2

pp. 447-

r Emerald Group Publishing Lim

1754-2

DOI 10.1108/17542731211261

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This focus on cost and the neglect of quality can be explained by generalmisconceptions, a lack of knowledge and limited experience with how to evaluateservice quality in a public procurement process (Corcoran and McLean, 1998). A reviewof previous research shows that little interest has been paid either to public

procurement (Thai, 2001) or to how quality can be managed in contracts in businessservice (Fisket al., 1993; Brownet al., 1994; Furrer and Sollberger, 2007; Camen, 2010).Previous research has been reluctant to include quality in public procurement as it isconsidered a difficult subject that may lead to bias from a procuring authority towardscertain tenders (Laffont and Tirole, 1993). As a result, price is the only award criterionthat the procuring clients use. This focus on price has resulted in services beingreduced and depleted for the passengers of public transportation (Enquistet al., 2005).Currently, eight out of Swedens 26 PTAs have adopted systematic approaches toevaluating quality in public procurement. There are three alternative models forevaluating tenders: price only, the use of key performance indicators (KPIs) andself-assessment. Seven of the eight PTAs that have included quality in the procurementhave attempted a self-assessment model. However, no research has yet investigated

the pros and cons of using a self-assessment model to evaluate quality in the publicprocurement process. Due to the limited experience in managing quality as a factor inpublic procurement, this paper uses three perspectives to explore four dimensions ofhow to integrate quality through the use of a self-assessment model in the publicprocurement process. The four dimensions are:

(1) what model to use;

(2) the balance between price and quality;

(3) how tenders perform their self-assessments; and

(4) the use of internal and/or external examiners.

The dimensions are investigated from three perspectives: the tenders, the PTA and theexaminers, i.e. all participants that influence the results of the procurement process.

The study focuses on the business-to-business relationship between a PTA andthree tenders involved in public procurement with regard to contracting a futurebusiness partner in train traffic for a period of nine years (2009-2018). Two datacollection methods were used. The first involves a self-assessment model in publicprocurement as well as the study of the tenders quality reports and the results fromthird-party evaluation. The second uses interviews to follow-up on the publicprocurement with the parties involved, that is, the tenders, the PTA and the examinerswho conducted the third-party evaluation of the tenders quality reports.

Framing the research

Evaluation of the quality of services in public procurementEvaluating service quality in public procurement can be difficult because of the servicecharacteristics: intangibility, heterogeneity, inseparability and perishability (Zeithamlet al., 1985; Edgett and Parkinson, 1993; Schneider and White, 2004). First, intangibilityrefers to services as activities rather than physical objects, which goods are. Second,the activities are produced by people, which means that no two services will be alike.Third, the customers are involved in the production of a service, which means thatproduction and consumption cannot be separated. Fourth, services cannot beinventoried, stored, warehoused or reused. These characteristics separate the purchase

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(2006) found that a typical pattern was a 70 per cent price weighting combined withthree non-price criteria.

The third dimension considers how the tenders perform their self-assessments.This includes who performs the self-assessments (internal resources and/or external

consultants); their prior experience with self-assessment; the degree to whichmanagers and employees are engaged and involved; how much time has been investedin this work; the degree to which calculated scores agree with results of third-partyevaluation; and whether the tenders follow-up the results from the third-partyevaluation and establish improvement plans. Previous research shows thatorganisations with little experience of third-party evaluations have difficultystarting improvements based on the feedback from examiners. However,organisations with more experience are more successful with such work (Loombaand Johannessen, 1997; Conti, 2001). Also, the establishment of improvement plansrequires the commitment among middle and top management, which is consideredas critical to obtain lasting improvements (Hillman, 1994; Van der Wiele et al., 1995,Porter and Tanner, 1996; Van der Wiele and Brown, 1999).

The fourth and final dimension in this study concerns the use of internal and/orexternal examiners. Previous research has illuminated a number of risks in third-partyevaluations. For example, Laffont and Tirole (1993) found the potential for firm-specificfavouritism by a purchasing authority towards a bidder. In addition, Loomba and

Johannessen (1997) identified the potential for conflicts of interest in third-partyevaluations. They found that examiners judging a third-party evaluation sometimesalso worked as consultants for competing organisations (Loomba and Johannessen,1997). In addition, the accuracy of feedback given in third-party evaluation depends onthe training of the examiners (Coleman et al., 2000). This calls for experienced andunbiased examiners in the public procurement process.

Empirical investigation

In order to achieve the aim of developing a better understanding of how to includequality in public procurement, an empirical study was conducted using two datacollection methods: a document study followed by an interview study. The documentstudy comprised the results of the procurement regarding the quality aspect, that is,the self-assessment work of the tenders, and the feedback reports from the third-partyevaluation. This was followed by the interview study, which involved the tenders,the PTA and the examiners.

Research setting and design of the quality criterionThe research was conducted in Swedens public transportation industry, whichincludes PTAs that manage transport and procure services from privately ownedtraffic companies. The study is limited to one PTA and three tenders involved in public

procurement in relation to contracting a future business partner in train traffic. Thiswas the PTAs first procurement including the quality factor and, therefore, consideredhow the operators worked with quality management. The choice of quality modeland the balance between price and quality were based on the quality maturity of thePTA and the industry overall (Sousa and Voss, 2002). Quality maturity is representedas the levels of quality management adoption (Lascelles and Dale, 1991) and isestimated here through self-assessment. Because the quality maturity was consideredto be rather low, a basic quality model (a self-assessment model) was used. The PTA setthe price factor to 80 per cent and the quality factor to 20 per cent.

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Sample, data collection and analysisThree tenders (A, B, C) were involved in the procurement process. Three participantswere interviewed for tender A, one for tender B and one for tender C. The twoparticipants involved in the procurement were interviewed at the PTA. Furthermore,

three examiners were involved in the evaluation and two were interviewed. Allparticipants influenced the results of the procurement process.

The interview guide consisted of three parts, one for each category of interviewee.For the tenders, the interview guide consisted of an introduction, a review of how thetender had practised self-assessment and a comparison with possible experiencesof other quality models. The improvement work itself followed the self-assessmentand the final section included any remaining questions about the model itself, theself-assessment work and the overall procurement process. For the PTA, the interviewguide consisted of an introduction and a section about the procurement process. Forexaminers, the guide also consisted of an introduction, as well as a practising part ofthe evaluation and the model. Based on the process of grounded theory, the interviewswere then recorded and transcribed for further analysis (see e.g. Strauss and Corbin,

1990). The analysis was carried out by using marginal remarks identifying keywords,focusing on the integration of quality in the public procurement process. This includedthe preconditions, the process and the outcome. This enabled the data to be codedand organised in order to gain an understanding of the characteristics of thedimensions; and the three groups of participants views on these. After analysingall the interviews separately, the keywords were then summarised and compared toeach other (see Table II).

ResultsThe outcome of the public procurement processThe first data collection method consisted of studying the documents from the tendersself-assessment work and the third-party evaluation. Table I presents the results

of the third-party evaluation, showing the calculated percentages distributed on thefour criteria of the model: customer collaboration, leadership, developmentand involvement of employees, processes, as well as the total calculated score andpercentage for each tender.

As Table I shows, the development and involvement of employees criterion hadthe highest average score among the three tenders (28 per cent), while the processescriterion had the lowest average score (13 per cent). Furthermore, the variation between

Criterion

tender

Customercollaboration

%

Leadership

%

Developmentand involvement

of employees

%

Processes

%

Totalpercentage

and score

A 21 13 23 4 15 150points

B 13 20 29 8 18 180points

C 16 39 31 27 28 280points

Average 17 24 28 13

TableThe distribution

percentages and scorof third-party evaluati

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the tenders was also highest in this area (A: 4 per cent, B: 8 per cent, C: 27 per cent).Interestingly, tender C had much higher scores for the leadership and processescriteria. With 280 points, tender C was also the winner in terms of quality. Despite theseresults, tender Cs costs were almost double those of tender B. Because the price factor

had been set to 80 per cent of the total evaluation, the winner of the total procurementwas tender B.

After the self-assessments of the tenders and the third-party evaluation, the aimwas to follow-up on the procurement by interviewing the involved parties, that is,tenders A, B and C, the two participants from the PTA and two of the examiners.Table II summarises the results of the interview study related to the three perspectivesand the four dimensions. Not all dimensions are relevant to all three perspectives.

The tenders perspectiveThe first dimension considered the model. Tender B preferred the self-assessmentmodel to the model based on KPIs. Tender A preferred the model based on KPIs andthe EFQM model. Another procurement process took place in parallel at another PTA

and involved all three tenders. The quality model used was a slightly modified versionof the SIQ model. Tender C was positive about this model, saying, The criteria of themodel [y] are more connected to the concrete processes; for example, the launch oftraffic, the negotiations of time tables, preventive maintenance and assuring personnelresources, instead of the more general criteria.

The second dimension dealt with the balance between price and quality. Althoughthe quality factor was set to no more than 20 per cent in this procurement, tenders Band C both felt that the quality factor would be of decisive importance. Tender B said,Yes, I thought [y] that we would be quite close concerning the costs [y] Calculatingcosts is not that difficult.

The third dimension concerned how the tenders performed their self-assessments.Tender A engaged an external consultant since they did not have the necessary

experience. At tender B, the CEO himself took on the self-assessment despite havingany previous experience of self-assessment. Tender C had some previous experience inthis area and the quality manager performed the assessment, with help from the CEOand other managers. The self-assessment took two weeks in total for tender A, aboutone week for tender B and two weeks for tender C. The entire procurement processtook five weeks for tender A, three and a half weeks for tender B and about five weeksfor tender C. When estimating the level (percentage rating) for each criterion of themodel, two out of three tenders calculated their scores higher than the examiners didand the third tender did not submit any ratings at all. Furthermore, when the interviewstudy was conducted about four months after the contract was signed, only one of thetenders (C) had used the results from the self-assessment to improve their processes.

The PTAs perspectiveThe PTA wanted a quality model that was general and relatively easy to use and chosethe Springboard model. The PTA integrated the quality factor in the procurement atthis time since they had worked with the Springboard model and identified their ownstrengths and weaknesses. The purpose was not to require more from the operatorsthan they themselves could live up to.

This was the first time the PTA had included the quality factor in its procurementprocess. Neither the CEO nor development manager had any previous experience ofincluding quality in a procurement process. Because of their own low-quality maturity,

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Dimensionperspective

(1)Whatmodeltouse

(2)Thebalancebetween

pr

iceandquality(quality

be

ingofdecisive

im

portance)

(3)How

tendersperform

theirself-assessments

(timeinvested/performed

self-asse

ssment/prior

experien

ce)

(4)Theuseof

internaland/

orexternalexaminers

(timeinvested/performed

self-assessmen

t/prior

experience)

Tender

A:EFQM

A:no

A:twow

eeks/consultant/

extensiv

e

B:Springboard

B:yes

B:onew

eek/CEO/none

C:SIQModel(modified)

C:yes

C:twow

eeks/quality

manager/some

PTA

Springboard

No

Oneinternala

ndtwo

external

Examiner

Internal:Springboard

No

Twoweeks/de

velopment

manager/mino

r

External:EFQM

No

Tenhours/con

sultant/

extensive

Table A comparison of the thr

perspectives and fodimensio

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the PTA decided to set the weighting of the quality factor to 20 per cent. Althoughquality had a much lower weighting than price, it could have had decisive importance.The development manager said, When it came to evaluating and comparing theindividual business models [y] is when the quality factor could have determined

the outcome [y

] it became much closer between tenders A and B than in the firstphase when the gross costs were calculated. However, tender C was relatively farbehind, both in terms of the business model and the gross costs, but had [y] writtenthe best quality report though not so much better than the other two which madethem the winner.

In order to evaluate the quality factor, two external examiners and one internalexaminer were engaged. As the PTA explained, We wanted to engage externalexaminers who [y] had experience; that was important for us in order to be objective.

The examiners perspectiveThe two external examiners were trained in both the advanced SIQ model and thebasic Springboard model. The internal examiner had worked with the Springboardwithin the PTAs organisation and had two roles: to follow the continuity of the wholeprocurement process and to perform the third-party evaluation.

The evaluation began with an individual assessment of the tenders quality reports.A consensus was then reached during a meeting with all three examiners. The internalexaminer said, Maybe we spent two weeks in total for the evaluation [y] we couldhave spent a little more time [y] With that, there was no guarantee that the resultswould have turned out so much better. The external examiner said, I spent 10 hourson each of the three tenders [y] The material was extensive and in that respect thetime was too short.

The external examiner reflected on the evaluation and the Springboard qualitymodel: The model is relatively easy to use [y] It may be a good introduction for

organisations if they have not worked with quality management for a long time. Theexternal examiner also suggested alternative models: I would recommend the EFQMmodel because it is relatively uncomplicated but it also makes it possible for Europeanactors to compete on the same conditions as the Swedish. The tenders had low scoreswhen it came to presenting results. The external examiner said, The focus on resultsdisappeared and it is a very important criterion. Maybe there should be some commonkey measurements in the next process.

A summary of the three perspectives on quality in the public procurement processTable II compares the four dimensions related to the three perspectives (tender, PTA,examiner) from the interview study. The dimensions were:

(1) what model to use;

(2) the balance between price and quality;

(3) how tenders perform their self-assessments; and

(4) the use of internal and/or external examiners.

The results show that the Springboard is the most preferred quality model; mostparticipants did not expect quality to be of decisive importance, although two out ofthree tenders did; two out of three tenders spent two weeks on the self-assessmentsusing internal resources with varying degrees of experience, and calculated their

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scores higher than the examiners did. Only one tender followed up the feedback fromexaminers and established improvement plans; and the PTA engaged two externaland one internal examiner, who spent ten hours and two weeks, respectively, on thethird-party evaluation. The external examiners had no link to any of the tenders

organisations and had extensive experience.

Conclusions and discussionsPrevious research has highlighted the difficulty of evaluating quality in publicprocurement (Laffont and Tirole, 1993) but also the fact that it is a critical process andan important prerequisite for contracting a desired service provider (Miles, 2007).Because there are few opportunities to negotiate the contract and make adjustmentsonce it has been signed (see e.g. the Swedish Public Procurement Act, Swedish Codeof Statutes 2007a, 2007b), the chance for procuring clients to add quality requirementsfor their service suppliers occurs during the public procurement process.

A procuring client must consider several issues when taking on a publicprocurement. In order to capture these, the study took a comprehensive view covering

three perspectives (tender, PTA, examiner) and four dimensions:(1) what model to use;

(2) the balance between price and quality;

(3) how tenders perform their self-assessments; and

(4) the use of internal and/or external examiners.

This study has produced four main implications derived from the dimensionsexplored. First, purchasers must decide which model to use when evaluating tenders:price only, use KPIs or self-assessment. When including quality, the model shouldcorrespond with the quality maturity of the procuring client and tenders (see alsoSousa and Voss, 2002). In this procurement, the PTA considered the quality maturity to

be rather low and, therefore, used a basic quality model based on self-assessment(see also Sousa and Voss, 2002). This research has shown that self-assessmentgenerates several improvement opportunities for the tenders (see Table I; see also Finnand Porter, 1994; Gadd, 1995; Porter and Tanner, 1996; Van der Wiele et al., 1995;Brown and van der Wiele, 1996; Eriksson, 2004). In addition, self-assessment takesa comprehensive view that covers the whole system (Gadd, 1995; Zink and Schmidt,1998), as opposed to alternatives such as KPIs that focus on performance, which can beinsufficient (see also Weimer and Seuring, 2009). Although self-assessmentincorporates measurements, this important aspect had an insignificant role whenusing the basic Springboard model. A basic self-assessment model could thereforeincrease its focus on performance by integrating KPIs. Another approach is to usea self-assessment model such as the EFQM, which places greater emphasis on results(see also Puay et al., 1998). Like the CMM, the self-assessment models have beenassociated with negative aspects, such as resource-intensive and time-consuming,which makes it more difficult for smaller organisations to work with these types ofpractices (see e.g. Ghobadian and Woo, 1994; Eriksson, 2004; Persse, 2006), inparticular in a public procurement with a time limit.

The second implication is that, if quality is included, a suitable weight in relation toprice must be chosen. The balance between price and quality should also agree withthe quality maturity of the PTA and tenders (see also Sousa and Voss, 2002). This wasthe first time that this PTA included quality in the public procurement and chose an

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80/20 weighting based on the rather low-quality maturity in the industry. A review ofthe eight out of Swedens 26 PTAs that have included quality in the procurement usinga systematic approach, they use different combinations for the weighting of priceand quality, such as 60/40, 75/25 and 80/20. Despite these forerunners, the public sector

as a whole, and specifically the public transportation industry, is highly focused onprice and uses the lowest bid as the solitary award criterion for contracts(Palaneeswaran et al., 2003; Camen, 2003; Enquist et al., 2005; Waara and Brochner,2006). Although quality had a much lower weighting than price in this procurement,two out of three tenders thought it could have had decisive importance since theyhave experience of calculating their costs quite close. This shows that quality is animportant factor that has to be considered as it can determine the outcome of aprocurement process, despite having a low weighting compared to price.

The third implication deals with how the tenders perform their self-assessments.In line with previous research, this study showed that the tender with the higherquality maturity tender C used internal resources to conduct the self-assessment,engaged several managers including the CEO, calculated its scores more accurately

and followed up the feedback from examiners and established improvement plans.This paper suggests to follow the process of conducting self-assessment that tender Cused in order to obtain lasting improvements (see also Hillman, 1994; Van der Wieleet al., 1995; Porter and Tanner, 1996; Loomba and Johannessen, 1997; Van der Wieleand Brown, 1999; Conti, 2001).

Fourth, a procuring client must decide whether to use internal and/or externalexaminers. Three examiners were involved in this procurement, two of which wereexternal and one of which was internal. The external examiners were trained in self-assessment, had previous experience of third-party evaluation in quality awardprocesses and were unbiased. The internal examiner had practised the Springboardmodel within the PTAs organisation and had a presumption of the quality of the tendersinvolved in the procurement. Because the accuracy of feedback given in

the third-party evaluations is depended on the experience and training of theexaminers (Colemanet al., 2000), this paper suggests to engage experienced examiners ina procurement process. Experienced, trained and unbiased examiners may also helpprevent possible favouritism. Still, previous research has shown that the compliancelevel for having independent members in public auditing committees is relatively low(Haronet al., 2005). As a final note, this paper has shown that by including quality in thepublic procurement, the tenders are evaluating on the basis of best quality practice.However, the public procurement is an isolated event and as this paper has shown, onlyone of the tenders followed up the results from the third-party evaluation and establishedimprovement plans. Hence, the idea is to create a system that is dynamic and has aservice level that improves over time (Edler and Georghiou, 2007; Ronnback and Witell,2009). There is minimal scope for this in the current tendering process in Swedens public

transportation system (Burwick and Sjovall, 2007; Enquist and Eriksson, 2007; Enquistet al., 2011). The public transportation industry is characterised by a culture of qualitycontrol. This research has shown that self-assessment is a promising approach to departfrom the culture of quality control towards quality management (see e.g. Dooley, 2000).Self-assessment is not only useful for evaluating the quality of tenders in the publicprocurement process but also for following up on the self-assessments with the operatorsduring the time of the contract, focusing on continuously improving quality forcustomers (see also Edler and Georghiou, 2007). The ISO 9000 series are designed to beused for internal and external audits, while organisations using self-assessment have the

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possibility to participate in a quality award process which from the organisationsperspective is a non-regular, non-compulsory proceeding. In order to transformself-assessment into a more dynamic approach, this paper suggests integrating theprocedure of certification, internal and external audits in the self-assessment process.

This paper is a first attempt to address the practice self-assessment in the publicprocurement process. However, more research is needed in order to illuminate if theseimplications are also valid in other contexts, both in those with policy and regulatoryconstraints but also in non-regulatory environments.

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Further reading

Enquist, B. (1999), Fran produktionsparadigm till serviceparadigm? (From a production to aservice paradigm), Karlstad University Studies 1999:3, Karlstad University, Karlstad(in Swedish).

About the author

Asa Ronnback is a Senior Researcher (PhD) at the Viktoria Institute and works as a Consultant

in connection with quality improvements in the context of public transportation. She conducts

her research on quality management systems and self-assessment. Prior to her doctoral studies,she worked as quality manager in the Swedish Air Force. A sa Ronnback can be contacted at:

asa.ronnback@viktoria.se

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