The Way Forward

In conclusion of this study, Sigma would like to elaborate briefly on how a centralised purchasing system (CPS) could be introduced in each of its partner countries that have no or very limited experience of central purchasing bodies (CPBs) for the award and management of framework agreements. However, Sigma realises that conditions vary extensively between these countries and that the concept of a CPS might not fit some countries at all or would need, at the least, to be extensively adapted to the national context. Under EU law, there is no legal obligation for Member States to introduce CPBs; decisions on the matter are left entirely to the governments. A public procurement system can always exist without centralised purchasing arrangements, instead relying on fully decentralised procurement through which individual procuring entities award contracts for goods, services and works. All kind of centralised and decentralised structures may also exist in parallel. Moreover, this study discusses mainly CPBs that serve, first of all, the state administration at all levels (central, regional and local) and where other sectors (e.g. municipalities and regional authorities) may participate if they so decide. As mentioned in the introduction of the study, in many countries there are other centralised purchasing arrangements in place, such as sector-based CPBs (e.g. health and education) or collaborative or co-ordinated framework agreements, with their specific advantages and disadvantages.

As this study shows, the proportion of the purchasing volumes of CPBs is fairly small compared to the total national procurement volume, but they nevertheless belong to the category of main purchasers in all countries studied. Therefore, the fundamental question concerns the extent to which a CPB can

generate an “added-value” to the public procurement system in terms of savings, rationalisation, modernisation and other important values. The study clearly indicates that CPBs, under the right conditions, generate such added-value.

Recommended Steps and Considerations

1. Elaborate a strategy and an action plan for the establishment of a central purchasing body (CPB), if considered appropriate

Many countries are already in the process of elaborating national strategies and action plans for the overall reform and modernisation of their national public procurement systems. Sigma proposes to include in this planning the possibility of introducing CPBs. Countries need to carefully analyse the preconditions for the creation of centralised purchasing arrangements before going ahead with such an important decision.

2. Take a step-by-step approach

If the decision to establish a CPB is taken by the government, Sigma would recommend a step-by-step approach in terms of goods and services to be covered at the start-up, organisation and staffing, etc. so as to provide the CPB management with realistic possibilities for successfully building the organisation’s capacity, infrastructure and performance without risking its credibility. The most sensitive stage of a CPB’s operations is the start-up phase, since procuring entities may regard the CPB only as a “competitor” and not as a partner. Building confidence, which is essential for the success of a CPB, takes time, but the initial period is often decisive in ensuring a good outcome. It is important to agree not only on the right steps but also on the right order of these steps. The main risks are:

• Over-ambitious or even unrealistic goals set by the owners, which will jeopardise the chances for the successful introduction of the new CPB;

• Insufficient time, discretion and financial means for the management to build the organisation, the infrastructure, the operational models, the system for framework agreements and, not least, the partnerships with the customers.

3. Take an integrated approach

Within the strategy and action plan for a new CPB it is important not only to address the establishment of the CPB but also to integrate the development of e-procurement, including dynamic purchasing systems if they are implemented in national legislation, and the use of framework agreements in general. The operations of the future CPB will be firmly based on such instruments.

4. Build centralisation on the principles of a decentralised public procurement system

Public procurement legislation is built on the idea of decentralisation, where procuring entities are responsible for all steps in the procurement process, including the award decision and the signing of contracts, for which they are held accountable. A CPB is also a contracting authority with the same responsibilities, but at the same time it might be able to make decisions that other procuring entities may be obliged to accept in the event that they need to acquire a product or service covered by a framework agreement. In a fully voluntary system this is not a major issue, since a procuring entity may always refrain from using the framework agreement and instead make its own purchases. In a fully compulsory system this set-up becomes a real issue, since the procuring entity has no choice other than to use the framework agreement. Sigma recommends that countries apply instead a differentiated approach, which means that goods and services to be centrally purchased would be carefully reviewed from the point of

view of the procuring entity’s interests (the client’s perspective) in order to determine whether the use of a framework agreement should be compulsory or voluntary. Some products may be well suited to compulsory use while others would be much better suited to voluntary use. As an example, compulsory conditions might be fully acceptable to procuring entities for the award of a framework agreement on fuel, which normally is a non-strategic commodity for which aggregation gains on prices and discount structures are probably important, whereas any intention to establish a compulsory framework agreement on office furniture would run the risk of being received very negatively, since procuring entities are likely to have different preferences. A compulsory application in the latter case could lead to dissatisfaction, maverick behaviour and low commitment on the part of the procuring entities.

5. Closely involve key stakeholders

A CPB cannot exist without strong support from its key stakeholders, that is, the owners, the procuring entities and the private sector, but there are also other stakeholders of importance. The study has emphasised the importance of involving the stakeholders in the CPB’s operations in order to obtain their support and commitment. This is particularly important for newly started CPBs. The CPBs should elaborate a communication strategy. The CPB should give its attention to the media and civil society at large, in addition to the core stakeholders.

6. Take strategic operational decisions

As demonstrated by the study, there are a number of crucial decisions to be taken by governments as part of the process of establishing a CPB. The most important decisions concern the following issues: • Legal status of the CPB – limited company or public agency?

• Which goods and services should be covered, initially and in the medium term? • A voluntary or compulsory system, or a mixed solution?

• Types of framework agreements and call-off systems to be used • What kind of electronic platform should be developed?

• How are the CPB’s operations to be financed? • Organisation and staffing

• Capacity-building of staff and also of customers and suppliers

The study has examined these issues in some detail and hopefully has provided guidance concerning possible solutions.

The Annex provides the country descriptions, which were prepared and approved by the CPBs included in this study and subsequently edited by Sigma for the purposes of ensuring a consistent structure and language.