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Public procurements must be based on strong procurement expertise

Public procurements are more than just compliance with the Act on Public Contracts.
Procurements in municipalities are carried out in line with legislation to the letter instead of procurements being based on procurement expertise.

In the private sector, the procurement process has been developed in particular over the last few decades. The best actors gain a competitive edge with well-managed procurements.

'The private sector's best purchasing practices include market intelligence i.e. a knowledge of the current service providers, a procurement strategy, total costs thinking, interorganisational activities, co-operation with suppliers, as well as sustainable development,' says Esa Väänänen, who will defend his dissertation at the Aalto University School of Business.

In Finland, public procurements are regulated by procurement legislation, which aims to guarantee non-discrimination of service providers in tendering. However, service providers feel that procurement legislation hampers tendering by preventing cooperation with the contracting organisation. Often, suppliers who fare poorly in tendering initiate proceedings on the matter in market court, which slows down the implementation of the procurement.

The annual value of public procurements in Finland is nearly EUR 30 billion, and municipal procurements from external goods and service providers account for approximately 12-15 billion euros. Service contracts by municipalities have been criticised in public, for example, for their poor quality in areas such as care for the elderly.

A great deal of development still required in the preparation of municipal procurements and the monitoring of their implementation

In his doctoral dissertation, Mr Väänänen examines the use of the aforementioned best procurement practices in service contracts by Finnish municipalities.

Public procurement processes can be divided into three stages: preparation, tendering and monitoring. According to the dissertation, municipalities have a clear lack of procurement expertise, and the preparation and monitoring of the implementation of procurements must be developed. In turn, the role played by legal counsels is too strong; procurements are carried out in line with legislation to the letter instead of procurements being based on procurement expertise. This approach results in municipal procurements being carried out just as before, without any major innovation.

'Interorganisational activities are commonly used, but the market is not examined prior to competitive tendering. At the time of the study, a procurement strategy was under development in some of the examined municipalities, total cost thinking is not in general use and there is little, if any, cooperation with service providers. The principles of sustainable development are only partially realised,’ Mr Väänänen sums up his research results.

Mr Väänänen's dissertation research focuses on the tendering related to the provision of housing services for the elderly in 2007-2012 in Helsinki, Espoo, Vantaa and Lohja and the joint municipal authority of Karviainen.

The planned social and health care reform will see the management of many municipal service procurements transferred to other actors. However, municipalities will still manage a large number of service contracts, which will require procurement expertise. Social and health services procurements require procurement expertise, in particular, because the importance of private service providers in these purchases seems to be increasing.

Esa Väänänen will defend his dissertation in the field of logistics titled “Utilization of private purchasing best practices in procurement of services in Finnish municipalities. The case of housing services for the elderly” at Aalto University's School of Business on Wednesday 12 April 2017.

 

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