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Centralised purchasing: it makes sense!. Saving money and becoming efficient by developing Framework Agreements. 9 th Public Procurement Exchange Platform Skopje | May 2013. Portuguese Public Procurement system SNCP. Key Stakeholders. Community/ Society. Contractors/ Suppliers.

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centralised purchasing it makes sense

Centralised purchasing: it makes sense!

Saving money and becoming efficient by developing Framework Agreements

9th Public Procurement Exchange Platform

Skopje| May 2013

portuguese public procurement system sncp
Portuguese PublicProcurementsystemSNCP

Key Stakeholders

Community/

Society

Contractors/

Suppliers

Government

Ministry of Finance

eSPap

Interministerial Advisory Committee

UMC (11)

Contracting authorities and entities (mandatory and voluntary)

2

UMC = MPU: Ministerial Purchasing Units

slide3

Portuguese PublicProcurementsystemeSPap - thenewmanagingentity

Board

Planning & Organizational Development

General Administration

Finance & Administration

Legal Support

Human Resources Management

Client Management & Innovation

Client & Service Management

Process Management & Innovation

Finance Shared Services

Human Resources Shared Services

Public Procurement

State Fleet & Logistics

IT Architecture & System Development

IT Infrastructure & Operations

Finance Business Development

Human Resources Business Development

Project & Product Management

Systems Administration

Finance Shared Services Roll-Out

Human Resources Shared Services Roll-Out

Business Requirements & Processes

Security, Data Center & Communications

New Products & Capacity Management

IT Architecture & Software Engineering

Shared Services Center

Service Desk, Monitoring & Support

Competence Center ERP & BI

Budget & Treasury Applications

Portfolio Management, SLA & Sourcing

centralised purchasing system portuguese model
CentralisedPurchasingSystemPortuguese model

Centralised Model - Framework Agreement (FA) for Contracts and Acquisitions

eSPap

Ministry Purchasing Units (MPU)

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)

Public

Tender

Supplier Selection

Request for Proposals

Awarded Suppliers

Request for Proposals

Negotiation

Awarding

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

Supplier technical and financial selection criteria

Best proposal (the most economically advantageous proposal OR the lowest price), as defined on the FA

Technical and functional requisites, contract requirements and economic proposal evaluation

E-auction or traditional negotiation

Framework Agreement Centralization

Purchase of goods and services categories under the FAs are mandatory for the central public administration

Centralization of acquisitions of goods and services under the FAs

eSPap can opt to centralize the acquisitions of goods and services covered by the FA

(example: Vehicles and Vehicle Insurance)

slide5

CentralisedPurchasingSystemSelectionof FrameworkAgreements

  • FA in “waves”
  • Criteria:

- PublicExpenditures

- Common Use

- Quickwins

- StrategicSourcing

  • The renewal rate of framework agreements in 2011/12 was 33%, stimulating competition and larger presence of SMES
c entralised purchasing system parties to the fra mework agreement
CentralisedPurchasingSystemParties to theframeworkagreement
  • 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 system suppliers
Centralised Purchasing SystemSuppliers

With a single economic operator - Framework agreements not used by eSPap

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

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

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 system major aspects of a framework agreement
CentralisedPurchasingSystemMajor aspectsof a frameworkagreement
  • 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)
the national public procurement plan assessing needs and planning demand
The National Public Procurement PlanAssessing needs and planning demand

Purchasing entities identify needs and estimate budget

UMC collects and validates information

Aggregation of demand according to the types of goods and services needed

Integration of information from different ministries

Preparation of draft version of the National Public Procurement Plan

eSPap

Ministry level

Version sent for validation and approval

Reception and evaluation of changes

Negotiation and final settings

Meeting of the CIC commission and preparation of the Final National PP Plan

Formal approval of the Ministry of Finance

Publication of the National PP Plan

9

eSPap , UMC and CIC

centralised purchasing system identification of goods services works to establish a fa
Centralised Purchasing SystemIdentification of goods/services/works to establish a FA
  • Identification of annual expense, incl. historical trends and forecasts
  • Evaluation of the public administration needs
  • Market´s solutions review

Conceptual model by eSPap

  • 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, ...

Public Administration Consultation

Technical Validation by experts

  • Review and validation of products and services specifications

Public Consultation

  • Economical operators, associations, public administration & citizens
centralised purchasing system calculation of contract values for the framework contract
CentralisedPurchasingSystemCalculation 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
centralised purchasing system dividing contracts subcontracting
CentralisedPurchasingSystemDividingcontracts/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.
centralised purchasing system organizing mini competition call off without competition
CentralisedPurchasingSystemOrganizing mini-competition/ call off without competition

CALL OFF under eSPap FA

  • Conduct needs assessment of the entities
  • Standardize the technical requirements
  • Aggregate demand and validate expenditure/spending approvals
  • Use of the eSPap eCatalogue

IdentificationofNeeds

(PurchasersEntities)

AggregationofNeeds

(UMC/eSPap)

  • Prepare tender/invitation documents (based on standard)
  • Comply with the requirements and award criteria defined in the framework agreement

Call offs documents

  • Use of eSPap ePlatform
  • Invitation to all FA economical operators
  • Contractors obligation of responding to all calls

Invitation to all FA economical operators

slide14

CentralisedPurchasingSystemOrganizing mini-competition/ call off without competition

CALL OFF under eSPap FA

Improving Attributes of Proposals

  • E-auction or traditional negotiation
  • Best proposal
  • (MEAT orthe lowest price, as defined on the FA)
  • Notify decision to other suppliers (ePlatform)

Awarding

  • 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

Report and Monitoring

c entralised purchasing system identifying needs and aggregation methodologies
CentralisedPurchasingSystemIdentifying needs and aggregation methodologies
  • Aggregation:
  • Internal
  • 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
c entralised purchasing system identifying needs and aggregation methodologies1
CentralisedPurchasingSystemIdentifying needs and aggregation methodologies
  • 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
c entralised purchasing system pricing mechanisms and meat evaluation within the frameworks
CentralisedPurchasingSystemPricing mechanisms and MEAT evaluation within the frameworks
  • FAs developed by eSPap allow both situations:
  • MEAT
  • The lowest price
  • Individual contracting authorities, within the FAs, will fit MEAT criteria / weights to their individual situation or chose the lowest price.
c entralised purchasing system pricing mechanisms and meat evaluation within the frameworks1
CentralisedPurchasingSystemPricing mechanisms and MEAT evaluation within the frameworks

FA

Lots

Region

Subcontracting

Contractors / SME

  • Paper
  • Stationary
  • Consumables

30 / 26

Paper & Stationary

No

Yes

  • Scanning
  • Fax
  • Portable printers
  • Printers (Low, medium, high performance)
  • Combine lot

Printing & Copying

21 / 18

Yes

No

North, South, Alentejo, Lisbon, Algarve, Azores, Madeira and National Level. (NUTS II)

  • Services
  • Products

Cleaning Services & Products

15 / 10

Yes

  • Surveillance
  • Alarm Receiving Centre & Monitoring services
  • Combine lot

Security &Surveillance Services

North, South, Alentejo, Lisbon, Algarve, Azores, Madeira and National Level. (NUTS II)

8 / 0

Yes

NUTS: Nomenclature of territorial units for statistics / NUTS II (Basic regions for the application of regional policies)

c entralised purchasing system financing structure
CentralisedPurchasingSystemFinancingstructure
  • 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.
centralised purchasing system centralisation efficency and transparency
CentralisedPurchasingSystemCentralisation = efficencyandtransparency
  • 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
centralised purchasing system results of sncp
Centralised Purchasing SystemResults of SNCP

Savings, transationaland processual (M Euros)

17,5

it framework setting up the framework agreement model
IT Framework |Setting up the framework agreement model
  • 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

Conceptual model

  • 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, ...

PublicAdministrationConsultation

Technical Validation by main IT entities

  • Review and validation of products and services specifications

Public Consultation

  • Submission to public consultation to collect contributions from general public and citizens, businesses associations, stakeholders, ...
it framework products and equipments
IT Framework |Products and equipments

Standard Desktop

Desktop

High performance Desktop

Personal Computers

Standard Laptop

High performance Laptop

Laptop

Small Laptop

Netbook

Standard rack server

Rack Servers

Servers

High performance rack server

Standard Blade System

Blade System

High performance Blade System

Storage

Peripherals

Desktop/Laptop/

Servers/Others

Display

Others

it framework public tender restricted procedure
IT Framework |Public Tender - Restricted procedure

1st step

QUALIFICATION

  • 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

2nd step

Invitation for bid

  • Selection criteria:
  • Economically most advantageous offer based on:
    • Price
    • Energy efficiency
    • Manufacturer environmental certification

In this procedure: from 36 candidates, 32 passed to the 2nd step

it framework proposals
IT Framework |Proposals

The tenderers must identify equipments, accessories, peripherals, OS and their technical features, and also quote their maximum price.

Example:

Basis equipment

Additional products and options

Desktop computer

Keyboard + mouse + Display TFT 17” + RAM memory + OS+ technical assistance…..

+

Laptop computer

Mouse + RAM memory + keyboard + transport case+ security cable+ docking station + OS+ technical assistance…….

+

it framework lots competitivenes s
IT Framework |Lots/Competitiveness

Lots / Number of bids

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.

it framework awards criteria
IT Framework |Awards criteria

FA – Award criteria (1st phase)

  • 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

Call offs – Award Criteria (2nd phase)

it framework fa upgrade
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
it framework main issues
IT Framework |Main issues

Main issues and difficulties

  • 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)
centralised management model of the state fleet pve
Centralised Management Model of the State Fleet (PVE)
  • Redefiningthe 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
state fleet some numbers
State Fleet – Some numbers
  • Since the implementation of the centralised management model of State Fleet we purchased around 1800 vehicles, with a 30% overall savings ratio.
slide32
Framework Agreements for Vehicles and Motorcycles (AQ-VAM), Electric Vehicles (AQ-VE) and Insurance (AQ-SA)
  • Defines technicalrequirements:
  • 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, HeavyGoodsVehicles (HGV’s), HeavyPassengerVehicles, ambulances, passengercars and light commercialvehicles
    • 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
call off process under the framework agreements for vehicles and insurance
Call-off process under the framework agreements for vehicles and insurance

Users send the request through SGPVE

(purchasing entities)

eSPapvalidatestherequest

Aggregation process of requests according to the types of vehicles needed

Preparation of the Call-off Documents (Invitation and Specifications)

eSPapBoard approves the Call-off

Paper and electronic

State Fleet Management System (SGPVE)

ReleaseoftheCall-off

ProposalsReception and evaluation

Negotiation

Preparation of the Preliminary Report

Preparation of the Final Report

Awarding

A

33

eSPap E-ProcurementElectronicPlatform

call off process under the framework agreements for vehicles and insurance1
Call-off process under the framework agreements for vehicles and insurance

Qualificationdocuments

Bankgarantee

(ifcontract

> 200K €)

Signingofthecontract

Court of Auditors (if contract

> 350K €)

A

eSPap E-ProcurementElectronicPlatform

Delivery of the new vehicles, legal destruction of the old ones

PreparationofAwardingReports

budget planning and cost control
Budget planningandcostcontrol
  • Changing variable into fixed costs:
  • Include variable cost components in the contract price
  • Consider maintenance costs if necessary
framework agreement bidding documents
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
fa and call offs invitation to tender
FA and call-offsInvitation to tender
  • Type of procedure, and object of the tender
  • Contracting authority
  • Decision to contract
  • Registration in the e-platform
  • Clarifications and rectifications
  • Errors and omissions
  • Tender documents
  • Price proposal
  • Variants of the proposal
  • Minimum period validity (Duration) of the proposal
  • E-signature
  • Term to present proposals
  • List of competitors and consultation of proposals
  • Awarding criteria
  • Electronic aution
  • Qualification documents
  • Possibility to group
  • Costs of the proposal
  • Technical support regarding the e-platform
  • Period counting in the formation phase of the Framework Agreement