© 2012 eSPap | Entidade de Serviços Partilhados da Administração Pública, I.P. | Direitos reservados. Centralised purchasing: it makes sense! Saving money

© 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 Platform

Skopje| 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


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


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


Spending categories

Car and Motorcycle Insurance

Cleaning 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 2011

Aug 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 Contractors

2

15

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


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


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


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)


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


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


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


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.


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


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


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


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


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


FA Lots Region SubcontractingContractors

/ 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


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.


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


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


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


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


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


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:


IT Framework | Lots/Competitiveness

LotsSelected

candidatesProposals to be

awardedCompetitiveness

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 10

Potentially 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


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)


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

• 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


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


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.


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


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

NegotiationPreparation of the

Preliminary Report Release of the Call-off

Preparation of the Final

Report Awarding

eSPap E-Procurement Electronic Platform

A

Paper and electronic


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


Budget planning and cost control

Changing variable into fixed costs:

Include variable cost components in the contract price

Consider 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


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-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

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