1. Smarter buyer
Iceland
Gudrun Ogmundsdottir
15 May 2017

2. Key statistics about Iceland
Population of 330,000
(2 million tourist per year)
Area of 103,000 km2 
Capital: Reykjavík
Currency: Icelandic Króna
Language: Icelandic
Industry: Tourism, fishery, geothermal power and aluminum

3. How the Icelandic gov. became better informed buyer
Governmental sector in Iceland and its challenges
Why public procurement is important
Why there was a need for structural and organizational change in the procurement system
What we did
The results
The way forward
What we learned and why it worked

4. Smarter buyer – joining forces and breaking silos in public procurement delivers better performance
Joining forces with the private sector
Developing procurement policy
Implementing the best practices and knowledge of the private sector
Improve procurement processes and deliver savings.
Benefit for private sector – more transparency
Breaking silos and joining forces across all government organizations in public procurement
Delivers better products/services at lower cost.
All agencies needed to take part

5. Governmental sector in Iceland
Governmental sector is organized on two levels – central and local
8 Ministries
160 Agencies linked to the Ministries´
74 municipalities
Challenges
Small population in large geographic area
Number of gov. agencies and municipalities
Fragmentation and lack of perspective

6. Procurement is an important tool governmental operation
To promote effective competition in the market and ensure efficiency in governmental operations.
Key role in shaping the business environment of companies in the private sector.
Significant impact on the market through the purchase of goods and services.
Communications between the government and the market
Segja svo bara þetta í strike through

7. Public procurement -large portion of governmental expenditure
Procurement expenditure
Governmental expenditure 44% of GDP
Public procurement 18% of GDP
50/50 central/local government
30% of governmental expenditure

8. Platform for effective procurement system was in place
Clear legal framework established
Central public procurement agency operating
Procurement policy defined
Mandatory framework agreements
All agencies leagally obliged
Green Procurement policy
Procurement used for other social purposes
Ethical codes for procurement officers in place     

9. Why was smarter buyer important
Awareness that there were flaws in the procurement system and changes were needed
Agencies were not complying to the framework agreements
Not many tenders
Believed that the gov. was paying higher prices than other private sectors.
Increased media attention

10. Improving the procurement cycle
Workgroup appointed by the Minister of Finance 2015
Interdisciplinary
Experience from the public and private sector
Led by ED from private sector
The Assignment
Increase efficiency in public procurement
Analyze how procurement was conducted - study
Formulate a policy on how to improve current procurement method
Savings recommendations by using procurement
Look for best practices

11. Workgroup´s Key Findings
The government had limited information about its purchases in many categories and little overview of purchasing prices and savings opportunities.
Framework agreements did not provide the government the lowest possible price.
The procurement policy had only been written but not fully implemented. Lack of tools to exploit the full benefit of the procurement policy.
Opportunities in place to acquire significant savings by using new “methods” in purchasing goods and services.
Er þessi setning kannski ný setning Lack of tools to exploit the full benefit of the procurement policy.?

12. Agencies allocated variable funds to buy the same inputs and there were no criteria defined for price or guidance on what requirements should be made to goods and services procured
+113%
787
440
369
Lowest
Average
Highest

13. Same product sold to agencies at different prices by the same supplier.
Highest
8.000
9.000
10.000
11.000
12.000
13.000
Avarage
Highest
+97%
TEXT
+68%

14. Study – agencies performance
Agencies do not always buy in the most efficient manner despite following the rules.
Agencies purchase the same product at different prices within the framework.
Agencies allocate varied funds for the purchase of the same input.
No one responsible for checking the criteria
Frameworks do not guarantee the lowest possible price but certain discount terms.
No encouragement for suppliers to go to the value chain and offer better prices.
Segja

15. Why need for structural and organizational change?
Challenges
Solution
Taks
Accountability. Agencies responsible for its procurement purchasing managers
Lack of discipline and rules not followed
Authority and lack of follow up
Clear responsibility
Fewer purchasing managers
Clear authority
Effective follow-up
IT-system developed
E-/On-line shopping
Contract management
Lack of information - what is the gov. buying
No system
The cost of procurement not visible.
No measurement
Better management
No procurement plans made
No prioritization
No standards and requirements
Benefit of joint procurement not visible.
Long term planning
Economy of scale
Define requirements and standards - initiatives
Planning and prioritization
Effective use of procurement tools
Fewer suppliers
Inform suppliers about procurement plans
Discount negotiate
Suppliers have no guarantee
Suppliers value chain not exploited
Commitment

16. The results confirmed that measures needed to be taken to increase efficiency.
Get better results by:
Standardize more goods and services procured
Make long term procurement plans
Define requirements
Decrease number of good procured in specific categories
Decrease number of suppliers if possible
Joint procurement across agencies
Increase commitment

17. Work group recommendations
Implementation of long term procurement plans
Within all 160 agencies
Connect them with the implementation of the budget
Use strategicaly by informing the market well in advance about the State´s future needs.
Procurement procedures applied in a targeted manner
by a joint procurement, mini tendering and making agreements with fewer suppliers.
Improve IT-solutions for better overview of purchases and defining goals for optimization.
By optimizing the purchasing process, in line with private sector best practice, will lead to more efficient sourcing – quality goods and services delivered on time.
Create incentive programmes for agencies and suppliers

18. Implementation process defined in phases
Proof of project
Structural organizational changes implemented at central procurement New framework agreement.
Full roll-out e-procurement
Tasks force set-up within ministry
Greater steering + standards and requirement defined
Procurement officers across the system + private market
Joint procurement
Strategic use of procurement plans
Link budget to procurement plans
Set up procurement plans
E-procurement system pilot
More joint procurement
Need analysis e-procurement system
Comply or explain
Rautt alltof langt

19. Pilot project – joint procurement.
Lap-top computers Monitors Paper
-40%
-56%
-35%
48.379
37.736
-55%
-49%
-65%
67.969
16.700
Reg. Price
Best price
Joint procurement
Reg. price
Best price
Joint procurement
Reg. price
Best price
Joint procurement

20. Monitoring results are important
Joint procurement
Comply or explain
Law on public finances
Collect statistics
E-procurement – buy through contracts

21. The Way Forward E-tendering Greater steering
Reduce the cost, time-to-procure, automate process, gain full audit trail and process intelligence
Greater steering
Use e-procurement system
Central contracts (framework agreements)
Procurement plan part of agencies financial planning
Joint procurement – other countries as well
Open date
Open invoices
More transparency - Follow the money

22. Major challenges Lack of information
IT solutions
Capacity and culture in central procurement agency
Mobilize support across all 160 agencies

23. Main lessons learned. Implement changes with pilot projects
Importance of high level political engagement by minister
Policy was improved and co-developed by experts from the public and private sector
Private sector best practices can be beneficial in the public sector.
Easier to mobilize support for changes by focusing on low hanging fruits.
Benefits implemented early in the process – short time span from policy change is announced and results are visible.

24. Thank You Guðrún Ögmundsdóttir
Ministry of Finance and Economic Affairs
Icleand