This chapter examines potential pathways for Slovenia to enhance collaborative approaches in public procurement at subnational level, focusing on two key dimensions: (i) leveraging centralised purchasing and (ii) establishing a community of practice to facilitate collaboration at subnational level. Given the voluntary nature of participation, their success will depend on effectively raising awareness of the benefits and actively encouraging local initiatives.
Enhancing Public Procurement through Collaboration in Slovenia
The Way Forward
Abstract
As already discussed in section 2.1, centralised purchasing is a useful collaborative procurement approach, because it benefits contracting authorities, in particular, smaller ones at subnational level with limited capacity. Centralised purchasing tools such as framework agreements bring many benefits such as generating savings from economies of scale and reducing administrative burden and transaction costs. They are more appropriate for standardised products and needs.
Currently, the Directorate for Public Procurement of the Ministry of Public Administration (MPA) acts as the only CPB in Slovenia in accordance with the Regulation on Joint Public Procurement of the Government of the Republic of Slovenia (hereinafter “the Regulation”). (Ministry of Public Administration of the Republic of Slovenia, 2021[1]) Public entities at the central administration level are required to use centralised purchasing unless they can provide justified reasons for opting out. The Regulation specifies 17 primary categories which correspond to the common needs of central administration (see Box 3.1). By January 31st of each year, the MPA submits a proposal to the government on the precise product categories subject to centralised purchasing. The proposal builds upon consultations with entities at the central level regarding their needs, which takes place no later than end of November of each year. (Government of the Republic of Slovenia, 2016[2]) Currently, the MPA arranges framework agreements and joint procurements for 24 product categories within the primary categories for central administration. The centralised purchasing services of the MPA are available to non-central contracting authorities upon approval from MPA. The number of CPB users can range from 30 to over 300 for a single procurement. The need for CPB services increases every year, even among non-central contracting authorities which are not obliged to use CPB services of the MPA. (Ministry of Public Administration of the Republic of Slovenia, 2021[1])
The Regulation on Joint Public Procurement of the Government of the Republic of Slovenia specifies the following primary 17 categories which correspond to the common needs of central administration:
Purchase, configuration and installation of computer hardware,
Purchase and maintenance of photocopying machines,
Purchase and maintenance of licensed computer software based on various technologies,
Computer hardware maintenance,
IT support services for users,
Mobile telephone services and the purchase of mobile devices, data transfer services in the mobile operator's network and the purchase of data transfer software,
Landline telephone services,
Postal services,
Property insurance,
Purchase of motor vehicles, except for special purpose vehicles and made-to-order vehicles,
Purchase of energy products,
Purchase of printing paper,
Purchase of office supplies and consumables,
Photographic services,
Charter flights for business purposes,
Purchase of airline tickets, and
Purchase of medicines, medical devices and equipment.
Slovenia would benefit from considering the possibility of extending the scope of centralised purchasing services of the MPA based on the analysis of spending at subnational level and based on a dialogue with subnational authorities.
Figure 3.1 shows top spending categories by all contracting authorities (both central and subnational ones) during a five-year period (2020 – 2024).
Source: Prepared by the author based on data on contracts awarded during a five-year period (2020 – 2024)
Calculating spending solely by subnational contracting authorities (e.g. municipalities and schools) is challenging compared to central-level contracting authorities (e.g. ministries and public agencies) due to the absence of a dedicated data entry point to distinguish between these entities. Therefore, the spending calculation was conducted for local authorities (municipalities), where feasible, accounting for 13.4% of the total contract amount awarded in the country. Additionally, spending was calculated for public entities, encompassing both central and subnational contracting authorities — including schools and hospitals —representing 25.7% of the total contract amount awarded.
Figure 3.2 shows top spending categories by municipalities during a five-year period (2020 – 2024) but does not include other contracting authorities at subnational level such as schools.
Source: Prepared by the author based on data on contracts awarded during a five-year period (2020 – 2024)
Figure 3.3 shows top spending categories by public entities at both central and subnational levels including schools and hospitals during the five years (2020 – 2024).
Source: Prepared by the author based on data on contracts awarded during a five-year period (2020 – 2024)
Construction works is a dominant spending category for all contracting authorities combined (33.30%) and municipalities (74.78%) and even ranks 2nd for the group of public entities that include schools and hospitals (10.96%).
The category of food and beverages accounts for 2.66% of procurement volume of all contracting authorities in Slovenia, ranking 10th of all the spending categories by CPV. The same category ranks 12nd for municipalities (0.32% of contract amount awarded by municipalities). It is worth mentioning that the category of food and beverages accounts for 8.70% of procurement volume of the group of public entities including schools and hospitals, ranking 3rd of all spending categories by CPV after medical equipment and medicines (46.33%) and construction work (10.96%). Additionally, this group accounted for 84.0% of the total contract amount awarded in the food and beverages category, as a share of the total awarded contract amount by all contracting authorities in Slovenia.
Currently, the Chamber of Commerce of Slovenia provides a catalogue of food and beverages for schools, kindergartens and elderly homes. Centralised purchasing using the tool developed by the Chamber of commerce could help gain efficiency. The relevance of this idea is supported by data analysis, which highlights food and beverages as a key spending category for the different groups of contracting authorities. The case of London Catering Group provides Slovenia with an example on centralised purchasing of catering services (see Box 1.7.)
Procurement Across London (PAL) was founded 40 years ago by like-minded procurement managers in London with the purpose of improving the image and role of procurement and working collaboratively to achieve best value for joint contracts awarded.
Procurement Across London Catering Group specialises in centralised purchasing of food catering for councils in London. Frameworks have been awarded for the following items:
Supply of groceries – dry, chilled and frozen goods
Supply of catering disposables
Supply of fresh fruit and vegetables
Supply of fresh meat
Supply of light catering equipment
Maintenance of kitchen equipment including gas/electrical, cleaning of ducting, refrigeration
All joint tenders are carried by a lead council (London Borough of Havering). However, PAL members are encouraged to participate in the tender process and influence the specification to ensure that local requirements are delivered as well as to improve the ethical and environmental standard of food provided by participating councils. All contract management and compliance reporting are handled by the London Borough of Havering and all members are kept fully briefed.
All contracts awarded on behalf of PAL are available to all London councils. There are no upfront fees for using the contracts, but a contribution is made to the lead council to cover the overheads of awarding and managing each contract (typically 0.5% of the contract cost).
PAL Members meet bi-monthly to share good practice, market knowledge, new ideas, menu solutions and operating procedures.
However, it is important to note that the regional spending analysis presented earlier in this report is limited and not entirely accurate due to the absence of a data entry point distinguishing central-level contracting authorities from subnational ones. Slovenia could consider the possibility of including this data entry point in its national e-procurement system to allow for a more accurate analysis of regional spending.
In addition, more than one CPB exists in many countries not only at central level but also at subnational and sectoral level. However, given Slovenia's size (2 million people and 20 271 km²), the country could focus on expanding the scope of the MPA rather than establishing multiple CPBs, unlike larger countries such as Sweden (10 million people and 450 295 km²), which have more than one CPB. Neighbouring Croatia, for instance, with twice the population (4 million) and a larger territory (56 594 km²) than Slovenia, operates with just one national CPB. Croatia’s example suggests that Slovenia could also continue to operate with a singular CPB, but with broader responsibilities.
Slovenia could explore various measures to enhance the analysis of procurement at the subnational level and identify additional high-demand categories. These measures include engaging with subnational authorities through close dialogue and conducting in-depth data analysis. For example, SKI, a Danish CPB, administers the joint municipal procurement programme to arrange framework agreements that reflect the needs of local authorities, through close dialogue and data analysis of regional spending (see Box 3.3).
Denmark has a procurement co-ordination mechanism between local/national authorities under the auspices of SKI. SKI – Staten og Kommunernes Indkøbsservice A/S – is a national CPB of Denmark. SKK was established in 1994 as a public owned limited company which is owned by the Danish State (55 percent of the shares) and Local Government Denmark (KL), the association of the Danish municipalities (45 percent of the shares). SKI is financed through the use of SKI’s services including the rebate paid by the supplies, which amounts to 1-3 percent of the turnover on the individual agreement (1.6% on average in 2019), and the annual membership fees for local authorities.
SKI manages joint agreements for both state (mandatory) and municipal authorities in Denmark. Therefore, representatives from all three levels of government are involved in the preparation of centralised purchasing in expert groups to ensure good coverage of needs.
Many of the centralised purchasing agreements under the auspices of SKI fall under one of three procurement programs which target specific administrative levels, one of which is the joint municipal purchasing programme. In the joint municipal procurement program, the agreements are tailored to the needs of the municipalities. The steering group for the joint municipal procurement strategy, which is drawn up by the National Association of Local Authorities (KL) for four years at a time, defines which contract areas are to be included in the joint municipal tender plan for subsequent periods. As of October 2020, there are 24 active agreements in SKI's joint municipal procurement program.
In addition to centralised purchasing service, SKI manages the Danish purchasing data collaboration, which collects very detailed information about Danish municipalities' purchases by reading electronic invoices at item level. The invoices are automatically categorised by a machine learning algorithm based on the UNSPSC hierarchy of purchasing categories. Based on this taxonomy, a spending analysis can be prepared for each municipality, and key figures such as purchasing volume/category/capita can be compared across municipalities. By conducting this type of analysis, SKI achieves a deeper understanding of common features and differences in the municipalities' purchasing behaviour. The data is also used to prepare management information for participating municipalities. The municipalities receive both standardised reports with their own key figures, in addition to customized reports that can be prepared at the request of the participating municipalities. 92 out of 98 Danish municipalities (corresponding to 97 percent of the population) are part of the collaboration and send all their electronic invoices to SKI for aggregation and analysis.
In Finland, a Competence Center for Sustainable and Innovative Public Procurement (KEINO) assigns the position called change agents, which are in charge of liaising with contracting authorities at each region, to facilitate collaboration among national and regional authorities and among regional authorities (see Box 3.4). In addition, Hansel, a Finnish national CPB, employs ten Key Account Managers who are in charge of strengthening the customer relationship by meeting with them regularly and/or by sending the automatic e-mail to raise awareness of its services among its 1 433 clients. (OECD, 2024[6])
KEINO is a network-based Competence Center for Sustainable and Innovative Public Procurement in Finland, which started its operations on March 2018. KEINO offers regional support to public procurers in Finland in the form of regional Change Agents. KEINO Change Agents act as the local contact point for KEINO, and guide and support contracting authorities at local level in their procurement work.
Change Agents gain an overview of local needs, opportunities and challenges through their interaction with clients of a region in charge. They provide clients with information about facilitating local procurement collaborations and joint skills development initiatives. The change agents also play an important role in providing information about new national joint agreements from Hansel (a national CPB of Finland), and often exchange views with clients on whether it makes sense for them to buy themselves, through a local partnership, or join a national joint agreement.
Note: KEINO ended its operations as competence centre in 2024. However, the organisations of the KEINO consortium will continue to support sustainable and innovative procurement as part of each organisation's operations.
Norway conducted a survey across all municipalities to gain insights into collaboration procurement practices and perceptions (see Box 3.5). In the context of Slovenia, a similar survey could be administered to the 212 municipalities and/or other contracting authorities at the subnational level.
The government of Norway identified procurement co-operation as one of six main measures to achieve the goal of more efficient and professional public procurement. Under this background, the Ministry of Trade, Industry and Fisheries (MTIF) requested Oslo Economics to conduct a study of procurement co-operation at municipal level for 2020 and 2021. The purpose of the study was to understand collaborative procurement at the municipal level given the fact that all forms of co-operation are voluntary for municipalities and county authorities.
The survey questionnaire was sent to Norway's 356 municipalities and 11 county councils. The survey results showed that 246 out of 356 municipalities participated in a formal co-operation, which represents approximately 70 percent of the country’s municipalities.
The report prepared by Oslo Economics provides the following five recommendations:
Small municipalities should generally participate in formal and comprehensive collaborations.
Success factors for procurement collaborations should be tracked, including a focus on common needs.
Enhancing access to various types of collaborations tailored to needs and supplier markets.
Using selected national agreements where the needs and supplier market indicate suitability.
Increase networking and guidance activities to include municipalities standing outside of collaboration.
Source: (Oslo Economics, 2021[5])
If Slovenia seeks to better understand the public procurement performance of contracting authorities, including subnational ones, Lithuania offers valuable insights through its scoreboard. This tool was developed to assess the public procurement performance of contracting authorities and is used as one of the criteria to determine which central-level contracting authorities' procurement will be transferred to CPO LT, the national CPB in Lithuania, each year (see Box 3.6).
In that case, Slovenia could consider setting up some indicators relevant to the procurement context at subnational level. These include, but are not limited to, the number and volume of procurement procedures and awarded contracts, competition (average number of bids, single bid, the use of negotiated procedure without prior notification), use of framework agreements arranged by the Ministry of Public Administration etc.
Recognising the benefit of setting up KPIs to measure the performance of its public procurement system, Lithuania launched its ambitious initiative of setting KPIs for contracting authorities in the first half of 2021, when PPO launched a scoreboard on the performance of the public procurement system and contracting authorities for years 2018-2020. The scoreboard calculated 7 indicators related to the uptake of green public procurement, BPQR, centralised purchasing, and reserved contracts. PPO’s scoreboard assesses each indicator at three levels with a colour coding system (green, yellow and red). These levels were defined based on the performance at the country level and the performance of each contracting authority relative to the national target values for the indicators. Green was assigned if the target value was reached or exceeded. Yellow was assigned if the indicator is below the target but scored at or above the average level. Finally, red indicates low indicator values that need to be improved.
In the second half of 2021, PPO launched a lightboard that replaced the scoreboard. The lightboard is an updated version of the scoreboard in that it includes more KPIs (14 indicators) and allows for real-time calculation on a daily basis. The lightboard allows contracting authorities to assess their own procurement performance against a range of procurement evaluation criteria as well as to assess their contribution to the overall public procurement system and national objectives. It also allows policymakers to develop data-driven policy making.
PPO specified the KPIs, their calculation method and data source (i.e., procurement data published in the e-procurement system and the data provided by the CPO LT), by publishing the document: Procurement map Lightboard: Methodology for calculating and assessing indicators. The colour coding (green, yellow and red) is assigned to the performance of each indicator with the same principles that applied to the scoreboard. The grey colour is assigned when the indicator is not calculated due to a lack of data. The lightboard also calculates the score based on the performance by converting each colour into the score: 3 points for green, 2 points for yellow, 1 point for red, and 0 points (not counted) for grey. Then, the lightboard calculates the overall performance by summing up the scores of all the indicators by adjusting them with coefficients (weightings) specified for each indicator with a range from 0.2 – 4.
Note: Coefficient 0 means that the indicator is not evaluated to calculate the overall score of all the indicators
Source: (OECD, 2024[6])
The previous section discussed the role of CPBs in facilitating procurement collaborative approaches. However, centralised purchasing services such as framework agreements offer limited options as they are more appropriate for standardised goods. In addition, the central government is not allowed to mandate subnational contracting authorities to use CPB services. Therefore, promoting collaborative procurement, such as joint and co-ordinated procurement, is essential as it allows for more tailored solutions that meet the specific needs of each contracting authority. Indeed, contracting authorities at subnational level are not obliged to carry out joint procurement and/or co-ordinated procurement with other contracting authorities. In addition, contracting authorities cannot consider implementing these approaches if (i) there is no forum or platform to discuss the needs which might lead to collaboration through joint procurement and/or co-ordinated procurement, (ii) they lack information on the available options (e.g. framework agreements, opportunities for joint procurement) , and/or (iii) they do not have the necessary capacities to conduct collaborative procurement.
Therefore, establishing a community of practice will be the first step to facilitate collaborative public procurement before implementing more concrete modalities of collaborative procurement, such as joint procurement and co-ordinated procurement. As already discussed in the section 2.2.4 establishing a community of practice will be relevant not only to share knowledge and good practices and capability-building initiatives but also to provide information on the tools / services available to municipalities (such as framework agreements open to municipalities) and to facilitate dialogue on potential collaboration such as joint procurement.
3.2.1. Knowledge sharing and dialogue for potential joint / co-ordinated procurement
A community of practice allows participants to exchange knowledge and experiences, and/or ask questions. This casual and informal dialogue can create a favourable environment for participants to open the discussion on a potential concrete collaboration such as joint procurement and co-ordinated procurement. For example, common buyer groups in the EU-funded project SPICE (Support Procurements for Innovative Transport and Mobility Solutions in City Environment) aimed at assuming the role of matchmaker to facilitate discussions on potential joint procurements (see Box 3.7). Additionally, in buyer groups in the Netherlands, participants learn from each other’s experiences. Joint procurement is not a goal per se but could be a means to an end to incorporate climate impact, circularity and social goals into their procurement procedures. (PIANOo - Dutch Public Procurement Expertise Centre, n.d.[8])
SPICE is a 24-month project (2016-2018), funded by the European Commission, that supports public authorities in Europe in their procurement of innovative mobility solutions within the city environment. The main role of SPICE with regard to Common Buyers Groups is to create awareness of advantages of innovation procurement actions and possibilities to procure innovative mobility solutions. Innovation procurement is not always well known among contracting authorities, or at least not often seriously considered. Therefore, it was relevant to provide insight into these benefits.
However, even after recognising potential benefits, contracting authorities do not have the capability of carrying out innovation procurement and/or are generally not aware of any potential ‘partner’ with comparable need or best-practice examples that exists.
SPICE aimed at assuming the role of ‘matchmaker’, by facilitating further co-operation of contracting authorities. Although joint procurement is out of the scope of SPICE, the project supported public procurers if they intend to find partners for such an approach.
The main benefits for participants of the common buyer groups in SPICE were defined as:
Members can share information on best-practices of innovation procurement;
Members can learn from cases of past Common Procurement and thereby save effort, time and financial resources;
Members can find possible partners for future joint procurement and share the workload of the tendering process and of the necessary preparation;
Members can gain more knowledge and experience about the process (from other contracting authorities);
Members will be supported by SPICE by providing access to networks, information, advice on possible approaches etc.;
Harmonisation, a common approach might lead to more harmonised solutions.
Members can be encouraged to procure commonly as they see the feasibility of the process.
Source: (European Commission, 2018[9]) and (Zijderhand, 2017[10])
3.2.2. Capability building
A community of practice can start from providing participants with capability-building activities. Topics covered by capability-building activities shall reflect the interest of the participants of each community of practice. Knowledge-sharing and dialogue will also help identify those topics. In addition, providing contracting authorities with guidelines and templates, such as a joint procurement agreement templates, would be beneficial. Trust built through common activities, including capacity-building initiatives, could further facilitate potential collaborative procurement, including joint and co-ordinated procurement.
3.2.3. Providing information on services and tools available
The community of practice should provide members with information on available services and tools through in-person events and/or a one-stop portal. For example, it is essential to communicate details about centralised purchasing services, such as framework agreements, and upcoming joint procurement opportunities, especially to subnational contracting authorities, as they may not always be aware of these options. In fact, the report on collaborative procurement prepared by Oslo Economics stated that some interviewed municipalities did not know that the City of Oslo conducted joint procurement which were open to all municipalities. (Oslo Economics, 2021[5]) This potential situation on the lack of awareness of services available backs up the role of KEINO change agents in providing information about new national joint agreements from Hansel, a national finish CPB (see Box 3.4).
3.2.4. Ensuring optimal participation in a community of practice
Communities of practice or similar groups such as a purchasing groups should include contracting authorities which have common characteristics. To facilitate specific collaborative procurement initiatives, such as joint or co-ordinated procurement, relevant characteristics of members include contracting authorities located within the same municipality, those in neighbouring municipalities, or those that share common interests in procuring goods and services in specific sectors (e.g. health ICT) and/or thematic topics (e.g. green public procurement, technical specifications). For example, in Denmark, almost all municipalities participate in voluntary, geographically based purchasing communities (see Box 3.8).
Danish municipalities have fostered local collaborative relationships through organising themselves into municipal purchasing communities. There are only a few Danish municipalities that are not affiliated with one of the 12 municipal purchasing communities in the country. Most Danish municipalities are part of a geographically based purchasing community. The number of members in purchasing communities varies, with the largest having 16 members and the smallest having only two.
The trend is for co-operation to move from entering into joint agreements to a more extensive co-operation on contract follow-up and shared data and systems. Municipal purchasing communities such as Fællesindkøb Fyn have strong focus on knowledge sharing. Some municipalities have merged the actual purchasing function across the municipalities to strengthen the professional environment and recruitment base.
Source: (Oslo Economics, 2021[5])
In this context, Slovenia already has a de-facto similar initiative. Ljubljana municipality acts as a leading entity by providing contracting authorities within Ljubljana with joint procurement opportunities led by Ljubljana municipality as well as capability-building opportunities. For this purpose, Ljubljana municipality collect annual needs, and procurement plans of contracting authorities.
While contracting authorities at the subnational level are not obliged to carry out joint procurement and/or co-ordinate procurement with other contracting authorities, it is also not yet a common practice to provide them with funding to incentivise joint procurement on its own. This financial incentive mechanism is usually and typically used in the context of supporting the strategic use of public procurement, such as innovation procurement.
Therefore, the Government of Slovenia would benefit from taking the initiative to ensure that subnational contracting authorities fully recognise the benefits of collaborative procurement approaches. A pilot project could be a starting point, demonstrating how a community of practice works and facilitating its voluntary establishment and ongoing management among different subnational contracting authorities in the future.
References
[7] Competence Centre for Sustainable and Innovative Procurement of Finland (KEINO) (n.d.), About KEINO, https://www.hankintakeino.fi/en/about-keino (accessed on 22 August 2024).
[9] European Commission (2018), SPICE: Best Practices New approaches to public procurement of innovative transport and mobility solutions within the city environment, https://ec.europa.eu/research/participants/documents/downloadPublic?documentIds=080166e5ba759a61&appId=PPGMS (accessed on 22 August 2024).
[2] Government of the Republic of Slovenia (2016), Regulation on joint public procurement of the Government of the Republic of Slovenia, https://pisrs.si/pregledPredpisa?id=URED7201 (accessed on 20 August 2024).
[1] Ministry of Public Administration of the Republic of Slovenia (2021), Joint Public Procurement, https://www.gov.si/teme/skupno-javno-narocanje/ (accessed on 20 August 2024).
[6] OECD (2024), Public Procurement in Lithuania: Increasing Efficiency through Centralisation and Professionalisation, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/aa1b196c-en.
[5] Oslo Economics, I. (2021), Procurement collaboration among municipalities.
[8] PIANOo - Dutch Public Procurement Expertise Centre (n.d.), Buyer groups for sustainability, https://www.pianoo.nl/en/sustainable-public-procurement/buyer-groups-sustainability (accessed on 22 August 2024).
[3] Procurement Across London (n.d.), London Catering Group, https://www.sustainweb.org/gffl/london_catering_group/ (accessed on 21 August 2024).
[4] SKI – Staten og Kommunernes Indkøbsservice A/S (n.d.), Facts about SKI, https://www.ski.dk/videnssider/facts-about-ski/ (accessed on 21 August 2024).
[10] Zijderhand, F. (2017), Best Practices in Common Procurement.