Efficient Public Procurement
12 April 2019
Authors: Jenni Heurlin, Johan Holmquist, Outi Jousi, Joakim Lavér, Toni Malminen, Juli Mansnérus, David Olander, Sven Olsson, Jesper Nevalainen, Anna Ribenfors, Caroline Sundberg and Emma Swahne
According to a recent study on bidding in public procurement in Finland, half of the contracting authorities received just two bids, or even no bids, in their tendering competitions. The study was based on extensive data, comprising of 18,000 invitations to tender over the recent years. The study was conducted in Finland, but the figures for Sweden are similar.
The lack of competition affects all industries and different contracting authorities. Only less than 10% of tendering competitions have more than six bidders.
According to the OECD, public procurement amounts to, on average, 12% of the national GDPs, which is why this matter is of importance. According to the study, lack of competition means difficulties in purchasing high-quality goods and services at reasonable price. This is a problem for the users of the procured product or service, the taxpayers, and the market as a whole.
How Could Contracting Authorities Attract More Bidders?
We have extensive experience in solving disputes arising from insufficient contracts. Contract terms should be clear and follow the practices of the market in question. As a rule of thumb, we advise our clients to think carefully what they are buying and then to adapt the terms accordingly on a case-by-case basis. Sometimes it is wise to adapt the contracting authority’s internal function according to the products and services available on the market and at other times it is advisable to have the contracts tailor made. We have rarely seen excellent results with simple contract templates, and for the same reasons, such templates are not used by large companies in the private sector. In addition, in order to attract more bidders, it is a good idea to tailor the terms in a way that enables smaller companies to participate as well.
It should be easy to take part in tendering competitions and to calculate the production costs. As often just one bidder is awarded the contract, unnecessarily vast and complex questions in RFPs (“Requests for Proposal”) lead to inefficient use of the bidders’ time. We have seen as many as hundreds of open questions being asked from all bidders during a tendering competition. In addition, the contracting authorities should refrain from using unnecessary requirements and/or requirements that are not proportionate and therefore create barriers of entry into the market.
Attracting the best talent is a key concern especially within the technology sector. According to our sources, some technology companies only take part in 70% of the tendering competitions available. This is because of scarce resources within the software industry. It is possible for contracting authorities to try to attract the best talent by describing the importance of their tasks, the nice working atmosphere, or benefit to the CVs.
One vital part of attracting more bidders, based on our experience, is to write clear RFPs with instructions for the bidders. Taking part in tendering competitions should be made as easy as possible. In our practice, on either side of the table, we regularly include checklists for the bidders and answer their questions during the RFI phase. As the contracting authority answers the questions, it helps the bidders find the relevant information in the RFP or to understand the logic behind a certain requirement, thus making participation in the tendering competition more interesting.
Tendering Competitions as Tools for Change
Digitalization and the digital transformation of the public sector does not take place without public procurement. Often the changes need to be done through tendering competitions, which means that correct and effective use of the public procurement procedures is a vital part of the welfare of our Nordic societies.
Hannes Snellman’s public procurement experts are ready to assist in all complex public procurement matters.
You may contact any of our experts in Finland or Sweden for assistance.