Centralised Purchasing Systems and Electronic Procurement Presentation of the Danish System for centralised purchasing: SKI

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Centralised Purchasing Systems and Electronic
ProcurementPresentation of the Danish System for
centralised purchasing SKI
The Danish National Procurement Ltd. (Statens og
Kommunernes Indkøbs Service A/S SKI)

• Soeren Jakobsen
• Malta, Thursday 26 January 2006

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Agenda

• A few facts about the company SKI
• The companys new strategy (as from Dec. 2002)
• Co-ordinated purchasing
• The future strategy of SKI
• SKI the interactive company
• Our vision for a Centre for Public Procurement
• Our electronic tendering system ETHICS
• Comments and questions

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A few facts about the company SKI

• Established in 1994 as a limited company.
• Business model
• A percentage (typically 1) of turnover on
  contracts from vendors
• Field of activity
• Contributing to greater efficiency in the area of
  public purchasing by establishing and maintaining
  attractive framework agreements
• Number of employees 43
• Number of framework agreements approximately 50
• Owners
• Ministry of Finance (55)
• KL, the National Association of Local
  Authorities (45)

The company is situated in the heart of Copenhagen
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A few facts about the company SKI Present
activities

• Framework contracts (on large standardized
  procurement areas)
• Advise on public procurement (data collection and
  handling, choice of supplier and solutions,
  procurement policy, tools for estimating
  procurement volume, green procurement)
• Consultative services (procurement analysis,
  e-commerce, advice in obtaining internal
  compliance)
• E-commerce initiatives (customer-related price
  lists, advice on implementation of e-commerce)
• Building of qualifications (courses and seminars,
  user-groups, dissemination of knowledge)
• Tools (electronic tendering system ETHICS,
  mini-tenders, e-auctions)
• Other services (guides, best practices, articles,
  PR, advice on how to communicate internally)

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A few facts about the company SKIs focus on
products and services
150 billion DKK
Building and construction
Roadwork
Special software
Clothing
Cleaning
Window-cleaning
Hospital equipment
Medicine
Special hardware
Low
Craftsman services
Eldercare
IT operation
Hospital articles
Ambulance-service patient transport
IT- and management consultancy services
Lawyer- and accountant-service
IT-outsourcing
Level of Standardization
Open Source
Handicap aid
Advertising
SKIs focus in 2006
Scanning of construction drawings
Newspapers/magazines
SKIs focus in 2003
Gas
High
Electricity
Printed matters
Food
Financial services
Travel services
Cleaning articles
4 billion DKK
Tele- and data communication
Office stationary
8 billion DKK
IT-standard software
IT for education
Furniture
IT-standard hardware
White goods
Vehicles
Office machines
Fuel
Potential turnover
Large
Small
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A few facts about the company Turnover breakdown
by product areas, 2004
Auditing serv.
Energy
XY 342 m.DKK/23,3
Food
Telephony data transmission
Electrical articles
Lab. equipment
Kitchen hardware
-growth from 03 to 04.
Furniture
Paper
Clothing
IT
Travel services
Cover articles
Office supply
Cars
Source SKIs 2004 result
Turnover 2004 (DKK)
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A few facts about the company SKIs turnover
2004 45
(million DKK.)
5.128
23,3
2004 47 30 10 13
-3,5
5,8
8,5
4.112
4.027
3.886
3.712
1998 56 25 15 4
12,2
20,4
3.082
13
2.748
37
36
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Est. 2005 Ordinary turnover 6.600 m. DKK 950
m. EUR Result 3,8 m. DKK
2004 Total turnover 5.100 1.000 6.100 m. DKK
880 m. EUR Result 9,1 m. DKK
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A few facts about the company SKIs turnover and
result
2004
2000
1999
Est. 2005
2001
Years result (in million DKK)
Budget 2006
2004
2003
2002
Total turnover from framework contracts (in 1.000
DKK)
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The companys current strategy (as from Dec.
2002)Mission

• National Procurement Ltd. creates increased
  returns of scale in public procurement to the
  benefit of its customers and the welfare of the
  Danish citizens.
• The advantages are secured by maintaining close
  ties between customers as well as suppliers, but
  at the end of the day National Procurement Ltd.
  acts primarily in the interest of the public
  sector.
• The customers are secured a more attractive price
  and quality than they would be able to obtain
  themselves, procurement expenses are held to a
  minimum as there is no need for them to carry out
  own tenders and electronic procurement systems
  secure efficient buying.
• The suppliers are secured lower costs due to
  reduced public tendering and reduced marketing
  costs due to National Procurement Ltd.s
  centralised marketing and e-procurement systems.
• National Procurement Ltd acts in accordance to
  commercial principles and at the same time
  promotes green and energy saving procurement.

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The companys current strategy (as from Dec.
2002)Vision

• By securing attractive framework agreements the
  Danish National Procurement Ltd. wants to play a
  central role in contributing to greater
  efficiency in the public procurement.
• By establishing close partnerships with the
  public procurement agents, National Procurement
  Ltd. wants to establish and maintain framework
  agreements that are in demand, make a difference
  for our customers and strengthens the company.
• National Procurement Ltd. wants to improve the
  professional dialogue and cooperation with public
  procurement agents, suppliers to the public
  sector and consultants.
• National Procurement Ltd. is committed to a
  policy of acting as an innovative and committed
  employer with the capacity for attracting,
  maintaining and developing skilled and motivated
  staff.

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The companys current strategy (as from Dec.
2002)Strategies and specific action plans
Priority

• Discontinue unsatisfactory framework agreements
• Strengthen analyses and follow-up
• Strengthen user-involvement
• Extend co-ordinated purchasing

1. Attractive framework agreements
Why?
How?

• Dissemination of knowledge
• Meetings for procurement agents
• New marketing strategy
• Partnership programmes
• Education and training of customers
• Offer consultancy
• Publish guides to public procurement

2. Partnerships with public procurement agents

• By securing attractive framework agreements
  National Procurement Ltd. wants to play a central
  role in contributing to greater efficiency in the
  public procurement
• By establishing close partnerships with the
  public procurement agents National Procurement
  Ltd. wants to establish and maintain framework
  agreements that are in demand, make a difference
  for our customers and strengthens the company
• National Procurement Ltd. wants to improve the
  professional dialogue and cooperation with public
  procurement agents, suppliers to the public
  sector and consultants
• National Procurement Ltd. is committed to a
  policy of acting as an innovative and committed
  employer with the capacity for attracting
  maintaining and developing skilled and motivated
  staff

• Adjustment of the organisation
• Project-groups regarding tendering
• Further improvement of qualification
• Involvement of employees
• Further improvement of management
• Benchmarking of efficiency
• Secure key qualifications

3. Revitalising the organisation

• Customer prioritisation
• Differentiated targeting of customers
• Prioritise use of resources to match potential
  turn-over
• Partnerships with consultancy firms and
  architects
• Commercial use of ETHICS

4. Focused marketing activities
5. Focus on profitability

• Strengthen financial control
• Strengthen debtor control
• Strengthen employees knowledge of expenditure

• Create benefits for suppliers
• Marketing in cooperation with suppliers
• Consultancy regarding choice of supplier
• Precision of demands to suppliers

6. Active supplier-policy

• The Public Procurement Portal must function
  according to demand
• Development of an e-procurement catalogue that is
  independent of e-marketplaces

7. Dissemination of e-procurement

• Establish close relationships to
• Shareholders
• Interest groups
• Trade organisations
• Consultants
• Media

8. Strengthen closepartner-relationships
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The companys current strategy (as from Dec.
2002) SKIs primary goal

• SKIs main challenge How can SKI secure
  attractive framework contracts, that are better
  than the contracts that each of our customers in
  the public sector can obtain themselves?
• Exact knowledge concerning the demands and needs
  of the customers through their active involvement
  in SKIs process of generating framework
  contracts
• Co-ordinated purchasing where the customers
  before and during the tendering process are
  invited to pool their expected turnovers on the
  different framework areas
• Secure an effective competition amongst the
  potential suppliers.

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Co-ordinated purchasing.Basic principle.
Large and small SKI-customers both obtain larger
discounts and/or lower prices through
co-ordination than they could obtain themselves
Discount from supplier
Additional discount through co-ordination
Total turnover
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Co-ordinated purchasing. Co-ordination - before
and after the tender.
Attractive framework contracts pooling of
expected turnovers

• Binding turnover expectations are
• collected
• Customers are invited to join the process

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The future strategy of SKI The Procurement
Function of the Future
Increased focus on the creation of value
(savings, efficiency and quality)
Today
Tasks Dialogue with mgt. Co-operation Growth
through technology Total costs Make or
buy Competence Development of vendors Involvemen
t of users Accelerate use of contract Follow-up A
utomation Decentralization
Tasks IT Search for and selection of
vendors Requirement assessments Contracting
Dispositions Requisitions Control of invoices
Future
De- velop- ment
New quali-fications needed
De- velop- ment
Sourcing
Contracts
Sourcing
eTendering
Contracts
Transactions
Value chain Integrated eProcure-ment system
Transactions
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The future strategy of SKI Primary focus points
1. wave
2. wave
3. wave
2005
2007

• Marketorientation
• Revitalisation of the organisation

• Processes and systems
• Buildingup of competences

• A deepening and broadening of partnerships
• Knowledge sharing value-based leadership

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The future strategy of SKISKI the interactive
companyThe main challenge

• We must ensure that cooperation exists and that
  knowledge, experience and attitudes are
  exchanged. If not it will be impossible to
  develop the right solutions, of high quality and
  at the lowest possible cost.
• We must combine what is individual and what is
  common. Make what is individual relevant for and
  possible in the community. In short Create room
  for the individual in the community and room for
  what is common in the individual.
• We must optimise processes and systems that make
  is possible for knowledge to be transported round
  in the organisation and ensure that knowledge is
  at hand where it is needed to generate value,
  increase creativity and innovation.

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The future strategy of SKISKI the interactive
company. Overview

• Attractive work-place
• Competence-building
• Recruiting
• Job appraisal interviews
• Curiosity
• Social competence

• Partnerships
• Structural frame
• Building
• Culture
• Values
• Knowledge-sharing

Talented colleagues
Unique organisation
SKI the interactive company
Externally Internally
Value-adding Productivity

• CRM
• ETHICS
• ERP
• Electronic archives

• Growth
• Simplification
• Prioritising
• Management training

Supporting technologies
Good management
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The future strategy of SKI SKIs vision Centre
for Public Procurement

• Aims
• Openness
• Cooperation internally and externally
• Flexibility
• Proximity to customers, suppliers and cooperating
  partners
• Vision SKI wants supported by an attractive
  building - to be the natural and inspiring focus
  point for all persons and organisations involved
  in public procurement.
• The elements of the concept
• Other organisations are invited to become tenants
• Project facilities
• Seminar and conference facilities
• Showroom facilities
• Service for visitors

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Our electronic tendering systemETHICS is a
central element in our new strategy
Besides being an exciting business opportunity
ETHICS offers
Compliance with EU rules

• Complies with thresholds, time frames, methods
  and standards

Efficiency
Transparency

• Internal productivity
• Development and re-use of knowledge and legal
  terms
• Workflow controlled execution
• Document Library
• Easy involvement of new users
• Management overview and control
• Growth in turn-over
• Strengthen user-involvement and accelerate use of
  contracts
• Efficient use of experts in the evaluation phase
• Help customers run own tenders

• No complaints from vendors have lead to legal
  issues
• Ability to handle an increasing number of
  complaints in the future
• Involvement of users easy and meaningful

innovasion
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Comments and questions