9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM S KOPJE M AY 2013 Centralized Public Procurement in Croatia - Experiences and Challenges - Ivančica Franjković Central Procurement Office Croatia

Content  Public procurement system in Croatia  Legal background and establishment of CPO  Goals, results and challenges  Performance measurement in the context of the CPO  Lessons learned 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

PP system in Croatia - legislative framework Public Procurement Act (OG 90/11) - entered into force on 1 January 2012 Public Private Partnership Act (OG 78/2012) Concessions Act (OG 143/2012) Act on State Commission for the Supervision of Public Procurement Procedures (OG 18/2013) 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

PP system - Institutional framework Ministry of the Economy – Directorate for PP system Ministry of Finance Agency for Public Private Partnership State Commission for Supervision of Public Procurement Procedure State Office for the Central Public Procurement 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

One of the key aspects of the PP system today Continuous training in the field of PP Certificates – “Training Programme” of 50 hours – carried out by authorities approved by ME Issued to more than 2700 persons Renewing of certificates upgrade of training system 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

The value of public procurement in the Republic of Croatia 6 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY 2013 (Source: Directorate for Public Procurement System, Year In millions HRK 26,08529,48344,95335,77340,59724,78630,982 % GDP

Establishment of the CPO 6/20087/20099/200911/200912/2009 1/2010 Strategy of develop. of the PP system Gov.conclusion on impementation of central p PP Plan of activities for Central purchasing Regulation on CPO Decision on procurement categories, 1.st meeting with clients Starting with operations 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

CPO in 2010 and 2011 Number of civil servants: 17 /42 Number of procurement categories: 17 Number of clients: 35 Established by the Regulation on CPO (Official Gazette 138/09 and 78/10) Mission: The Office shall set up an effective system of central public procurement with responsibilities towards taxpayers, the State Budget, persons subject to central procurement, and all economic operators involved in the environment of public procurement with a view to creating savings in public consumption, while bearing in mind an optimum relationship between quality and the price of procured supplies, works and services, respect of ecological and socially acceptable principles, sustainable procurement and the encouragement of SME." 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

CPO structure / internal organization Head of CPO Department for Procurement Categories Planning and Management (9) Legal Affairs and Contracting Department (4) Department for control of the execution of contracts and FA (4) Deputy Head of CPO 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

CPO in 2012 and 2013 State Office for Central Public Procurement (OG 31/2012) New structure; same goals 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

European vs. Croatian practice Various examples regarding to: 1.Institutional set up Department within the ministry/ Gov. Office / State office – Agency – L.t.d. 2.Financing Budget – Service fee (vendor/client) – Mixture of previous 3.Participation Manadtory – Voluntary 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

Procurement categories 1. OFFICE FURNITURE 2. OFFICE SUPPLIES 3. EXPENDABLE MATERIALS 4. OFFICE EQUIPMENT 5. COMPUTERS AND COMPUTER EQUIPMENT 6. TELECOM. SERVICES -MOBILE 7. TELECOM. SERVICES -LANDLINE 8. VEHICLES 9. REPAIR AND MAINTENANCE SERVICES OF VEHICLES 10. CAR TYRES 11. FUEL 12. ELECTRICITY 13. POSTAL SERVICES 14. INSURANCE SERVICES 15. SOFTWARE LICENCES 16. CLEANING 17. MAINTENANCE OF OBJECTS IN THE OWNERSHIP OF THE REPUBLIC OF CROATIA 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

Key stakeholders 13 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY 2013

Tasks of the CPO planning the implementation of procurement procedure; establishing procurement requirements for products and services; coordinating the activities among the clients; market research; implementing procurement procedures; contracting; setting up and managing the database of awarded contracts and framework agreements; monitoring the execution of contracts and framework agreements; analysing the efficiency of central procurement through continuous monitoring of savings made; drawing up proposals of decisions, specifying products and services purchased through central procurement TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY 2013

Results By the end of April of 2013, CPO has concluded FA at the amount of approx. 1.5 billion HRK & savings of 150 mil HRK in following categories / sub-categories: Electricity, Fuel, Postal services (universal and courier services), Cars (operational leasing of cars, purchase of vehicles for police-interceptor and operational leasing of commercial and off road vehicles), Office supplies (toner and ink, paper); Expandable material Telecommunication services (mobile) Cleaning services Internet access service Comupter and computer equipment Office equipment 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

Value of FA concluded by the CPO in 2010 and TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY 2013 Procurement category Estimated value of procurement in HRK Estimated savings in HRK % of estimated value Toners and inks50,000, ,200, Vehicles180,000, ,000, Fuel640,000, ,500, Electricity165,000, ,000, Telecom. services (mobile)47,000, ,400, Cleaning services57,880, ,500, Office supplies43,000, ,200, Insurance services26,000, , Expendable supplies20,000, ,

Key challenges Lack of standardization / catalogues of supplies Slowness in implementation of other Strategies (for example Internet for all central state) Need for profesionalization of procurement officers (the CPO and clients) Fluctuations of employees Lack of modern IT infrastructure for the central procurement system Inability for timely completion of procedures (within 50 days of the start of the procedure) due to repeated appeals The legal status and financing of the CPO Justification for the certain procurement categories 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

Performance measurement in the context of CPB How to measure sucessfullnes of the CPB? Potential savings based on EU experience… 18 Procurement categoryPotential savings (%) Fuel5-7% Cars10-15% Car Maintenance5-10% Cleaning Services20-30% PC / server10-20% IT accessories7-10% Land-line, Internet10-20% Telecom mobile network6-9% Telecom hardware5-15% Office Supplies14-22% Furniture10-15% Source: Action plan for the establishment of the central purchasing body and introducing a system of central procurement; the Government and the Ministry of Economy, 2009

Performance measurement in the context of CPB Measuring the Economic Efficiency – based on price Measuring the Economic Efficiency – based on processes Measuring the Quality of the Procurement Procedures Measuring the Standard of External and Internal Relations and Collaboration 19 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY 2013

Cashable savings Problem with calculating cashable savings – baseline price Some of the examples of the “baseline” prices are: – regulated prices in some markets (in the case of fuel, electricity etc.), – prices paid by other authorities (need for an access to other contracts concluded in parallel procurement procedures - for example, contracts concluded on the local levels). – prices of “older” contracts, (if regulations on central purchasing allow the CPB to gather information on older similar contracts, it is possible to ask for information about prices and quantity of goods /services procured earlier, together with new needs expressed toward CPB). – average market prices –the most common baseline price TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY 2013 Savings based on price

Unit price analysis – Example of price comparisons of office supplies – for 5 most sold items – The comparisons showed significant economies of scale in the central FA. – The savings between different individual products tested were: 8% (toner cartridges), 19% plastic folder, 29% copy paper, 33% ballpoint pen and 37% stapler. – If the average savings across all the products within the office supplies is assumed to be 25%, the price savings from these purchases might be calculated in the same way, based on the purchasing value of the central framework agreement for this category TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY 2013 Savings based on price

Annual cashable efficiencies in the procurement function – Transaction cost – Administrative cost Utilization rate of the existing frameworks in regard to its application /usage (typical for voluntary use) 22 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY 2013 Savings based on processes

Examples of possible indicators: – The average period for planning and preparation should not exceed X days; – Competitive procedures, such as the open and restricted procedures, should be used in no less than X% of the total number of procedures; – The average participation rate in connection with open invitations during a calendar year should not be fewer than X tenderers or applicants; – The number of contracts awarded to SMEs should normally not be fewer than X% of the total number of contracts awarded during a calendar year; 23 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY 2013 Measuring the Quality of the Procurement Procedures

An annual Supplier Satisfaction Survey – to ensure that the majority of suppliers are satisfied with the collaboration with the contracting authority. An annual Internal Customer Survey – to ensure that the majority of internal clients are satisfied with the services of the procurement organisation. Reporting tools in order to avoid additional costs/quantities 24 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY 2013 Measuring the Standard of External and Internal Relations and Collaboration

Conclusions &Lessons learned PREPARATION might take longer time (depends on the quality of input data, way how it is organized etc) Good communication with clients / bidders Knowing the market / needs of clients Simple FA to use, better contract conditions, guidelines for clients Flexibility of FA Specialised knowledge connected to subject matter of procurement / PPA Introducing standards & IT support Step by step approach 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY

Thank you for your attention! 26 9 TH P UBLIC P ROCUREMENT K NOWLEDGE E XCHANGE P LATFORM - S KOPJE, 29 M AY 2013