1. Developing a concept for centralised procurement at municipal level: different business models TAIEX-REGIO Workshop on Public Procurement Applicable Rules 9.-10.12.2015 Sophia Raili Hilakari, CEO

2. 2 Topics Finland – facts Public procurement in Finland Electronic procurement system Process About us and our framework agreements Third Act on Public Contracts 2 Combining municipal buying power

3. 3 Facts on Finland 3 317 local authorities / municipalities 19 provinces 9 of local authorities with over 100,000 residents and 37% of the country's whole population live there. Over a half of all local authorities have a population of less than 6,000. Combining municipal buying power 2000 other municipal organization 15 new districts year 2019 for social welfare and healthcare - New reform going on 5.5 million inhabitans

4. Public procurement

5. 5 A lot of money The procurement costs year 2015 Local authorities (municipalities + public organizations owned by a group of municipalities) more than 20 billion euros Other organizations (companies owned by municipalities etc.) more than 10 billions euros The State’ spending amount to almost EUR 12 billion at the end of 2015 Social welfare and healthcare services – soon accounting for half of the budget – and taking almost EUR 1 billion more each year Combining municipal buying power 5

6. 6 Municipals Every municipal organisazion sources Same kind of products, materials and services to their own administration and to their inhabitans/clients Models varies: centralized purchasing or non-centralized or mixed Strategic purchasing management: big cities have purchasing strategies and maybe officials for this, smalles cities not Resourses varies from 1 or ”half” official to centralised units with 10-20 experts (large cities) Too many actors The level of procurement know-how varies -> anyway too many practices Combining municipal buying power 6

7. 7 Centralised bodies Approximately 18 centralised municipal purchasing bodies Operate regionally or across several regions Are coordinated by large or medium-sized towns/cities Based on cooperation agreements or shares KL-Kuntahankinnat Ltd is the only nationwide joint purchasing body Combining municipal buying power 7

8. 8 Local joint purchasing units, excemples 8 Combining municipal buying power KL-Kuntahankinnat Oy IS-Hankinta Oy KuntaPro Oy Lahden seudun hankintatoimi Tuomi Logistiikka Oy Kokkolan hankintarengas

9. 9 Local joint purchasing units, excemples IS-Hankinta Oy (ltd.) www.is-hankinta.fiwww.is-hankinta.fi Shares: 37/The City Of Kuopio, 35/Kuopio University Hospital, 1/8 Kokkolan hankintarengas, www.kokkola.fiwww.kokkola.fi TheCity of Kokkola and 7 other organization in district of Kokkola Cooperation agreement, City of Kokkola as ”master city” KuntaPro Oy (ltd.), www.kuntapro.fiwww.kuntapro.fi City of Hämeenlinna and Pori + 70 other smaller organizations Financial administration and payrol services, also purchasing Combining municipal buying power 9

10. 10 Local joint purchasing units, excemples Lahden seudun hankintatoimi, www.lahti.fiwww.lahti.fi The City of Lahti and 15 other organizations Lahti ”master as city” Tuomi Logistiikka Oy (ltd) 1.1.2016- kick off The City of Tampere and Tampere University Hospital Combining municipal buying power 10

11. 11 Social welfare and healthcare – – 15 new districts year 2019 Social welfare and healthcare services Responsibility belongs now to municipalities Costs soon accounting for 60% of the budget in municipalities – and taking almost EUR 1 billion more each year The Covernment Programme, Reform Reform in the process: harmonisation, costs down, common ICT 15 new districts for social welfare and helthcare Self government Taxation rihgt – open issue Coming 2-3 new joint procurement bodies: Products and cervices, ICT, other Combining municipal buying power 11

12. Electronic procurement system, processes

13. 13 Electronic procurement system Framework agreement supplier for KL-Kuntahankinnat year 2012 Used in 100 organisations of our clientele This year adopted by Hansel Ltd. (central purchasing body for government organisations) Most important solutions: Cloudia Tendering Cloudia Contract Cloud-based service – rapid deployment and automatic updates Open interfaces – can be integrated with other processes Audited quality, information security and environment management: ISO 9001:2008, ISO 27001:2005, ISO 14001 13

14. 14 Cloudia in brief 14 Combining municipal buying power

15. 15 Process, focus Combining municipal buying power Planning Tendering Implemen- tation Contract manage- ment Homework 40% Procedure, law 10% Instructions to clients, 5% Constant coordination, cooperation 45%

16. 16 Contract management e.g. yearly schedule – Furnitures 16 Combining municipal buying power January February March April May June August October November December July September Launch of new invitation to tender Review meeting Internal meeting before the review Entry into force of new prices Client satisfaction survey Price revision proposal Client survey + agenda for the review meeting Client event Price review Client case study

17. KL-Kuntahankinnat Oy

18. 18 Commitment to contracts and tenders – voluntary way - commitment In the Finnish Act on Public Contracts (348/2007) a central purchasing body can only have contracting authorities as its clients who own it either directly or indirectly Clients own Kuntahankinnat indirectly through the Association of Finnish Local and Regional Authorities Kuntaliitto Clients’ commitment is based on a voluntary commitment and is contract/tender specific - Clients can commit to tenders and/or existing contracts by simply filling in and signing a commitment form By signing a commitment the client also commits to KL-Kuntahankinnat’s general terms of joint procurement The general terms of joint procurement mainly include the roles and responsibilities of KL-Kuntahankinnat and the client as well as the terms of the commitment Clients commit principally for the whole contract period but clients can also commit for shorter periods of time 18

19. 19 Fee 1%, ordering, invoicing, paying The fee of KL-Kuntahankinnat to our clients is 1% Suppliers/companies include the fee (1%) to their bills, which they send to our clients Suppliers report KL-Kuntahankinnat next month how much they have charged clients: total and separatly per each client KL-Kuntahankinnat check reports, if they are ok, Kuntahankinnat send bill to suppliers and they return/pay 1 % to us We don’t charge our clients, because our suppliers do it for us Of cource our clients pay our fees, but not direct Simple and cost-effektive modell to all 19

20. 20 KL-Kuntahankinnat Oy Tenders framework agreements of large volume to bring cost savings and process advantages Handles the related contract management and covers the financial consequences of complaints Fee 1%, more on page 19 Combining municipal buying power 272 Meur Value of framework agreements 330 Meur Value of framework agreements Commitments4 700Commitments5 500 Framework agreements 50 Framework agreements 60 Established2008 Owned by the Association of Finnish Local and Regional Authorities www.kuntaliitto.fi www.kuntaliitto.fi Act Finnish companies, Board: 4

21. 21 Combining municipal buying power Provides framework agreements of large volume products and services to meet clientele needs Combining municipal buying power Customers1 220 4 Customer Satisfaction (1-5) Suppliers190 Personnel14 Categories: Products and services Energy ICT Social and health care 14 officials, employeed from privat and public sector + extensive network of expertise

22. 22 Joint purchasing body 22 Combining municipal buying power Significant nationwide benefits Cost savings Process advantages Quality of products and services Easy to join Legal reassurance Supervision Development Service level Responsibility Market know-how Customer requirements Competence Agreement management Tendering process Framework agreement

23. Current framework agreements

24. 24 Goods and services 24 Combining municipal buying power

25. 25 ICT 25 Combining municipal buying power

26. 26 Energy + Social welfare and healthcare services 26 Combining municipal buying power

27. Current tenders

28. 28 Current tenders, proposals for new tenders Combining municipal buying power 28

29. Our clientele

30. 30 Number of clients, e.g. all municipalities are with 30 Combining municipal buying power

31. 31 The largest cities in Finland Number of commitments valid on 11/2015 and all values of agreements since 2008 31 Combining municipal buying power

32. Third Act on Public Contracts

33. 33 Third Act on Public Contracts The new Act on Public Contracts, which implements the Public Procurement Directive into Finnish law, is due to enter into force before summer 2016 or after There is a danger that too much focus will still be on the legalities of procurement and not enough on commercial considerations and skills Contract management is of paramount importance to ensure cost-effective and quality contracts Combining municipal buying power 33

34. 34 www.kuntahankinnat.fi