Innovative Procurement in City of Tampere A conference on innovation procurement in Estonia Tallinn 21.4.2016 Kari Hakari Director of Development, PhD City of Tampere

Facts about Tampere Population: 225 000 Budget 2016: 1,536 mrd Euros Largest inland city in the Nordic countries One of three most rapidly growing regions in Finland Centre of know-how intensive entrepreneurial activities Educational and cultural city Leading city in industry and a centre of information society 7.11.2018

Arguments for developing procurement in Tampere City of Tampere spends c. 800 m€ on investments and service + materials purchase, which has a significant impact on local markets and welfare Development of (innovative) procurement process and methods will help the city to adapt to the changes in operating environment It targets to decrease expenses in the long term respond to growing and changing service needs spur businesses in Tampere-area: companies will have new business opportunities and are encouraged to innovate 7.11.2018

Commissioning services in City of Tampere Need of innovations Figure is based on Murray, J.G. (2009). Towards a common understanding of the differences between purchasing, procurement and commissioning in the UK public sector. 7.11.2018

Concept of Innovative Procurement in Tampere Innovativeness in procurement setting can refer to innovation in: Procurement process (how we procure): new methods in procurement planning, procedure, or deployment phase Subject to tender (what we procure): procuring R&D, new or significantly improved products or services Model for delivering services (how service is organized): new forms of public-private collaboration and partnerships 7.11.2018

Elements of Innovative Procurement in Tampere User orientation stakeholder involvement in procurement: needs are defined with service users Active dialogue with providers at all stages of procurement Tests and pre-commercial development Outcome based approach contractual incentives and development during the contract cost-effectiveness in procurement 7.11.2018

Procurement development in Tampere: HANKI - Project Our mission: Innovative procurements will become an integral part of City’s procurement culture Seven pilot procurements in social & health services and infrastructure to develop efficiency and effectiveness of procurement function to test new procurement models and methods (outcome based procurement, pre-commercial procurement, co-development) aim at having positive effects on businesses in Tampere area Project will result in a Roadmap for Innovative Procurement 2015 – 2025 and the toolbox to support its implementation Project is funded by Finnish Funding Agency for Innovation (TEKES) Market supply Procurement culture 2015 2016 Innovative Public Procurements Needs & visions Public sector Service users Companies NGO’s Pilots 7.11.2018

The Roadmap for Innovative Procurement City strategy Services in the future –model and visions Investment plans Organizational reform CITY Strategic choices and targets for development Principles of Innovative Procurement Cost-effectiveness consists of: effectiveness on stakeholders, service and product innovations, locality, market development, price. Plan about Procurements when to run innovative procurements objectives for innovative procurements and their expansion role of innovation platforms Business’ growth potential in Tampere region ICT & IoT Life Science/Health-sector Cleantech & environmental solutions etc. MARKET Market’s growth potential & the city’s interest to create markets Plan about competency development ensures successful implementation of the Roadmap promotes and firms the new procurement culture Information to City Commissioning becomes more planned. Setting objectives for procurement becomes systematic. Information to companies Forwards City’s needs to which the market can develop solutions and target resources. Innovative procurement: Procurement process (how we procure) Subject to tender (what we procure) Model for delivering services (how service is organized) PROCUREMENT How can procurement promote better products and services? Procurement management Toolbox Modelled practices and guidelines to support procurement 11/7/2018

Cases of Innovative Procurement

Kotitori – Key to services Service integrator model New solution models for the home care of elderly people The integrator ties together needs, services and service providers Senior citizens and their family User and purchaser / orderer of the services Part of the funding come from the municipality, part is paid by the elderly people themselves services Contract & SLA Service and care plan The city as a purchaser Defines objectives such as quality, coverage and functioning Defines the role of the municipal service production Answers for services designated municipal responsibility (such as official decisions or funding) Kotitori – service integrator Maintains and manages a service network Client guidance Assessment of service needs Develops services and processes Producer network Produce services in compliance with jointly agreed rules (quality) and practices Municipal service production is part of the service network. Municipal home care Other producers SLA = Service Level Agreement; service description, quality requirement 7.11.2018

Areas of innovation in Kotitori-case Procurement process (December 2014-June 2015) Subject to tender The model for delivering services Tendering with negotiation City’s objectives for the service providers’ presentations on their concepts, visions and innovations contract model Outcome based definitions and evaluation criteria Providers’ service level promises founded the basis for bonus-sanction model in the contract Service integrator Development partnership with the City and networks, which is measured and rewarded by the level of stakeholder satisfaction 7.11.2018

Benefits of Kotitori Easier access to services One contact point for all elderly services Right services for right customers at the right time Enhanced service portfolio from privately paid services Lower cost & higher productivity Synergies in service provider network Sharing best practisies between city and service providers Price negotiations between Kotitori integrator and service providers Less work for the city Only one public procurement One provider to deal with Lower transaction costs in purchasing services and adapting to changes More privately funded services used Improved quality of services Increased competition between service providers Learning between service providers Continuous development Enhanced auditing of service quality 7.11.2018

Results of Kotitori 1. Kotitori Service Center Access to service is considered fast and service friendly Replacing contacting and visiting other units and services Very high customer satisfaction (2015: 4,4) 2. Costs, quality and effectiveness Fixed and predictable costs of home care Slowing down increase of demand for services paid by the city Lower costs for specialized healthcare Amount of aged people living at home with high need for services increased 3. Good collaboration with home care integrator 7.11.2018

Economic impacts of Kotitori Service Kotitori’s costs compared to whole city’s costs of people + 75 years old (M€) Kotitori’s own area (ca. 300 clients) Client guidance + 0,1 26 % Regular home care - 1,9 58 % Transitions to 24 h housing services + 0,3 3 % Use of special health care - 0,5 48 % Use of short-term hospital care 0,0 4 % Total M€ -2,0 City Developing (together with city’s own home care, e.g. increasing the immeadiate working time)(2008-2013) -3,3 12 % Support services of home care (2008-2013) -0,1 25 % -3,4 7.11.2018 Audited by KPMG

Procurement of R&D in Intelligent Transport-case City’s need to do development work with companies Aim was to encourage companies to introduce cost-effective data-sources that would benefit the city with better information about transport in Tampere. Aimed at mapping the yet un-commercialized ideas of companies and unite them with City’s needs. Purchasing of R&D-services targeted to conceptualizing, prototyping and user-testing of Realtime information about transport and street conditions. R&D-process to which the Act on Public contracts isn’t applied. In Pre-commercial procurement the City doesn’t commit to procuring the commercialized version. Gave chances to companies to test their ideas. 7.11.2018

Procurement of R&D in Intelligent Transport-case A modified model of pre-commercial procurement Variation for lighter (2-phase) and quicker pre-commercial procurement process. Budget 200 000 euros Needs Market dialogue Purchasing of R&D, 60 000 euros Purchasing of R&D, 140 000 euros Idea contest -phase Implementation phase Call for tenders 29.6.2015 Tenders (10 pcs) Concepts Concept A Concept B Concept-idea A Concept-idea B Concept-idea C Concept-idea D Concept-idea E Concept A Concept B Concept C Preparation (fall 2014- spring 2015) 1st phase of R&D pro-curement Selection of proceeding ideas (December2015) Assessment of functionality & Decision on phase 2. Piloting (2/2016-2/2017) Assessment of 2nd phase results Supply, know-how, technologies City of Tampere Companies: software, transportation, consultancy firms Pilot A Pilot D Company A Company B Company C Company D Company E 6 pilots to be implemented Introduction of needs and aims of the City Market dialogue on ITS-development forum Possiblity to face-to face negotiations =procurement order cycle. Possibility to procure the solution by means of public procurement. 11/7/2018

Life cycle neighborhood @Tesoma Pilot integrates construction, living, services and community to serve inhabitants in all ages. Pilot will include an idea contest on planning the neighborhood studying the needs and wishes of citizens and other stakeholders in the neighbourhood area Aims at creating a testing environment for companies in welfare, construction and technology businesses. It also could serve as a platform for diverse research institutions to develop and test their services and equipment. Welfare center @Tesoma Tesoma welfare center -pilot creates an operating model for an integrated welfare center. The center will combine the social and health services with other services that enhance welfare. Multiple market dialogue -events aimed at: mapping out the interest of the market defining the size and objectives of procurement clarifying the possibility to found an alliance as an operating and contractual model An idea contest on digital solutions applied to health and welfare, that could be included in the procurement 11/7/2018

Summary: Some lessons of innovative procurement in Tampere IP must be seen around the hole cycle of commissioning IP has implemented the strategic objectives of the Tampere like customer orientation and partnerships in service provision as well as new enterprises in Tampere region IP has achieved verified value for money, outcomes and economical impacts As a result of co-creation IP has produced new services and innovations, which the purchaser has been acquisition of knowledge before the IP process The outcome based procurement and bonus/sanction models have shared the risk between the city and the service provider and encouraged continuous improvement There is a continuous need of new IP projects after the first good results A successful IP process takes a time: there is often need for extra resources, too 7.11.2018

Kari Hakari kari.hakari@tampere.fi +358 50 590 2197 www.tampere.fi