© 2012 eSPap | Entidade de Serviços Partilhados da Administração Pública, I.P. | Direitos reservados.
Centralised purchasing: it makes sense!
Saving money and becoming efficient by developing Framework Agreements
9th Public Procurement Exchange PlatformSkopje| May 2013
© 2012 eSPap | Entidade de Serviços Partilhados da Administração Pública, I.P. | Direitos reservados. | 2
Community/Society
Contractors/Suppliers
eSPap
Interministerial Advisory
Committee
Government
Contracting authorities and entities (mandatory and voluntary)
Ministry of
Finance
UMC (11)
2
UMC = MPU: Ministerial Purchasing Units
Key Stakeholders
Portuguese Public Procurement systemSNCP
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Portuguese Public Procurement systemeSPap - the new managing entity
Public Procurement
Planning & Organizational Development
State Fleet & Logistics
Legal Support
Board
Finance & Administration
Human Resources Management
General Administration
Client & Service Management
Process Management & Innovation
Client Management & Innovation
Finance Business Development
Finance Shared Services Roll-Out
Human Resources Business Development
Human Resources Shared Services Roll-
Out
Human Resources Shared Services
Systems Administration
Security, Data Center & Communications
New Products & Capacity Management
Project & Product Management
Business Requirements & Processes
IT Architecture & Software Engineering
Competence Center ERP & BI
Budget & Treasury Applications
Portfolio Management, SLA & Sourcing
IT Architecture & System Development
IT Infrastructure & Operations
Service Desk, Monitoring & Support
Shared Services Center
Finance Shared Services
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Framework Agreement Centralization
Selecting suppliers and awarding the best proposals for each Framework Agreement (FA). 6 to 8 months.
Acquisitions of goods and services categories available in the framework agreements
(Call Off Stage / mini-competition)
Supplier technical and financial
selection criteria
Technical and functional
requisites, contract requirements and economic proposal
evaluation
Contract awarded to the most
economically advantageous
tenders OR to the lowest
price tenders
Public Tender announced via OJEU notice.
Tender documentation available online
Invitation for tendering to all the awarded suppliers(FA contractors).Minimum 5 days
E-auction or traditional negotiation
Best proposal (the most economically
advantageous proposal OR the lowest price), as defined on the FA
Centralization of acquisitions of goods and services under the FAs
eSPap Ministry Purchasing Units (MPU)
eSPap can opt to centralize the acquisitions of goods and services covered by the FA(example: Vehicles and Vehicle Insurance)
Purchase of goods and services categories under the FAs are mandatory for the central
public administration
Centralised Model - Framework Agreement (FA) for Contracts and Acquisitions
PublicTender
Supplier Selection
Request for
Proposals
Awarded Suppliers
Request for
ProposalsNegotiation Awarding
Centralised Purchasing SystemPortuguese model
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Spending categories
Car and Motorcycle InsuranceCleaning Services and Products
Electric Vehicles
Energy (incl. Electricity)
E-procurement Tools
Fuel and LGP
Hardware and IT equipment
Landline Communications (voice and data)
Meals
Mobile Communications
Paper and Stationery
Printing and Copying
Security and Surveillance Services
Office Furniture
Software Licensing
Travel and Accommodation
Vehicles and Motorcycles
Valid as of
Feb 2011Aug 2010
Sep 2011
Nov 2011
Jun 2009
Sep 2012
Aug 2011
Jun 2010
Jul 2010
Oct 2012
Apr 2011
Apr 2011
Apr 2010
Mar 2010
Sep 2009
Sep 2011
June 2012
FA Contractor
s
215
10
3
5
3
18
5
4
3
30
21
8
6
77
13
14
Centralised Purchasing SystemSelection of Framework Agreements
FA in “waves”
Criteria:- Public Expenditures- Common Use- Quick wins- Strategic Sourcing
The renewal rate of framework agreements in 2011/12 was 33%, stimulating competition and larger presence of SMES
Waves
2nd
2nd
2nd 2nd 1st
1st 3rd
3rd 1st
1st 1st 2nd
3rd
1st 3rd 2nd
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In the contract notice eSPap identifies that all mandatory entities (State Direct Administration
Services and Public Institutes) and voluntary entities (Local Authorities (Municipalities), Local
Authorities’ Owned Companies, Regional Authorities and State Owned Companies) are party to
the framework agreement.
Mandatory entities: + 1800 entities
Voluntary entities: around 500
.....framework agreements can only be used between the contracting authorities and the economic operators originally party to the
framework agreement. When a framework agreement is to be used by several contracting authorities, therefore, these contracting
authorities must be identified explicitly in the contract notice, either by naming them directly in the notice itself or through reference to
other documents (e.g. the specifications or a list available from one of the contracting authorities [ ], etc.).
Centralised Purchasing SystemParties to the framework agreement
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With a single economic operator - Framework agreements not used by eSPap
Contracts based on framework agreements concluded with several economic operators may be awarded either:
a) by application of the terms laid down in the framework agreement without reopening competition, or
Where a framework agreement is concluded with a single economic operator, contracts based on that agreement
shall be awarded within the limits of the terms laid down in the framework agreement. For the award of those contracts,
contracting authorities may consult the operator party to the framework agreement in writing, requesting it to support its
tender as necessary.
With several economic operators
b) where not all the terms are laid down in the framework agreement, when the parties are again in competition on the basis of the same and, if necessary, more precisely formulated terms, and, where appropriate, other terms referred to in the specifications of the framework agreement, in accordance with the following procedure:
(a) for every contract to be awarded, contracting authorities shall consult in writing the economic operators capable of performing the contract;
......(d) contracting authorities shall award each contract to the tenderer who has submitted the best tender on the basis of the award criteria set out in the specifications of the framework agreement.
eSPap Framework Agreements
Centralised Purchasing SystemSuppliers
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Centralised Purchasing SystemMajor aspects of a framework agreement
Duration of framework: up to 4 years ( usually 2 + 1 + 1 )
FA concluded with several economic operators
For every contract to be awarded, contracting authorities shall consult the economic operators capable of performing the contract (using ePlatform)
Public tenders or Public Tender (restricted procedure)
Use of electronic platform (mandatory)
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The National Public Procurement PlanAssessing needs and planning demand
UMC collects and validates
information
Aggregation of demand according
to the types of goods and services
needed
Integration of information from
different ministries
Purchasing entities identify needs and estimate budget
Preparation of draft version of the
National Public Procurement Plan
Ministry level
9
Reception and
evaluation of changes
Negotiation and final settings
Meeting of the CIC commission and
preparation of the Final National PP
Plan
Version sent for validation and approval
Formal approval of the Ministry of Finance
Publication of the
National PP Plan
eSPap , UMC and CIC
eSPap
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Conceptual model by eSPap
Public Administration Consultation
Technical Validation by experts
Public Consultation
• Identification of annual expense, incl. historical trends and forecasts
• Evaluation of the public administration needs
• Market´s solutions review
• Concept model and technical solutions review with all ministries
• Preparation of technological solutions to include in the FA
• Term of the framework agreement, FA criteria award, ...
• Review and validation of products and services specifications
• Economical operators, associations, public administration & citizens
Centralised Purchasing SystemIdentification of goods/services/works to establish a FA
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Centralised Purchasing SystemCalculation of contract values for the framework contract
No value contract at FA level
Public tender / Public Tender (restricted procedure) are advertised on OJEU
There are no limit to the value of the contracts to be awarded under a framework agreement
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Centralised Purchasing SystemDividing contracts/Subcontracting
Through the Portuguese e-procurement solution, SMEs are able to better access public markets, either isolated or in association, in order to improve scale.
In designing the tenders, several measures were taken according to the principles of the European SBA, like creation of lots, regionally and by size, adaptation of requisites to the economic dimension of the markets, multi-access criteria or allowing subcontracting.
Currently SMES account for 70% of the System’s 250 suppliers.
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Identification of Needs
(Purchasers Entities)
Aggregation of Needs
(UMC/eSPap)
Call offs documents
Invitation to all FA economical operators
• Conduct needs assessment of the entities
• Standardize the technical requirements
• Aggregate demand and validate expenditure/spending approvals
• Use of the eSPap eCatalogue
• Prepare tender/invitation documents (based on standard)
• Comply with the requirements and award criteria defined in the framework agreement
• Use of eSPap ePlatform
• Invitation to all FA economical operators
• Contractors obligation of responding to all calls
CALL OFF under eSPap FA
Centralised Purchasing SystemOrganizing mini-competition/ call off without competition
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CALL OFF under eSPap FA
Improving Attributes of Proposals
Awarding
Report and Monitoring
• E-auction or traditional negotiation
• Best proposal
(MEAT or the lowest price, as defined on the FA)
• Notify decision to other suppliers (ePlatform)
• Contracting authorities must:• Monitor the conditions of supply / delivery
• Produce and submit award reports to eSPap
• FA contractors must:• Meet the conditions agreed in contracts
• Report billing reports to the Agency, UMC and entities, within the time specified in the FA
Centralised Purchasing SystemOrganizing mini-competition/ call off without competition
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Aggregation:
a) Internal
b) External, UMC, CPB or third party
To aggregate it is necessary to:Understand available goods and services in the Catalogue
Define rules: duration of contract, timeline, formularies,
documentation, etc
Centralised Purchasing SystemIdentifying needs and aggregation methodologies
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Best practices
• Do not include all goods and services – rationalise
» Advantages:
• Order management
• Stock management
• Invoice management
• Assess and plan needs (at least one year ahead, but it is
possible to adapt to each category and/or FA)
• Define clearly the rules, but be flexible if necessary
Centralised Purchasing SystemIdentifying needs and aggregation methodologies
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FAs developed by eSPap allow both situations:
a) MEAT
b) The lowest price
Individual contracting authorities, within the FAs, will
fit MEAT criteria / weights to their individual situation
or chose the lowest price.
Centralised Purchasing SystemPricing mechanisms and MEAT evaluation within the frameworks
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FA Lots Region Subcontracting Contractors / SME
Paper & Stationary
• Paper• Stationary• Consumables
No Yes 30 / 26
Printing & Copying
• Scanning• Fax• Portable printers• Printers (Low, medium, high performance)
• Combine lot
No Yes 21 / 18
Cleaning Services & Products
• Services• Products
North, South, Alentejo, Lisbon, Algarve, Azores, Madeira and National Level. (NUTS II)
Yes 15 / 10
Security &Surveillance
Services
• Surveillance• Alarm Receiving Centre & Monitoring services
• Combine lot
Yes 8 / 0North, South, Alentejo, Lisbon, Algarve, Azores, Madeira and National Level. (NUTS II)
NUTS: Nomenclature of territorial units for statistics / NUTS II (Basic regions for the application of regional policies)
Centralised Purchasing SystemPricing mechanisms and MEAT evaluation within the frameworks
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Centralised Purchasing SystemFinancing structure
Operations are funded by charging fees on suppliers that are part of the framework agreements. No fees are charged on public buyers.
There are only fixed rates in each framework agreement that are charged to suppliers based on their invoicing amount to public entities under the framework (purchases). Rate range: from to 0.5% up to 3%. The usage of the e-procurement tools is free of charge:· Electricity: 0.5%· Software, Vehicle Insurance and Mobile communications: 3%· Vehicles: 2%· Fuel: 1 cent per litre· All other framework agreements: 1%
Framework fees are calculated to support the setting up and managing costs, but also operating costs. The fees take in consideration the relevance of each category of goods and services, in terms of market size, margins and relevance. In the last two year they covered 100% of operations.
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Centralised Purchasing SystemCentralisation = efficency and transparency
Decide on the rules and mandatory/voluntary approach, incl. penalties
Streamline processes and aggregation flows
Create a sound expenditure approval model (internal and external)
Design mechanisms to support procurement policies (SME, GPP)
Promote integration of information, report and monitoring
Assure publication of contracts awarded under the system in a portal, in order to promote transparency and trust
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Centralised Purchasing SystemResults of SNCP
20102011
2012
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
122,8
184,8
314,6Invoicing reports
(M Euros)
2009
2010
2011
2012
10.6
23.9
11.8
22.2
2
7.2
5.7
3.6 25,8
31,1
12,6
Savings, transational and processual (M Euros)
17,5
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IT Framework | Setting up the framework agreement model
Conceptual model
Public Administration Consultation
Public Consultation
• Identification of annual expense
• Identification of bad practices in public sector
• Evaluation of the public administration needs
• Analysis of potential savings attached to the amount of the estimated
expense
• Market´s solutions review and link to the public administration needs
• Concept model and technical solutions review with all ministries
• Preparation of technological solutions to include in the FA
• Term of the framework agreement, FA criteria award, ...
• Review and validation of products and services specifications
• Submission to public consultation to collect contributions from general
public and citizens, businesses associations, stakeholders, ...
Technical Validation by main IT entities
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IT Framework | Products and equipments
Personal Computers
Desktop
Rack Servers
Desktop/Laptop/Servers/Others
Servers
Peripherals
Laptop
Blade System
Standard Desktop
High performance Desktop
Standard Laptop
High performance Laptop
Small Laptop
Netbook
Standard rack server
High performance rack server
Standard Blade System
High performance Blade System
Storage
Display
Others
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IT Framework | Public Tender - Restricted procedure
Technical and financial selection criteria:• Experience (at least 5 customers of € 50.000 each)
• EBITDA
• Number of workers
• Years in the market
• NP EN ISO 9001:2008 e NP EN ISO 14001:2004
In this procedure: from 36 candidates, 32 passed to the 2nd step
1st step QUALIFICATION
2nd step Invitation for bid
Selection criteria: • Economically most advantageous offer based on:
• Price
• Energy efficiency
• Manufacturer environmental certification
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IT Framework | Proposals
Desktop computer
Laptop computer
Keyboard + mouse + Display TFT 17” + RAM memory + OS+ technical assistance…..
Mouse + RAM memory + keyboard + transport case+ security cable+ docking station + OS+ technical assistance…….
+
+
The tenderers must identify equipments, accessories, peripherals, OS and their technical features, and also quote their maximum price.
Basis equipment Additional products and options
Example:
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IT Framework | Lots/Competitiveness
Lots Selected candidates
Proposals to be awarded Competitiveness
Lot 1 - Desktop computers; 22 10
Lot 2 - Laptop computers; 19 10
Lot 3 - Rack servers; 26 10
Lot 4 - Blade servers; 16 10
Lot 5 - Components, accessories and peripherals; 28 10
Lot 6 - Aggregate purchase of desktop and portable computers; 21 10
Lot 7 - Desktop computers and laptops renting; 6 10Potentially lack of competition at FA
level Lot 8 – Rack servers renting; 4 10
Lot 9 - Blade servers renting. 2 10
The competitiveness was assured in the first six lots but in the seventh, eights and ninths there was some lack of it due to the renting type of provide, quite unusual in the public sector.
Lots / Number of bids
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IT Framework | Awards criteria
The award criteria for the framework agreement tender was the economically most advantageous offer based on:
• Price• Energy efficiency• Manufacturer environmental certification
Additionally all the products and equipments must fulfill technical / environmental requirements as well as required SLAs
In the call offs under the FA, the award criteria must be one of the following:
• The lowest price or:• The economically most advantageous offer based on:
• Price and:• Environmental/ Energy efficiency, and/or• Time to delivery, and/or• Technical and functional adequacy, and/or• Warranty period
FA – Award criteria (1st phase)
Call offs – Award Criteria (2nd phase)
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IT Framework | FA upgrade
Product upgrade during FA length (usually 2 years)
Can occur:
• By eSPap initiative or• By contractors request (typically due to a product discontinuation)
However, the new proposals must:
• Maintain or decrease price offer• Maintain brand/maker• Maintain or improve technical specifications
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IT Framework | Main issues
• Diversity of public administration key needs
• Solved by constitution of lots with several package solutions which fit in the majority of requests (laptop, desktop, netbook, rack server, blade server, standard, high performance,...)
• Market diversity and modularity
• Solved by division on lots by product category attached with various possible combinations of peripherals, accessories and additional options for upgrade to ensure and optimize their adaptability
• FA Product upgrade/update
• Solved by availability of update procedure during FA length
• Performance assurance
• Solved due the use of a settled requirement benchmark rating (Sysmark 2007: scenario office productivity/ Mobilemark 2007: performance qualification / Mobilemark 2007: battery life/ SPEC CPU 2006 – CINT 2006 Baseline)
• Due to legal risk, eSPap did not request or refer any model /brand of processor (or other with similar performance). Instead we defined a level according to an official and accepted benchmark (Bapco and SPEC)
Main issues and difficulties
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Centralised Management Model of the State Fleet (PVE)
● Redefining the Legal Framework:● Publication of a new legal decree law for the State Fleet (DL n.º 170/2008)
● Publication of other Regulatory Documents
● Legal Obligations of organizations and services using the State Fleet
● Providing the State Fleet Management System (SGPVE)
● Public tenders to select suppliers of motor vehicles as well as insurance services through frameworks agreements
● The acquisition of motor vehicles is an exclusive competency of eSPap● Call-off process under the framework agreements for vehicles and insurances
● Access to the PVE Services by voluntary bodies
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State Fleet – Some numbers
Year # Vehicles ∆ # ∆ %2009 28.7932010 28.350 -443 -1,5%2011 27.692 -658 -2,3%2012 27.279 -413 -1,5%
● Since the implementation of the centralised management model of State Fleet we purchased around 1800 vehicles, with a 30% overall savings ratio.
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Framework Agreements for Vehicles and Motorcycles (AQ-VAM), Electric Vehicles (AQ-VE) and Insurance (AQ-SA)
AQ – VAM and AQ-VE
Defines technical requirements:● Displacement, capacity ranges, weight, number of wheels, doors, places, wheelbase, height,
length, minimum equipment, permitted load and other specs.
103 lots grouped in 6 typologies of vehicles:• 5 groups for acquisition: motorcycles, Heavy Goods Vehicles (HGV’s), Heavy Passenger Vehicles,
ambulances, passenger cars and light commercial vehicles• 1 group for operational leasing of passenger cars and light commercial vehicles
Effective for two years, automatically renewed for one year up to a maximum of 4 years Defines obligations of suppliers and service levels to comply with before the purchasing entities and eSPap Sets penalties applicable to suppliers for failure to comply with the obligations Sets deadlines for payment Foresees management reports, which are the key to a detailed analysis and to support future decision-making process Sets the maximum prices in place during the validity period, with the possibility to improve by negotiating during the tender Defines products and suppliers
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Call-off process under the framework agreements for vehicles and insurance
eSPap validates the request
Aggregation process of requests
according to the types of vehicles
needed
Preparation of the Call-off Documents
(Invitation and Specifications)
Users send the request through
SGPVE (purchasing entities)
eSPap Board approves the Call-
off
State Fleet Management System (SGPVE)
33
Proposals Reception
and evaluation
Negotiation Preparation of the Preliminary Report
Release of the Call-off
Preparation of the Final
Report Awarding
eSPap E-Procurement Electronic Platform
A
Paper and electronic
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Call-off process under the framework agreements for vehicles and insurance
Bank garantee (if contract > 200K €)
Signing of the contract
Court of Auditors (if contract > 350K €)
Qualification documents
Delivery of the new vehicles,
legal destruction of the old ones
A
Preparation of Awarding Reports
eSPap E-Procurement Electronic Platform
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Budget planning and cost control
Changing variable into fixed costs:
Include variable cost components in the contract priceConsider maintenance costs if necessary
year 1 year 2 year 3 year 401234567
3 3 3 32
1
4
6
Maintenance costs
Incl. in the con-tractVariable costs in the execution
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Framework agreementBidding documents
Tender program / Invitation to tender• Definition of lots: 8• Definition of price: min. discount (cents per litre) over
reference price (eg. Fuel)• Awarding criteria for the FA – best discount offered per lot
(weighted %)
Tender specifications / Terms of reference• Definitions, duration of the FA• Obligations of the parties• Auditing• Acquisitions under the framework agreement• Awarding criteria• Duration of contracts under the FA• Conditions and payment terms• SLA’s, technical and functional requirements (minimum)• Reporting and monitoring• Fee to the managing entity• Penalties
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FA and call-offsInvitation to tender
Type of procedure, and object of the tenderContracting authorityDecision to contractRegistration in the e-platform Clarifications and rectificationsErrors and omissionsTender documentsPrice proposalVariants of the proposalMinimum period validity (Duration) of the proposalE-signatureTerm to present proposalsList of competitors and consultation of proposalsAwarding criteriaElectronic autionQualification documentsPossibility to groupCosts of the proposalTechnical support regarding the e-platformPeriod counting in the formation phase of the Framework Agreement
Juntos, partilhamos eficiência
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