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Centralised Purchasing Systems and Centralised Purchasing Systems and Electronic ProcurementElectronic Procurement

Presentation of the Danish System for Presentation of the Danish System for centralised purchasing: SKIcentralised purchasing: SKI

Soeren Jakobsen

Malta, Thursday 26 January 2006

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

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AgendaAgenda

• A few facts about the company SKI• The company’s new strategy (as from Dec. 2002)

• Co-ordinated purchasing

• The future strategy of SKI• SKI – the interactive company …

• Our vision for a “Centre for Public Procurement”

• Our electronic tendering system; ETHICS• Comments and questions

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A few facts about the company SKIA few facts about the company SKI

Established in 1994 as a limited company.

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

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

Number of employees: 43

Number of framework agreements: approximately 50

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

The company is situated in the heart of Copenhagen

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A few facts about the company SKI A few facts about the company SKI Present activitiesPresent activities

Framework contracts (on large ’standardized’ procurement areas)

Advise on public procurement (data collection and handling, choice of supplier and solutions, procurement policy, tools for estimating procurement volume, green procurement)

Consultative services (procurement analysis, e-commerce, advice in obtaining internal compliance)

E-commerce initiatives (customer-related price lists, advice on implementation of e-commerce)

Building of qualifications (courses and seminars, user-groups, dissemination of knowledge)

Tools (electronic tendering system ETHICS, mini-tenders, e-auctions)

Other services (guides, best practices, articles, PR, advice on how to communicate internally)

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A few facts about the company A few facts about the company SKI’s focus on products and servicesSKI’s focus on products and services

Potential turnover

Le

vel o

f S

tan

da

rdiz

ati

on

Large

Hig

h

Small

Lo

w

SKI’s focus in 2003

SKI’s focus in 2003

SKI’s focus in 2006

SKI’s focus in 2006

IT-standard hardwareIT-standard software

Tele- and data communication

Vehicles

FoodTravel services

Office stationary

ElectricityGas

IT- and management consultancy services

Open Source

Printed matters

IT for education

Building and construction

Roadwork

Cleaning

Craftsman services

Hospital articles

Medicine

Eldercare

Special software

Special hardware

Ambulance-service & patient transport

IT operation

Clothing

Window-cleaning

Lawyer- and accountant-service

Handicap aid

Cleaning articles

White goods

Financial services

Newspapers/magazines

Advertising

Office machines

8 billion DKK

4 billion DKK

150 billion DKK

Furniture

Fuel

Hospital equipment

IT-outsourcing

Scanning of construction

drawings

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-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0 500.000.000 1.000.000.000 1.500.000.000 2.000.000.000

Turnover 2004 (DKK)

%-g

row

th f

rom

’03

to

’04.

XY= 342 m.DKK/23,3%

Travel services

Telephony & data transmission

Cars

IT

Furniture

Auditing serv.

Cover articles

Source: SKI’s 2004 result

Energy

Food

Electrical articles

Lab. equipment

Kitchen hardware

PaperClothing

Office supply

A few facts about the company A few facts about the company Turnover breakdown by product areas, 2004Turnover breakdown by product areas, 2004

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A few facts about the company A few facts about the company SKI’s turnoverSKI’s turnover

0

1.000

2.000

3.000

4.000

5.000

6.000

1998 1999 2000 2001 2002 2003 2004

Regions Semi-public companies Municipalities Central authorities

2004

47%

30%

10%13%

1998

56%

25%15%4%

(million DKK.)

2.7483.082

3.7124.027 3.886

+12,2% +20,4%

+8,5% -3,5% 4.112+5,8%

2004+45%

2004Total turnover: 5.100 + 1.000 = 6.100 m. DKK = 880 m. EURResult: 9,1 m. DKK

Est. 2005Ordinary turnover: 6.600 m. DKK= 950 m. EURResult: 3,8 m. DKK

5.128+23,3%

+24%

+36%

+37%

+13%

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A few facts about the companyA few facts about the company SKI’s turnover and resultSKI’s turnover and result

Yea

rs r

esu

lt (

in m

illio

n D

KK

)

Total turnover from framework contracts (in 1.000 DKK)-6,000

-4,000

-2,000

0,000

2,000

4,000

6,000

8,000

10,000

3.000.000 4.000.000 5.000.000 6.000.000 7.000.000 8.000.000

19992000

2001

2002

2003

2004

Est. 2005

Budget 20062004

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

National Procurement Ltd. creates increased returns of scale in public procurement to the benefit of its customers and the welfare of the Danish citizens.

The advantages are secured by maintaining close ties between customers as well as suppliers, but at the end of the day National Procurement Ltd. acts primarily in the interest of the public sector.

The customers are secured a more attractive price and quality than they would be able to obtain themselves, procurement expenses are held to a minimum as there is no need for them to carry out own tenders and electronic procurement systems secure efficient buying.

The suppliers are secured lower costs due to reduced public tendering and reduced marketing costs due to National Procurement Ltd.’s centralised marketing and e-procurement systems.

National Procurement Ltd acts in accordance to commercial principles and at the same time promotes green and energy saving procurement.

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

By securing attractive framework agreements the Danish National Procurement Ltd. wants to play a central role in contributing to greater efficiency in the public procurement.

By establishing close partnerships with the public procurement agents, National Procurement Ltd. wants to establish and maintain framework agreements that are in demand, make a difference for our customers and strengthens the company.

National Procurement Ltd. wants to improve the professional dialogue and cooperation with public procurement agents, suppliers to the public sector and consultants.

National Procurement Ltd. is committed to a policy of acting as an innovative and committed employer with the capacity for attracting, maintaining and developing skilled and motivated staff.

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

Strategies and specific action plansStrategies and specific action plans1. Attractive

framework agreements

1. Attractive framework agreements

4. Focused marketing activities

4. Focused marketing activities

5. Focus on profitability5. Focus on profitability

6. Active supplier-policy6. Active supplier-policy

7. Dissemination of e-procurement

7. Dissemination of e-procurement

8. Strengthen closepartner-relationships

8. Strengthen closepartner-relationships

• Discontinue unsatisfactory framework agreements• Strengthen analyses and follow-up• Strengthen user-involvement• Extend co-ordinated purchasing • Dissemination of knowledge

• Meetings for procurement agents• New marketing strategy• Partnership programmes• Education and training of customers• Offer consultancy• Publish guides to public procurement

•Adjustment of the organisation•Project-groups regarding tendering•Further improvement of qualification •Involvement of employees•Further improvement of management•Benchmarking of efficiency•Secure key qualifications • Customer prioritisation

• Differentiated targeting of customers• Prioritise use of resources to match

potential turn-over• Partnerships with consultancy firms

and architects• Commercial use of ETHICS• Strengthen financial control

• Strengthen debtor control• Strengthen employees knowledge of

expenditure

• Create benefits for suppliers• Marketing in cooperation with

suppliers• Consultancy regarding choice of

supplier• Precision of demands to suppliers• The Public Procurement Portal

must function according to demand• Development of an e-procurement

catalogue that is independent of e-marketplaces • Establish close relationships to:

• Shareholders• Interest groups• Trade organisations• Consultants• Media

Why? How?

Priority

•By securing attractive framework agreements National Procurement Ltd. wants to play a central role in contributing to greater efficiency in the public procurement

•By establishing close partnerships with the public procurement agents National Procurement Ltd. wants to establish and maintain framework agreements that are in demand, make a difference for our customers and strengthens the company

•National Procurement Ltd. wants to improve the professional dialogue and cooperation with public procurement agents, suppliers to the public sector and consultants

•National Procurement Ltd. is committed to a policy of acting as an innovative and committed employer with the capacity for attracting maintaining and developing skilled and motivated staff

2. Partnerships with public procurement agents

3. Revitalising the organisation

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

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

• Exact knowledge concerning the demands and needs of the customers through their active involvement in SKI’s process of generating framework contracts

• Co-ordinated purchasing where the customers before and during the tendering process are invited to pool their expected turnovers on the different framework areas

• Secure an effective competition amongst the potential suppliers.

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Co-ordinated purchasing.Co-ordinated purchasing.Basic principle.Basic principle.

One or more customers

Total turnover

Dis

cou

nt

fro

m s

up

plie

r

One or more customers

One or more customers

One or more customers

One or more customers

One or more customers

One or more customers

One or more customers

One or more customers

One or more customers

Additional discount th

rough co-ordination

Large and small SKI-customers both obtain larger discounts and/or lower prices through co-ordination than they could obtain themselves

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Co-ordinated purchasing. Co-ordinated purchasing. Co-ordination - Co-ordination - beforebefore and and afterafter the tender. the tender.

Attractive framework contracts – pooling of expected turnovers

• Binding turnover expectations are

collected• Customers are

invited to join the process

Before thetender

• Market-analysis• Customer- and supplier- analysis

During thetender

• Turnover expectations are distributed between suppliers

After thetender

• Co-ordination with other customers

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The future strategy of SKI The future strategy of SKI “The Procurement Function of “The Procurement Function of

the Future”the Future”Increased focus on the creation of value (savings, efficiency Increased focus on the creation of value (savings, efficiency and quality)and quality)

TransactionsTransactions

ContractsContracts

SourcingSourcing

De-De-velop-velop-mentment

TodayToday

FutureFuture

TransactionsTransactions

ContractsContracts

SourcingSourcing

De-De-velop-velop-mentment

Tasks

IT

Search for and selection of vendors

Requirement assessmentsContracting

DispositionsRequisitionsControl of invoices

Tasks

Dialogue with mgt.Co-operation

Growth through technology

Total costs”Make or buy”

CompetenceDevelopment of vendors

Involvement of usersAccelerate use of contract

Follow-up

AutomationDecentralization

eTenderingeTendering

Value chain Value chain Integrated Integrated eProcure-eProcure-ment ment systemsystem

New quali-New quali-fications fications neededneeded

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The future strategy of SKI The future strategy of SKI Primary focus pointsPrimary focus points

1. wave 2. wave 3. wave

•Marketorientation

•Revitalisation of the organisation

•Processes and systems

•Buildingup of competences

•A deepening and broadening of partnerships

•Knowledge sharing & value-based leadership

2005 2007

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The future strategy of SKIThe future strategy of SKISKI – the interactive companySKI – the interactive company

The main challengeThe main challenge

We must ensure that cooperation exists and that knowledge, experience and attitudes are exchanged. If not it will be impossible to develop the right solutions, of high quality and at the lowest possible cost.

We must combine what is individual and what is common. Make what is individual relevant for and possible in the community. In short: Create room for the individual in the community and room for what is common in the individual.

We must optimise processes and systems that make is possible for knowledge to be transported round in the organisation and ensure that knowledge is at hand where it is needed to generate value, increase creativity and innovation.

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The future strategy of SKIThe future strategy of SKISKI – the interactive company. SKI – the interactive company.

OverviewOverview

SKI the interactive

companyExternallyInternally

Value-addingProductivity

Talented colleagues

Supportingtechnologies

Unique organisation

Good management

• CRM• ETHICS• ERP• Electronic

archives

• Partnerships• Structural frame• Building• Culture• Values• Knowledge-

sharing

• Growth• Simplification• Prioritising• Management

training

• Attractive work-place

• Competence-building

• Recruiting• Job appraisal

interviews• Curiosity• Social

competence

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The future strategy of SKI The future strategy of SKI SKI’s vision: ”Centre for Public Procurement”SKI’s vision: ”Centre for Public Procurement”

Aims: •Openness•Cooperation –internally and externally•Flexibility•Proximity to customers, suppliers and cooperating partners

Vision: SKI wants – supported by an attractive building - to be the natural and inspiring focus point for all persons and organisations involved in public procurement.

The elements of the concept•Other organisations are invited to become tenants

•Project facilities•Seminar and conference facilities•Showroom facilities•Service for visitors

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Our electronic tendering systemOur electronic tendering systemETHICS is a central element in our new strategy ETHICS is a central element in our new strategy

EfficiencEfficiencyy

CompliancCompliance with EU e with EU rulesrules

TransparenTransparencycy• Internal productivity

•Development and re-use of knowledge and legal terms•Workflow controlled execution•Document Library•Easy involvement of new users•Management overview and control

• Growth in turn-over•Strengthen user-involvement and accelerate use of contracts

• Efficient use of experts in the evaluation phase• Help customers run own tenders

• No complaints from vendors have lead to legal issues

•Ability to handle an increasing number of complaints in the future

• Involvement of users easy and meaningful

Besides being an exciting business opportunity ETHICS offers:

• Complies with thresholds, time frames, methods and standards

[inno:vasion]

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Comments and questions …Comments and questions …