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Katja Koskelainen, Soile Pohjonen and Alina Wernick Aalto University School of Science
Department of Industrial Engineering and Management SimLab, Finland
Proactive and trialogic procurement contracting
Our paper discusses how contracting processes and contract documents in Finnish municipalities enable and promote collaboration in public procurement. Our focus is on open procedure tendering. The prevailing comprehension of contracts is that they are legal documents, drafted for legal interpretation purposes as safeguards in legal disputes. However, the main purpose of contracting should be to promote collaboration to achieve the desired aims. Our starting point is the proactive law/contracting approach which perceives contracting as a collaboration tool. Inspired by the trialogical approach to learning we call our approach to contracting proactive and trialogic contracting where contracting documents are boundary objects, i.e. artifacts that facilitate knowledge sharing between the contracting parties. According to this theoretical perception, we emphasize the need to reflect the functionality of working tools and methods, so that they would be user-friendly facilitators of knowledge sharing. Our preliminary findings in the procurement processes observed propose that majority of hinders to successful contract implementation is due to lack of functional knowledge sharing between and within organizations. Adoption of the design attitude and the use of contract visualization produce new knowledge sharing instruments for successful procurement management.
Introduction
This paper discusses how contracting processes and contracts enable and promote collaboration and co-innovation in public procurement. We have studied how Finnish municipalities can develop their contracting processes and contracts to provide fruitful grounds for an “innovation friendly” public procurement in the bulk of public purchasing advanced by Uyarra & Flanagan (2010). Our focus is on open procedure tendering. We define open procedure public procurement contracting as a three phased, iterative process which includes the preparation phase, the official tendering phase, and the contract execution and follow-up phase. The preparation phase encompasses all preliminary activities including all measures of planning and preparation of the forthcoming procurement until the publication of the contract notice. The official tendering phase is the most regulated part of the process and in a narrower conception of the public procurement process understood as the procurement process itself. The tendering phase is succeeded by the contract period which encompasses contract implementation and follow-up. Our study focuses on the preparation phase as well as
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the implementation and follow-up phase which are often inseparable in cases of expiration or termination of a prior contract. The importance of the official and administrative tendering phase and its requirements on the contractual relation are acknowledged, but not discussed in depth.
Figure 1. Public procurement contracting
In this paper, the focus is on knowledge sharing between the procuring organization and market or potential tenderers and within the procuring organization, i.e. between different professionals in the procuring municipalities. Using process descriptions of procurement contracting processes, tendering and contract documents and visualizations as boundary objects within the public procurer helps to draw a more complete picture of the procurement at hand, to indicate what knowledge is needed and, who can best provide that information.
The paper takes a contracting perspective to public procurement. The focus is on contracting about the procurement, i.e. the object of procurement is the key issue. Contracting is the tool by which reaching that target is enabled. We perceive contracts as legally sound, practical tools that enable reaching the contracting parties’ joint goals and facilitate collaborative interaction among parties. By procurement contract documents we mean all written or visual documents that are used during the procurement process, e.g. internal working papers, contract notice, invitation to tender with appendices, tenders, contract with appendices. Below we use the term contracting documents, when we refer to which ever document, whether paper or electronic, that is used to share and/or create knowledge in a procurement contracting process.
The developing of procurement contracting practices and contracting documents is perceived as an iterative process where the development ideas can be implemented
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already during the procurement process at hand or in future procurement processes. Naturally the persevered development of the entire procurement contracting system and contracting documentation is the most preferred. This is an important aspect to be taken into account in the public procurement setting, especially in open procedure tendering. As the official procurement process has been initiated by the publication of the contract notice, the procurer has only limited possibilities to alter or modify the present procurement without being obliged to publish a new contract notice.
In this paper we have adopted the proactive and trialogic contracting approaches as our theoretical perspective to contracting and contracts. According to our theoretical perception of contracting and contracts, proactive and trialogic contracting, we emphasize the need for contracting documents to reflect the functionality of working tools and methods, so that they would be user-friendly facilitators of knowledge sharing and creation. Next the proactive contracting approach is introduced. Then trialogical learning, from which we have adapted the notion of trialogic contracting, is discussed. We continue by building our theoretical perspective through contracting documents as boundary objects and finally discuss contract visualization and design thinking as novel methods for promoting innovation-friendly public procurement. Then we reflect the theoretical framework of proactive and trialogic contracting in the light of five procurement process cases followed through by our two case municipalities. Preliminary research results may be of value to practitioners and researchers by indicating developmental directions that should be taken to promote innovation-friendly procurement in the bulk of public procurement.
Proactive Law and Contracting
Proactive Law belongs to approaches born out of real-life needs to balance the prevailing legal logic (see on Proactive Law and its history in Siedel & Haapio 2010 and Proactive Law in relation to legal thinking in general in Pohjonen 2006). In Proactive Contracting, contracting is considered a cross-professional process to promote success. The approach has been developed in cross-disciplinary co-creation between researchers and experts in business-to-business contracting practice. In business contracting, Proactive Contracting focuses on helping the parties to reach their business goals and identifying possible sources of problems before damage has occurred. It looks at contracting from the perspective of individual contracts as well as the whole contracting system of an organization and the implementation of the contract by different employees. Further, it understands contracting as an essential part of business management and strategic planning. The emphasis is on value-generation.
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Contracting is enhancing knowledge sharing and knowledge co-creation,1 securing that
all parties know what they are supposed to do, creating methods of preparing for changes, promoting the desired attitudes, and so forth. Ramaswamy and Gouillart’s core principle of co-creation and transformational framework of co-creation takes a seller or service provider perspective to co-creation. Co-creation principle and framework have been transported and discussed also in the demand driven public procurement settings (Koskelainen et al. 2011).
The orientation of Proactive Contracting is in the future, whereas the traditional legal focus is on the past, related mainly to legal disputes. Since court decisions have constituted the core interest in legal thinking, the most common future-oriented element in legal discussion has been the anticipation of those decisions. Contract law is mostly about addressing contract failures. Proactivity differs from reactivity in that it emphasizes consideration how one can create the preconditions for achieving goals oneself in a manner that does not contribute to unnecessary problems. Therefore, it is not about simply reacting to something that has happened or is happening. Rather, it is about preparing the contracting parties for the forthcoming implementation of the procurement itself and creating collaborative interaction, communication, and development processes to be utilized during the contract period.
In Proactive Contracting, contracts are not seen as primarily legal documents but rather as business plans which clarify what has been agreed upon. The most important task of proactively drafted contracts is not purely to prevent legal risks but rather to enable business goal. That requires proper tools that enable knowledge sharing and co-creation. Contracts are at present rarely made for that purpose but for potential legal disputes. Contract competence is not developed if we do not believe that contracting has potential to benefit business instead of being “pure law”.
Trialogic Approach to Contracting
Sami Paavola and Kai Hakkarainen (Paavola & Hakkarainen 2005) have distinguished an approach to learning which they call “trialogical”. It concentrates on interaction through mediating artifacts or processes of activity, not just between people, or between people and environment. Inspired by this concept, contracting process could be called trialogic
1 The term knowledge co-creation used here is a combination of knowledge creation by Nonaka &Takeuchi 1995
and co-creation by Ramaswamy & Gouillart 2010.
Trialogue = dialogue + tools to cross the boundaries between people’s thinking
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contracting (Pohjonen 2012) to emphasize the additional need to also reflect the functionality of its working tools and methods, so that they would be user-friendly facilitators of knowledge co-creation and knowledge sharing.
Thinking of contracting in the framework described by Paavola et al.’s trialogical approach to learning (Paavola & Hakkarainen 2005, Paavola et al. 2004) gives a new perspective to procurement contracting processes and their tools. Trialogical learning is based on the knowledge creation metaphor and emphasizes the collaborative and target-oriented activities of learning and developing of collaborative shared objects or artifacts. Paavola et al. (2004) claim, that questioning and disturbances initiate cycles of innovation. Innovative knowledge advancement is characterized as a cyclical and iterative process. Knowledge creation is not linear but a process of transforming and developing existing ideas and practices. The process, whereby new knowledge and new mediating objects of activity are collaboratively created, is in the center of the knowledge-creation perspective. In the context of virtual collaboration tools Irrmann et al. (2011) define trialogical learning as a collaborative and systematic effort to develop the shared objects, tools, practices, and ideas in order to collectively advance the community’s knowledge, and this process is mediated through the shared objects that are being developed. (italics in the original text)
Hakkarainen & Paavola (2007) propose six, interrelated principal features that characterize trialogical learning. Those being:
1. Shared objects of activity (whether conceptual artifacts, concrete, material products or practices) and their collaborative development are in the focus. Collective advancement of shared knowledge objects enables knowledge creation.;
2. Sustained and longitudinal knowledge advancement is critical due to the discontinuous and non-liner nature of knowledge creation process. However short-term processes, stages and moments are not to be neglected.;
3. Interaction between individual and collective activities;
4. Cross-fertilization of knowledge practices between educational, professional, and research communities;
5. Technologies designed to support long-standing, collaborative creation, building and sharing of knowledge; and
6. Development through interaction between various forms of knowledge and between practices and conceptualizations etc.
We introduce a novel concept of trialogic contracting which is based on and constructed from the trialogical learning phenomenon where new knowledge is created with the
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help of mediating objects. The six principals applied to the context of public procurement contracting can be proposed to be:
1. Focus on contracting documentation and processes (e.g. market dialog2
2. Both long-term and short-term development of contracting practices and related documentation are to be enabled.
; their development as practical collaborative tools that promote knowledge sharing and creation.
3. Interaction between internal (within public procurer) and external (public procurer and market) activities.
4. Cross-fertilization of professional practices; between different professionals within the procurer and between procurer and market.
5. Technology support to share and create knowledge e.g. existing public procurement portals and development of more user-friendly tools for both procurers and the market.
6. Development through interaction between e.g. legal and substance knowledge.
According to our theoretical perception of contracts and contracting, proactive and trialogic contracting, we emphasize the need to reflect the functionality of contractual working tools and methods, so that they would be user-friendly facilitators of knowledge sharing and enable innovation between and within contracting parties.
Creation of new knowledge, i.e. development and innovation of products, services, processes, and practices, in procurement processes may be advanced by adopting a trialogic approach to contracting. Contracting is understood, contrary to the prevailing perception of contracting and contracts functioning by the legal logic, as a process of activities to facilitate knowledge sharing, the advancement of practices and knowledge creation. The contracting documents play an integral role in creating new procurable entities and how collaboration between the procurer and supplier is enabled and fostered during the contract period. In trialogic contracting, contracting documents function as knowledge sharing artifacts or boundary objects. On the other hand, these artifacts are further developed through knowledge creation which takes place in the procurement community.
Smeds & Pöyry-Lassila (2011) propose that in trialogical learning, conceptual or concrete objects and practices are collaboratively and systematically developed through collective intellectual action in which the individual members of the community participate actively”. Learning or the creation of novel knowledge takes place though
2 Market dialog is understood as all knowledge sharing and creation interaction and activities between the public
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these shared objects. In contracting documents, both conceptual and concrete objects are naturally present as the content of contracts comprises the textual or visual conceptualized expressions of the content of the contractual relationship. On the other hand, Finnish legislation on public procurement requires for written contracts and therefore each procurement contract is a concrete boundary object in itself.
Figure 2. Central competence areas in public procurement contracting processes
Contracting Documents as Boundary Objects
Boundary objects are “objects that are both plastic enough to adapt to local needs and constraints of the several parties employing them, yet robust enough to maintain a common identity across sites” (Star & Griesemer 1989). Boundary objects enable individuals with different backgrounds and between various groups to collaborate and build a shared understanding by providing cooperation and interaction a common context. (Pöyry-Lassila & Teräväinen 2010) The role of boundary objects has been studied in various contexts e.g. research on organizational memory, decentralized teams, innovation processes, product development, management of strategic change and multi-professional negotiations (See Pöyry-Lassila & Teräväinen 2010 p.19 for detailed references), but to our knowledge not in public procurement contracting setting.
Proactive contracting emphasizes the target-oriented and collaborative approach to contracting and contracts as practical tools that promote the successful fulfillment of the subject matter of the contractual relationship. To achieve the set goal contracts are required to facilitate knowledge transfer and sharing between contracting parties. Contract documents may serve as repositories (Star 1989) of information that parties may refer to while transferring knowledge between contracting parties as well as within a contracting party, e.g. between different departments of a public procurer. We extent
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the role of contracting documents further and see that they provide means for knowledge creation and innovation in addition to acting as mere repositories of information. Appropriate contractual arrangements, e.g. incentive structures promoting innovation, agreed collaborative processes or working methods facilitate knowledge sharing and even knowledge creation during contract implementation.
Contracting documents serve as externalization of knowledge. Nonaka’s (1994) externalization process of making tacit knowledge explicit has been recognized as one of the most critical processes in organizations. Knowledge boundaries between different groups, whether within or between organizations, are perceived as a barrier to and a source of innovation. Boundary objects present a tool for exploiting the innovative possibilities offered by knowledge boundaries between different professions, organizations etc. They have proved to effectively provide concrete means of representing different interests and facilitating their negotiation and transformation, i.e. different interests and their political consequences can be negotiated and common interest can be defined (Carlile 2004, 2002).
Design Thinking
Design thinking is a strongly emerging research field. It has influenced for example research in business strategizing and management. Many of its elements are already present in the prevailing tradition of research and working practice. Process thinking, systems thinking, grounded theory and action research, for example, represent design attitude. Iterative and experimental way of working is typical of engineering as well as of designing. Design thinking has, though, explicitly incorporated design attitude elements, including its practices, into “one package”. Design thinking has as well taken into account the intermingled: embodied, emotional and aesthetic elements in subjective human collaboration. Thus, it affords novel attitudes and practical tools to face challenges in human collaboration.
It has been argued that designers share a “design thinking” in which problems and opportunities are framed from a human-centered perspective, visual methods are used to explore and generate ideas, and potential users and stakeholders are engaged. (Kimbell 2011) Design thinking is a methodology in which “innovation is powered by a thorough understanding, through direct observation, of what people want and need in their lives and what they like or dislike about the way particular products are made, packaged, marketed, sold, and supported.” (Brown 2008) Design thinking enables the imagining of experiences that are combinations of products, services, spaces and information as well as giving them desirable form. In public procurement settings design thinking could open up new, fresh ways of understanding procurement needs and finding novel solutions which could be adopted as procurable entities. Adopting design
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thinking into public procurement processes present a means of fulfilling the request for innovation-friendly procurement demanded by Uyarra and Flanagan (2010) and acting as an “intelligent” customer.
In design thinking contracting can be seen as an activity of social prototyping, as an iterative, evolving and innovative process that is grounded on the participating parties’ subjective understanding, as opposed to control-oriented and technical approaches, which strive for objective rationality. According to the design attitude contracting documents are to be developed as boundary objects where visualization is a core element.
Contract Visualization
Contract visualization is at present one of the most important emerging interests in the proactive contracting approach.3 If contracts are supposed to be expressions of
externalized knowledge and common will of the parties, but they still too often remain unclear and result in disagreements, the most obvious key to improvement is to ameliorate knowledge sharing where contract visualization is an efficient tool. Visualization facilitates knowledge transfer and enables transmission of holistic and complex comprehension. (Pohjonen 2012) Visual literacy and visual skills to increase the ability to send and receive visual messages more consciously are needed in order to utilize contract visualization as a knowledge sharing and creation tool in procurement contracting.
Visualization facilitates collaboration, knowledge sharing and creation both during contract preparation and contract implementation phases. Visualization techniques add images to words. Barton et al. (2011) see two dimensions of use of contract visualization techniques. On one hand, “such techniques could be used directly in a contract, as part of the drafting process”. On the other hand, “visualization can be about the contract, a separate document that assists those who are involved in the planning, review, or approval of a contract or in monitoring or implementing its terms”. (Barton et al. 2011)
3 See for example Passera, Stefania & Haapio, Helena, User-Centered Contract Design: New Directions in the Quest for Simpler Contracting, in Bringing together academics and practitioners to promote research and best practice in Contracts and Commercial Management 80-97 (R. F. Henschel ed., Academic Forum for Innovative Research and Practice, International Association for Contract and Commercial Management IACCM: Ridgefield 2011) and Gerlinde Berger-Walliser, Robert C. Bird & Helena Haapio, Promoting Business Success through Contract Visualisation, 17 The Journal of Law, Business & Ethics 2011, 55. On legal visualizing in general see Colette R. Brunschwieg, Visualisierung von Rechtsnormen – Legal Design (Zürichen Studien zur Rechtsgesichte, Vol. 45, Rechtswissenschaftliche Fakultät, Universität Zürich, Schulthess Juristische Medien: Zürich 2001).
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Rekola and Boucht (2011) suggest that legal and contract visualization has emerged as a potential tool to increase interest in contracts and see their potentials. Context and audience of the contract at hand must be taken as starting point while visualizing contracts. Rekola and Boucht summarize five requirements posed on legal and contract visualization. Those being: 1) clear message, visual or textual, is the ultimate goal; 2) importance of understanding what your are visualizing, to whom and for what purpose; 3) the process of visualization may be more useful than the final result; 4) further research on practical implications of contract visualization is needed; and 5) a change of attitude is required to increase legal expertise of non-lawyers.
Passera & Haapio (2011) discuss visualization of service contracts from the design and user point of view. They state that for contract visualization to facilitate the production of service contracts (i.e. negotiation, drafting and signing), the visualization process has to be user-driven and the designer has to be guided by a clear understanding of the users’ need and context of use. Visualization facilitates not only the production of service contracts but also the communication of service contracts during implementation and follow-up phase (Passera & Haapio 2011). The usability of images as knowledge sharing and creation tools both during procurement contract planning and preparation phase and during the implementation and follow-up phase is based on their ability to “help groups to focus attention, to surface areas of agreement and disagreement, to make implicit knowledge and past experiences explicit, to discover new perspectives, and to document or revise decisions” (Eppler 2007).
Novak &Wurst (2005) state “knowledge visualization is intrinsically connected to the problem of knowledge transfer in social structures.” Visualization has proved to be a faster and more efficient way to share knowledge than purely textual means. According to Eppler (2007) the potential of visual practices and images in knowledge work is, in addition to design and architecture, for areas where collaborative drawings do not necessarily represent tangible objects. This accounts in public procurement settings for e.g. contracting for services.
There are various means for visualization, it may mean anything from plain language and infographics to films. The former are comparable to plain language or textual settings in the world of words and the latter nearer narratives. Messages of the latter category are received more spontaneously and holistically than more rational presentations. Visual literacy and competence are needed to increase our ability to send and receive visual messages more consciously. Improving the visual structure of contract documentation helps to ease the legibility and usability of the documentation. (Pohjonen and Koskelainen 2012 forthcoming) Contract visualization together with a design thinking approach to procurement contracting may provide novel means to promote successful contracting during different procurement contracting phases.
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Method
The research approach in our study is a combination of action research (Gummesson 2000) and case study. We have conducted two developmental process simulation projects according to the SimLab process simulation method (Smeds at al. 2006) to reveal the holistic picture of the process of public procurement and related contractual practices. The action research approach we have adopted is supported by the SimLab process simulation method by way of enabling systematic data collection in multiple cases. The main data collection methods are semi-structured interviews, participation and observation of process simulations and workshops which all were audio and/or video recorded and the recordings transcribed. Secondary written documentation is also used.
The SimLab process simulation method comprises seven steps: opening meeting with representatives of the pilot organization, process modeling, interviews, preparation of the simulation and workshops, simulation and workshops, analysis of results, and reporting results. (see Figure 3. below) The core of the method is the interactive social process simulation where researchers facilitate reciprocal knowledge sharing and creation among participants utilizing visual process models. The aim is to gain a joint understanding about the process which enables the generation of development ideas. The simulation at its best results in a holistic view of the process, its challenges and possible solutions when the simulation group is composed of the key performers of the process and professionals representing different expert areas. The simulation experience assists participants to understand the wholeness of the process and their own role in it. Thus they are more able to develop new practices and take them to use.
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In our data analysis, we applied the iterative process of considering theory and empirical data following the grounded theory approach presented by Strauss & Corbin (1990). The first round of analysis was used to identify the main challenges and development points in public procurement contracting processes from the proactive contracting view point. Then we went back to theory and searched for possible answers and solutions to the indicated challenges. We came up with trialogic contracting, contract visualization and design thinking as possible approaches that may promote target-oriented and collaborative contracting. During the second round of analysis, we coded our data based on the findings of the first round of analysis and took into account the new dimensions to contracting and contracting documents suggested by design thinking and contract visualization.
Cases and Empirical Data
In total, we have studied five specific open procedure public procurement processes in two cities, City A with 130 000 inhabitants and City B with 250 000 inhabitants. Three of the researched processes were carried out by City A and the other two by City B. The studied procurement processes were intentionally selected to represent the different distribution of work as well as diverse subjects of procurement.
Our research data consists of 58 semi-structured interviews with representatives of municipalities and companies and recordings from two simulation events held for each municipality. The length of the interviews varied between 30 minutes to 2 ½ hours. The recordings from each simulation event consist of video recording of three-hour process simulations and audio recording of workshops. The data is complimented by both internal and public documents concerning the procurement processes of two case municipalities, e.g. contract notices, invitations to tender, tenders, contracts, the internal guidelines of case municipalities.
The data on the procurement processes of the City A was collected in February – April of 2011. The data consists in total of 23 individual interviews with representatives of the municipality and companies and recording from a simulation event with 18 participants. The case data concerned the procurements of bakery products authorized by a procurement ring comprising of eight other public organization in addition to our case municipality, dental technical laboratory work and woodwork machines for schools. In the case of the procurement processes of City B, the data consists of 35 interviews from the municipality and companies that took part in the studies procurement processes. The interview data was collected between September and November of 2011 and complemented with recordings from a process simulation for 44 people. The public
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procurement processes of the City B concerned procurement of cleaning service and a building contract concerning the renovation of a school yard.
Municipality The products/services
procured Interviewees from municipality
Interviewees from
companies
Interviews
in total Number of people at process simulation events City A • Bakery products • Dental technical laboratory work • Woodwork machines for schools 20 3 23 18 City B • Cleaning service • Building contract 24 11 35 44
Table 1. Empirical data description.
Discussion
The preliminary findings from the interviews and simulations are discussed in relation to the proactive and trialogic contracting framework introduced above, namely contracting documents as mediating boundary objects and procurement contracting as a knowledge sharing and creation process that enhances collaboration.
Market dialogue
Our first round of analysis revealed that in all of our five procurement cases disruptions in knowledge flows and the lack of communication acted as the main hinders of collaboration and knowledge creation throughout the entire contracting processes. The lack of market dialogue, i.e. all knowledge sharing and creation interaction between the public procurer and companies that enable the planning and preparation of procurements, was specified as the main reason for knowledge sharing challenges.
Municipality: ”We have minimal communication prior to making an invitation to tender, we have felt that it is against the Act on public contracts to ask and talk with companies about future invitations to tenders. However, with one of the tenders I had been in contact with contractors on the suitable formulation of the invitation to tender.” (Original interviews are in Finnish and all interview quotes are translated by the authors.)
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The public procurers were seen to still follow a culture of dictating what is to be done and how the contractual relationship should work and were cautious about market dialogue. The interviewees both on the procurer side and company side acknowledge this challenge and its negative effect on the implementation of active market dialogue.
Company: “It is impossible to include anything to the contractual clauses, in the tendering phase you cannot change anything and nobody asks the companies what they think. We have
collaborated with the municipality for 20 years and we have never engaged in dialogue […]I wish there would be more discussion instead of just dictation, which creates emotional burden”
Municipality:”Market dialogue? We have a tradition, that when the tendering phase is on, we do not engage in the dialogue, so that some [company] does not know more that another. … when we are preparing a tender , ‘the period of danger’ begins, although it probably actually would start from the advance notice or contract notice.“
The adoption and development of market dialogue requires a change of attitude and an experienced procurer with profound expertise, subject matter and legal, to be able to take part in an innovative dialogue with the market and develop methods for co-innovation. On the procurer side, the turnover of staff as well as the lack of resources and time are seen to delay the development of a more open dialogic culture.
Municipality: “We often do not have the time to engage in the dialogue”
However, both of our case municipalities had acknowledged the need to develop market dialogue and taken initial steps developing legally sound methods for it. Special effort is to be put to ensure the equality and non-discrimination of companies.
Municipality: “We should have a target we have agreed upon [together with companies], so that both parties would commit to work for the common goal”
Company: ”No, we have not engaged in a dialogue. Nothing has ever been asked. It could be beneficial, we could find common targets savings, define optimal level of quality…”
Companies found that at the moment no neutral channels for ongoing knowledge sharing are available. The official internet portal, HILMA, appears a bureaucratic and “cold” environment that does not enable innovative dialog. Thus the taken development efforts are in the right direction.
A case study on Road Service Consultancy as a public sector procurement agency carried out by Hazlett et al. (2008) considers ‘attitude’, ‘structure’, and ‘culture’ to be the main barriers to public sector procurement knowledge transfer. Lack of experienced resources and the turnover of staff in important areas of procurement are listed as additional barriers. Our five cases confirm their findings as the same barriers where indicated by our interviewees.
Our data clearly indicates a need for tools and methods that make possible the collaborative development of joint targets for public procurers and companies and
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disseminate the content of the targets among different parties. The proactive contracting approach fosters a target-oriented and collaborative mentality into public procurement contacting. As for the concept of trialogic contracting is proposed as one solution that provides means to meet the demand for innovation friendly public procurement in open procedures. Trialogic contracting has many intertwined features, but we focus in our empirical data analysis on the contracting documents and processes as mediating boundary objects and the interaction features. Since contract visualization and underlying design thinking are seen to provide new practical means for promoting knowledge sharing and co-innovation between public procurers and the market, these aspects are highlighted here.
Boundary Objects in Different Phases
Figure 4. The use of boundary objects in case procurements.
In the studied cases, the municipalities and companies used various types of boundary objects over the course of the public procurement processes. However the use of boundary objects varied from phase to phase.
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In the preparation phase, the boundary objects were mostly lacking in the reviewed processes and there was a little contact between the municipality and the market. The companies and the municipalities did not engage in an active market dialogue in open procedure public procurement. Some discussions with existing contractual partners took place but they were unsystematic and related more with ongoing contractual operations. However, interviewees from both companies and municipalities were aware of further need for interaction in the preparation phase of the public procurement. They wished for boundary objects focused on means of setting common targets for the public procurement and formulating the object of the procured service or product through the goal of the procurement rather than though casuistic definitions. This could enable the companies to offer more innovative products and services. The companies’ representatives also suggested that the municipalities would notify companies in advance of the forthcoming public procurement processes.
Company: ” Some of the cities arrange these info events about where the municipality and they are heading at. The City B does not hold such events although I notice that in their display spaces they have a lot going on, but I never hear about it. Such events, where the municipality tells about its needs and where we could see what kind of service we could offer.”
City A has published an annual list of forthcoming procurements that are under preparation. City B looks kindly on a more open and transparent attitude and considers adopting a similar practice.
The key need in the preparation phase of the public procurement processes was the increase in market dialogue and tools for it. In addition there was a need for increased transparency of the public procurement practices of the individual municipalities. Both of our case municipalities have awoken to the need to interact with the market in different ways. In addition to providing internal procurement training, City A has actively participated in coaching entrepreneurs how to take part in public tendering processes. Both municipalities have actually implemented practices of interacting with local companies e.g. they have participated in or arranged events for companies where public procurement is discussed in general and on specific issues as well.
During the official tendering phase the nature of interaction changes drastically. The amount of contracting documentation naturally rises and various documents are exploited. In our five case procurements the boundary objects used were: contract notice, invitation to tender with appendices such as service descriptions or specifications, construction plans and drawings, the process of questions and answers, demonstrations of the end users’ facilities, and tenders.
In general the number of used boundary objects suffice, but the knowledge sharing quality becomes a central issue. The widely used electronic answer/question procedure, where all questions addressed to the procurer are answered simultaneously and in public, during the tendering phase helps to solve some knowledge sharing issues.
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Company representatives take it as a good forum for simple clarifying questions but on addressing more complex questions it falls insufficient. The main shortage of the system, as stated by interviewees, is that if the given answer does not really answer the question there is no way of asking clarifying or specifying questions. No channel for dialogue is thus available.
The process becomes formal and rigid during the official tendering phase. Many of the interviewed company representatives expressed their concern over the administrative nature of the official tendering phase. They expressed their bemusement about how the behavior of the procurer changes into a forbidding, cold buyer which “is concerned only about the price”, even though most of them have vast experience in attending public procurement tenderings and understand the regulatory constraints imposed on public procurements.
Company: “Once I get the invitation to tender on my table I should have the opportunity and time to meet the people who are doing the procurement and the very people who understand the products at hand. So that one could tell them one’s suggestion… it is very cold to do business by sending e-mails and asking about… to put together a perfect entity. … now you are not allowed to talk to people, but forced to talk to a machine.”
On one hand, the representatives of the procurers were frustrated about the formalistic and strict procedure as well and they, too, are fully aware of the limitations of the open procedure. On the other hand, they are reluctant to utilize alternative possibilities provided by law e.g. to use economic advantageousness as comparison and award criteria and to allow alternative tenders, invoking the difficulty of tender comparison and the increased exposure to court appeals. A general reluctance falls upon other available procurement procedures enabled by law. They are either not applicable due to the nature of day-to-day public procurements or they are seen as too burdensome and resource-consuming.
The boundary objects used in the contract implementation phase focused on:
• transfer of the content of the contract to companies; such as the contract documents enclosing the appendices, e.g. service descriptions and specifications, construction plans and drawings; annual meetings.
• quality control: regular inspections by the representatives of the municipality, spot checks, access control lists, list of defects, processes for handling reclamations,
• transfer of information between the company and end user: initiation meeting, implementation, notebooks for transferring information between cleaning staff and end users, e-mail correspondence, electronic order system
• transfer of information between the procuring unit, company and end user: initiation meetings, meetings, guiding company employees in their tasks
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In terms of challenges of informing companies on the content of the contract, fewer problems appear in the fields where the general terms of agreement were more established. Thus both, the municipality and companies, were knowledgeable of them. In contrast, in the fields where there were no general terms of agreement, the terms of the contract tended to vary more between municipalities and companies needed more time and effort to become familiar with them. As an answer to this challenge, City B considers the possibility to publish all its procurement contracts (exclusive of information on for instance trade secrets and prices) on the Internet, so that the companies could learn what type of terms they used in public procurement. The public distribution of procurer’s contracts sets challenges on the quality of the contracts when the procurer desires to indicate that they are an attractive and tempting contractual partner and that their contracts enhance reaching these objectives. This setting may be considered as a positive driver to develop contracting documentation to meet the target of collaborative knowledge sharing and creation.
What the companies considered to be missing in the phase of contract implementation were meetings or other channel of communication that would be focused on the development of collaboration, instead of merely handling claims.
Company: “There is not communication channel for development ideas… We are keeping quiet and to do our work the best we can, and influence that way. “
Also, some of the interviewees would have wished for an easy and neutral possibility to give suggestions or improvement ideas or even anonymous feedback regarding the content or execution of a contract subject at hand. It was suggested that such improvements could be taken advantage of and be incorporated proactively into forthcoming invitations to tender.
Over the course of the studied procurement processes, the municipalities used boundary objects that enabled iteration, such as transfer of suggestions for the development of the processes from the operative level to managers crafting invitations to tender or design meetings of the renovation of the school yard. However, the interviewees noted, that they would need more structured means for developing their procurement processes through iteration. Beside end user satisfaction surveys, City B for example began to use feedback surveys on the procurement processes to companies that took part in the tender. As for City A, after the contract award the procurer offered suppliers that were rejected or lost the competition or that were presumed to tender, but did not, the opportunity to come and discuss the procurement. This was appreciated by the suppliers and many took advantage of the opportunity. There was also demand for more accurate means to acquire and transfer information about
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procurement processes internally. The IT systems would need to enable iteration, for example the documentation of reclamations.
Current use of visual elements
In certain fields, such as construction industry the invitation to tender and thus also the contract includes almost without exception visual construction plans and drawings. Thus in practice the content of the contract is visualized and both contracting parties are knowledgeable of how to use such boundary objects. Due to the established nature of using visual boundary objects in construction industry, the development suggestions for improvement on the use of construction drawings concerned companies’ wider possibilities to consult the person who designed them.
Company: “The consulting designers are not invited to meetings every time as they would charge for it[…] it would be important for them to be along, so that we can make decisions fast if we must do some alterations to the design. It is important that everybody are there in the meetings. […] it is also easier to check the issue face to face on site.”
The case of cleaning service procurement differs from the other four cases as to the case municipality outsourcing about 30 % of cleaning services and producing the rest itself. The case municipality uses visualized cleaning instructions for internal use and uses them successfully to overcome the challenge of language barrier with foreign cleaners. They also take advantage of visualizations in planning and illustrating the annual cycles of different cleaning activities.
Municipality: “Diverse cultural background of cleaners creates a lot of challenges for the direction of their work. We have our own visual models that for example picture how the teamwork room of a day care center […] We have used different colors to represent the cleaning frequencies for example. They work very well, as a person who doesn’t know the language can understand them.”
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However, the representatives of the case municipality had never considered using visualizations as part of invitations to tender or contracts, but distinguished the positive prospects of utilizing them in the future.
It was a surprising finding that beside the boundary objects used between municipalities and companies, the studied municipalities used a wide range of different boundary objects, e.g. the above mentioned visualizations, internally. In all case procurements, different boundary objects were commonly used between the centralized units responsible for the legal frame and the substantial framework of the procurement. The procurement and subject matter professionals worked the invitation to tender documents together and used the documents as boundary objects to overcome possible knowledge barriers between different professions. The procurement preparation regarding dental technical laboratory work provides a good example of collaboration between different professions within a procurer. In addition to using the contracting documents as boundary objects, different IT-systems were used for storing documents and transferring information between units.
Conclusions and Future Research
According to our starting point proactive and trialogic contracting contracts are perceived as collaboration tools i.e. boundary objects to cross boundaries between the perceptions of collaboration parties. Our analysis of five public procurement cases deepened our understanding about knowledge sharing in public procurement contracting environments and needs to develop functioning tools for enhancing it. Our research provides insight on the role of contracting documents and processes as boundary objects and introduces initial applications for the use of contract visualization. Adopting a design thinking approach and the use of contract visualizations requires a change of ‘attitude’, ‘structure’, and ‘culture’, which are appointed as the main barriers of knowledge transfer in public procurers by Hazlett at al. (2008), both by the public procurers and companies participating public tenderings. Our findings implicate that the use of contracting documents and processes as boundary objects requires a proactive and future-oriented attitude towards contracting. Without adopting such attitude the parties of the procurement processes fail to exploit the potential benefits of trialogic contracting.
We challenge the scientific community to further investigate how to enable and promote target-oriented collaboration in public procurement. Moreover it is important to study what promotes co-innovative interaction. We have indentified practical application of contract documents and processes as boundary objects in public
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procurement processes. Based on our initial findings we presume that such applications would enhance innovativeness in public procurement. However, the actual impact of such application on knowledge sharing and creation, i.e. innovativeness, requires further research. We believe that Finland, as a small and networked country, provides favorable possibilities to study the creation of novel procurement environment.
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