Belgrade – 9th Feb 2010 Gian Luigi Albano, Ph.D. Head of R & D Italian Public Procurement Agency - Consip S.p.A. The Italian Centralized Public Procurement Model: Sharing experiences and know-how to move forward

1 Roadmap Institution and History matter!: A look at the Italian experience in centralized procurement Lessons learnt Which dimensions to look at Order of priority (if any) Does there exist a universally applicable solution?

2 Consip is a joint-stock company, created in 1997 by the Ministry of Economy and Finance (MEF), its sole stockholder Consip is entrusted with two main fields of action… 1997 management and development of ICT services for the MEF 2000 e-Procurement for public administrations MEFpublic administrations Support to the adoption of e-procurement solutions Consip S.p.A. Consultancy on technical and organizational projects

3 Implementation of the Program for the Rationalization of Public Spending on Goods and Services through the use of information technology and innovative tools for the purchases of the Administrations (national frame contracts, web-based tenders, the Electronic Marketplace) e-Procurement 2000 IT services for MEF Eprocurement 1997 PAs

4 A 10-year history on rocky mountains* Phase 1 (200-03): Constructing a centralized system Emphasis on savings (mind Maastricht Treaty!) Aggregation of demand through the Program for the Rationalization of Public Spending in goods and services (National Frame Contracts) Increasing mandatory constraints even on local authorities (mainly municipalities) Public buyers’ administrative responsibility for mismanagement of procurement strategies *See also Pamela Varley, “Experiments in Public Procurement: Italy Buys in Bulk”, Kennedy School of Government Case Program, Harvard University, 2008.

5 Phase 2 ( ): The “immune reaction” of (a part of) the system Growing discontent coming from local government and SMEs Program put on hold Pressure to shift from buying to consulting/monitoring the Electronic Marketplace

6 Phase 3 (2006- to date): Redesigning a fully-fetched e-GP system Mandatory constraints limited to central government (and for a list of goods and services drafted each year by the MEF) Other public authorities have to meet-or-beat the quality- price benchmark Growing emphasis on e-proc solutions for SMEs (low-value contracts) Flexible e-proc solutions for meeting public agencies’ potentially heterogeneous preferences (Framework Agreements, Dynamic Purchasing System, electronic auctions)

7 E-shops eMarketplace  Purchases within frame contracts  Direct Purchases  Many-to-one approach  Need for:  Large volumes  Demand aggregation  Standardized goods  Low price volatility  Slow obsolescence On-line tenders  Development of Frame contracts or ASP on behalf of other administrations  Lowest price or economically most advantageous tender  Need for:  Large volumes  Demand aggregation  Or Specialized goods  High price volatility  Rapid obsolescence  Direct order or RFQ  Many-to-Many approach  Supplier defined e-Catalogue  Need for:  Low cost goods  Spot purchasing  Highly fragmented offer Above and Below EU Threshold Below EU Threshold The current model Frame Contracts

8 Supply side Demand side High degree of demand heterogeneity  Concentrated  Standardized  Fragmented  Specialized The road ahead Low degree of demand heterogeneity multiple suppliers fixed conditions 1 supplier open conditions multiple suppliers open conditions Framework Agreements Dynamic Purchasing System e-Marketplace Frame Contracts: 1 supplier Fixed conditions

9 public authorities’ (PAs) buying autonomy Market Maker Awarding Authority An evolving e-GP model: The role of Consip multiple suppliers fixed conditions 1 supplier open conditions multiple suppliers open conditions Framework Agreements Dynamic Purchasing System e-Marketplace Frame Contracts: 1 supplier Fixed conditions

10 An overarching system: Framework Agreements (FAs) suppliers in the market suppliers in the FA awardees (SC) PAs concluding the FA PAs concluding the specific contracts 2nd stage selection 1st stage selection  What terms of the contract are laid down in the “master” contract (1st stage)?  How many operators are selected at the 1st stage?  How do the two different selection processes take place?  What terms of the contract are laid down in the “master” contract (1st stage)?  How many operators are selected at the 1st stage?  How do the two different selection processes take place? Different classes of FAs Different problems Different classes of FAs Different problems CA1 CA2

11 Hot topics… Institutions matter (and evolve) Legal framework cannot regulate all conceivable contingencies Flexible solutions require a multidisciplinary approach Learn fast from mistakes (national and international benchmarking) Organizational design come first! Technology is a tool, not an objective R&DR&D

12 Wrapping all up Value of purchases by any single public agency is (at least weakly) negatively correlated with the degree of centralization  is there any role for a central purchasing body (CPB)? Demand heterogeneity main driver of e-proc tools  higher DH calls for more flexible e-proc solutions Institutional aspects of paramount importance  how many degrees of freedom for public agencies in setting procurement strategies? Supply side  SMEs are to be given a very special attention! User-friendly technological solutions  fancy e-auctions formats sometimes generate more problems than solutions (collusion, over- investment in IT infrastructures etc)

13 A simple “case study” Value for money Participation by SMEs Low transaction costs Priorities Degrees of freedom of Public Auth. Few if central government More if local government RequirementsE-GP Solutions Goods and services Standardized high-value contracts Customized low-value contracts  Fairly selective first-stage process  Light procedural burden on awarding authorities  Benchmarking still feasible  Direct purchases and simple competitive procedures  Stretch “e-” along the process when possible/feasible Technological solutions User friendly Framework Agreements eShops / eCatalogues Simultaneous implementation