1. Innovation procurement experiences in Espoo, Finland
Examples: Procurement of support for housing by the alliance model, and the Service Centre

2. Introduction
This presentation introduces two examples of innovative procurement by the City of Espoo:
The alliance procurement model in social and healthcare services, and
an innovative service centre that provides public services at a large shopping centre.
The examples have been chosen from among basic services that have paid special attention to the customer relationship perspective.
The starting point is the customer, who is provided with an easy and flexible service model on the “one-stop shop” principle.
The implementation of a customer-oriented model has necessitated new procurement practices.
Marjo Ojala

3. Case 1 Procurement of support for housing with an alliance model
Marjo Ojala

4. Introduction
The object of procurement is support for housing for customers with multiple problems who do not really belong to any specific service category. The customer group also face challenges with finding permanent housing. The customer group uses a lot of different public services, and it has not been possible to offer them a comprehensive rehabilitative service concept.
The new innovation came when Espoo decided to carry out the procurement using a new service concept so that, in future, services for the customers will be provided jointly by a partnership of the public sector and private service providers at a “one-stop shop”.
The alliance is formed as a partnership between the city and representatives of the service providers. The alliance ensures together that the customers receive the services they need with high quality, at the right time and in an appropriate manner.
Espoo was the first in Finland to test the alliance model in social services.
Marjo Ojala

5. Principles of alliance contracting
The Client and service providers form an alliance
One agreement in the “we” tense
The alliance has common goals
The alliance participants jointly share the risks and benefits
Everybody wins or everybody loses
The alliance partners are selected based on capability criteria
Tenders are also invited for the fee percentage
Ability to work together and a grasp of the alliance spirit are important
The alliance is managed by an alliance board
Members of the alliance board come from the participants
Decisions are unanimous
The starting point of decisions is the best of the alliance
The commercial model defines financial relationships
Compensated costs, fee
Target costs
Bonus/sanction system
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6. Principles of the commercial model
Incentives
Key profit areas
Bonus for gains
Sanction for pains
Target costs
Sharing gains
Sharing pains
Profit + overheads
Fee
(percentage-
based)
Direct costs
Principles:
Direct costs are always compensated
The fee is paid on top of direct costs
Realised
costs
(open book)
Gains/pains in regard to the target costs are
shared as agreed
Targets are set for key profit areas, and the bonus/sanction system is tied to them

7. Cost model Direct costs are always compensated
The Client compensates the alliance participants for the agreed direct costs for providing the service, which are actual costs based on the “open book” principle
The fee is paid on top of direct costs
In addition to costs, the participants are also paid a percentage-based fee that covers the service providers’ overheads and profit
Tenders were invited for the fee percentage
The incentive system facilitates efficient services
The direct costs and the fee are used to determine the target costs, and the gains and pains are shared between all participants.
Targets are set for key profit areas, and the bonus/sanction system is tied to them
The financial risks and rewards are shared: only realised costs are compensated, and any additional costs are shared using a ratio agreed in advance.
Conventional agreements involve significantly larger contractual risks, and liability for such risks almost always falls on the city.
Marjo Ojala

8. Targeted advantages
Customers get the service they need individually on a one-stop principle. Housing is made possible regardless of the need for support.
Paying for results (customer satisfaction, rehabilitation) instead of the conventional daily fee.
SMEs can participate in producing a large entity as a part of a consortium (9 participation applications, 5 for negotiations, 5 service providers in the selected consortium)
The model has helped the city to increase the customer orientation and flexibility of its own service organisation practices
Thanks to the commercial model, the city has gained more awareness of the cost structure of its own activities and those of service providers
Service providers have felt that they have had the opportunity to really influence the service package provided.
Marjo Ojala

9. Conclusions
The Finnish Espoo PPI case ”Support for housing alliance business model" consists of a public-private partnership to provide services.
According to the commercial/financial model set in the contract of the alliance, the partners share both risks and benefits.
These arrangements are similar to value engineering in that the partners (public and private) share the 'gains and the pains'.
The model does not refer to  value' neither to the value method itself, but we can say that is based in the same principle of creating a system of incentives to improve, in which the gains are shared.
Thus, the arrangements in the alliance model are similar to value engineering because:
(1) they are based on adding value as a result of reducing costs because of improvements;
(2) there is a share of gains and pains;
(3) there are targets (KPI's) and a bonus/sanction system tied to them.
Marjo Ojala

10. Case 2: Service Centre
(in Finnish: Iso Omena Service Centre)

11. Concept of the Service Centre
The Service Centre was opened in autumn 2016 at a large shopping centre.
It offers a new service concept and meeting place where people can use several public services in the same place while running their daily errands.
The Service Centre provides public services provided by the city:
A library, youth services, a maternity and child health clinic, mental health and substance abuse services, a health centre (tenders invited), a Citizen’s Services office and a meeting place for art and culture.
The premises are also shared with Kela (the Social Insurance Institution, a Finnish government agency in charge of settling benefits under national social security programmes) and HUS (Helsinki and Uusimaa hospital district) laboratory and medical imaging services.
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12. Concept of the Service Centre
The facilities are flexible and adjustable
The Service Centre’s activities have been digitalised
Approximately 140 professionals of different fields work at the Service Centre.
In a little over a month, there have been approximately 230,000 visits to the Service Centre (compare to the population of Espoo, 271,921 people)
Marjo Ojala

13. Innovations at the Service Centre
The activities of the Service Centre have been made possible by innovations obtained through public procurement:
The service operator’s service centre concept as a whole is a customer-oriented total service
The electronic appointment system for clinic services and conference rooms and evening appointments make things easier for families with children and create opportunities for entrepreneurs. The facilities can be reserved freely and are free to use.
The automated borrowing and book return systems are easy to use and save the municipality’s money
Healthcare services for which tenders were invited (health centre services from a private service provider)
ICT solutions
Marjo Ojala

14. Introductory video of the Service Centre

15. Thank you! Marjo Ojala Legal Counsel, Doctor of Laws Mayor´s office PL City of Espoo