Saving government funds

Hansel’s task is increasing the productivity of public administration. It has been proven that joint procurement activities produce savings in comparison to decentralised procurement. The higher volumes in joint procurement often simultaneously offer price benefits and reduce the amount of resources tied to procurement. Furthermore, when contractual management is also professionally and effectively handled during the agreement period, economic added value will be achieved.

It is a challenge to calculate the exact amounts of savings related to procurement. For the past ten years, Hansel has been making rough savings calculations that are based on a study on the savings produced by joint procurement carried out at the Helsinki School of Business (Karjalainen et al. 2008). The study proved that the centralised operating model produces savings of some 20–25%, depending on the category.

Using this model, we have been able to calculate that in 2018, Hansel’s joint procurement activities produced theoretical savings of more than €300 million, compared to decentralised acquisition. The calculation model also utilises calculations of the potential of Hansel’s framework agreements, but it does not account for factors such as the use of working time, the costs of dividing resources or competence gaps that may be caused by distributed operations.

Hansel’s category management is in charge of the savings calculations related to centralised procurement contracts. The calculations study joint procurement contracts from the perspective of the procurement object and the supplier markets based on available information. Whenever comparable market prices or prices based on benchmarking are available, the prices obtained from the tendering are compared with them. If the procurement object is not considerably different from a previous procurement object, the prices obtained from the tendering are compared with the previous contractual prices. Suitable reference prices are not available in all cases, however, in which cases contract-specific cost-benefit indicators are defined for the centralised procurement contract.

In the past year, social effectiveness through procurement has been discussed a great deal. It consists of many factors. In addition to centralised procurement contracts, we realise a great deal of customer-specific tendering processes where the goal is increasing the customer benefit and effectiveness. Systematic measuring of effects achieved through tendering has been proven challenging, however.

For several years now, we have collected information on the procurement value of customer-specific tendering processes, the savings achieved and customer satisfaction. Our goal for 2019 is to develop the indicators used to measure the effectiveness of customer-specific tendering. The plan is to expand the analysis to the assessment of responsibility, innovation, development of competence or service quality.