This Chapter provides an overview of the state of competition in the Slovenian public procurement market. The Chapter first describes the methodology used to measure competition, then it presents the results of the analysis based on different variables (general overview, state of competition in various sectors, regions etc.).
Maximising the Benefits of Effective Competition in Public Procurement in Slovenia
Abstract
To explore competition in the Slovenian public procurement system, this Report follows a methodology that i) measures different aspects of competition in public procurement based on publicly available administrative data, and ii) enumerates the key factors which are likely to impact competition directly or indirectly.
Regarding competition, the Report considers five indicators: (1) single bidding, (2) number of bidders, (3) market entrants, (4) market concentration, and (5) non-local suppliers. Beyond competition, the analytical framework includes further indicators which are likely to impact competition directly or indirectly. These additional indicators describe the economic fundamentals for competition, the characteristics of organisational capacity, tender and contract design and last but not least transparency. These factors will be analysed in depth in Chapters 3. and 4.
Table 2.1 presents the variables and indicators used in the analytical framework, however, to ensure the readability of this Chapter, Annex A, B and C include the more detailed description of the methodology, such as the details of data collection, processing, and data quality or the precise definitions and descriptive statistics of variables used in the analysis.
Source: Authors’ own work
Determinants of competition, more precisely single bidding, encompass a range of factors which are not readily modifiable through policy intervention, as well as a wide range of factors which can be influenced through policy action on the short to mid-term range. Considering such a wide variety of determinants for single bidding and in general for competition allows the Report to identify the most powerful levers comprehensively and precisely for improving competition in public procurement in Slovenia.
The empirical analysis draws on data from publicly available official government sources, such as the e-Procurement system (https://www.enarocanje.si) as well as data made available by the Slovenian authorities. The data was combined between the various sources in order to identify and include in the analysis framework agreements and centralised procurement tenders. The analysis draws on data for 96,559 public procurement contracts representing approximately EUR 19.5 billion for the period 2017-2022 (see Table 2.2). Public procurement officials record the data into a variety of standard procurement forms. The data collection methodology compiles such information from different structures and standardise them into a harmonized structure. The collected data is further processed to remove likely erroneous records and values (e.g., currencies which no longer exist).
Source: e-Narocanje and e-JN systems
The data processing pipeline considers modifications and cancellations occurring during the tendering process to identify the final correct record of each tender and contract. Unfortunately, due to source data errors, some records must be excluded from the analysis as they lack information on key variables, such as number of bidders. In addition to automated checks of data quality, manual checks on a sample of the dataset were also performed in order to ensure that the dataset as closely as possible replicates the source publications (i.e., comparing sample records in the dataset with the corresponding official publications). More details on data processing and data quality can be found in Annex A.
To identify the determinants of single bidding in Slovenia, fixed effects binary logistic regression models were estimated for the full dataset on the contract level (following the data quality and sample selection procedures described above). As such, each policy-relevant impact identified should be interpreted taking into account differences by year, sector and region. This means that the estimated effects of changes in procurement practices are not biased by differences across these major dimensions. Such comprehensive modelling means that the most complete models can accurately predict over 81% of single bidding outcomes (that is 0s and 1s combined) across the whole public procurement market of Slovenia.
This section presents the state of play of competition in public procurement in Slovenia along a number of related dimensions, based on the methodology presented in Section 2.1. More precisely, the section conceptually describes and provides an overview of the trends of competition in public procurement, with special focus on trends of single bidding, which is the main dependent variable of the analytical framework, as well as further indicators that aim to capture competition or lack thereof, such as the number of bidders, share of non-local bidders, market concentration, and market entry throughout the period of analysis, between 2017 and 2022.
The descriptive analysis in this Section includes not only country-wide results but also a deep dive into 7 sectors with varying spending value and varying single bidding share:
IT services
Laboratory, optical and precision equipment
Repair and maintenance services
Transport equipment
Medical equipment, pharmaceuticals, and personal care products
Business services
Architectural, construction, engineering, and inspection services
Competition trends over time
Considering the potentially wide range of activities needed to be undertaken by central governments and local authorities to ensure continuity of public service delivery, governments’ spending on public procurement in OECD countries amounts to 4.5-20.9% of GDP (OECD, 2023[1]) Slovenia’s 13.7% of GDP ranks slightly higher than the OECD’s average (12.9%), and slightly below OECD-EU’s average (14.8%). Considering such figures, the primary aim of the public procurement process is to ensure the promotion of the best value for money, and subsequently promote open and fair competition. To ensure that this blueprint is followed, public agencies have to secure and provide competitive bidding processes within the relevant markets. Therefore, public procurement process should be designed to encourage open competition by promoting higher participation of potential bidders. (Spagnolo, 2012[2])
Between 2017 and 2022, Slovenia’s share of single bidding varied between 36.1% (2019) and 43.5% (in 2022). After a period of downward trend between 2017 (41.4%) and 2021 (36.4%), in 2022 a more substantial increase can be observed in the share of single bids, reaching 43.5%. (Table 2.3).
Source: e-Narocanje and e-JN systems
Single bidding
Two trends can be detected across the different procurement categories. Services and works follow similar pathways, although from different starting points. After an initial increase between 2017 and 2018, a steady decline until 2020 can be noticed (Figure 2.1). Nevertheless, since 2020, there is a continuous increase until the end point of the analysis, 2022. Services share of single bidding varies between 48.6% in 2017 and 59.7% in 2022. Works has a much lower starting point of 16.1% in 2017, and further declining to 12.2% in 2020. However, since 2020, an upward trend can be noticed and the share of single bidding for works reaches 28.2%. Unlike works and services, goods’ trajectory follows a different pathway. Between 2017 and 2018 there is a sharp decline in the share of single bidding, from 44.6% to 33.6%. This decline is followed by a second period, 2018-2021, when there is not much change, and the share of single bidding fluctuates between 33.1% and 33.7%. In spite of this trend, in the last year of the analysis, and similar to the other two procurement categories, a sharper increase in the share of single bidding is detected, to 41.2%.
Source: e-Narocanje and e-JN systems
Number of bidders
Regarding the average number of bidders, and contrarily to the share of single bidding, all three procurement categories are much closer to each other, or at least converge to in the latter years of the analysis (see Figure 2.2). At national level, i.e., for all three categories together, the average number of bidders decreases from almost 3 bids on average in 2017 to 2.3 bids on average in 2022. Goods follow a similar trend to the national average, declining from almost 3 bids on average in 2017 to 2.3 bids on average in 2022. There are minor variations between 2019-2021, when the goods category was marginally lower than the national average. Works receives the highest number of bids on average, although it is downward trend in the last few years. After an initial decline between 2017 and 2018 from 4.2 average number of bidders to 3.1, in the next two years a sharper rise is detected reaching almost 4.7 bidders on average in 2020. Nevertheless, this encouraging trend slowly dissipates in the period between 2020-2022, when the decline is sharper than the previous rise, and the category finishes the analysis with 2.8 bidders on average. Services, similar to works, have periods of ups and downs. An initial fall between 2017 and 2018, is followed by an increase spiking at almost 3 bidders on average in 2019. Nevertheless, since 2019 there is a constant deterioration in competition extending to 1.9 bidders on average for 2022.
Source: e-Narocanje and e-JN systems
Market entry
Market entry is defined as the average share of new companies that have not been awarded a contract in the preceding year, i.e., if a given supplier was not awarded a contract in the previous year in the same market, its score will be 1, otherwise, the score is 0. Lack of competition, transparency, and restrictive bidding requirements present obstacles for new companies to enter the market (Coviello and Gagliarducci, 2017[3]), (Duguay, Rauter and Samuels, 2023[4]), (Fazekas, 2022[5]). Between the start and end points of our analysis, an upward trend in the share of market entrants is detected, from 7.4% to 11% (see Figure 2.3).
However, this period is split into two pathways. In an initial path between 2017 and 2019, a growth of market entrants can be observed, reaching 11.3% in 2019. Nevertheless, this trend steadies at approximately 11% between 2019 and 2022. The three different procurement categories also experience similar developments, with some minor adjustments. For instance, the share of market entrants within works is on the rise until 2020, reaching 17.8%, before dipping to 14.6% in 2021, and again recovering to 17.9% in 2022. Goods follow the same development line as the national average, increase of market entrants until 2019, reaching almost 9%, before steadying at 8.6%. Services experience a more linear growth between 2017 and 2020, that is followed by a major drop and then consolidation at slightly above 15%.
Source: e-Narocanje and e-JN systems
Non-local suppliers
The variable for non-local suppliers is defined as a binary variable that denotes whether the buyer and supplier are from the same settlement. (Lewis-Faupel, Neggers and Olken, 2016[6]) There is consistently high share of non-local bidders across all procurement categories. Compared to the start and end point of the analysis, there is a minor decline in the share, from 77.2% to 71.2% (see Figure 2.4). However, the decline mainly takes place between 2017 and 2018. The trend for goods closely shadows the national average, starting from 81% in 2017 and then dropping to 66.7%. The drop is followed by a period of consolidation around 68% that happens between 2018 and 2021. In 2022, a minor increase in the share of non-local suppliers can be observed again. In 2022, the category of works has the highest share of non-local suppliers across the three procurement categories, 73.2%. The services category remains the category with the lowest share of non-local suppliers, ranging from 67.6% in 2017 before a dip in the share to 59%. Since 2018 a stabilisation of the share can be observed at around 64.5%.
Source: Source: e-Narocanje and e-JN systems
Market concentration denotes the annual winner's market share, i.e., the share of the supplier total market value per year. When the market is less concentrated and there is a greater number of suppliers that received a share from the buyer, lower averages of single bidding can be observed. (Cingolani and Fazekas, 2017[7])In essence, market concentration aims to capture the size of suppliers relative to the size of the market/sector. Higher market concentration indicates lower competition. Figure 2.5 shows the market concentration trends for six selected sub-markets from the sectoral analysis. Construction materials and programming services of packaged software products note low to medium market concentration that varies from year to year. Accounting, auditing and fiscal services have medium to high concentration over the entire period of analysis. During the first several years a medium concentration can be observed around the 0.4 mark, that increases substantially in the last period of analysis. Conversely, systems and technical consultancy services develop from medium concentration in the first year of analysis, 2017, to low market concentration for the period 2018-2021, and then again, a medium concentration in 2022. Medicinal products for alimentary tract and metabolism develop a more linear trend over the period of analysis. In 2016, there is a medium market concentration that increases linearly until 2022.
Source: e-Narocanje and e-JN systems >
Figure 2.6 shows the share of each procurement category (goods, services, works) in terms of total number of contracts and total value of contracts. Although the bulk of the contracts are in the goods category (right figure), the total value share of goods is the lowest (left figure). Works represent 12% of the total number of contracts, however, their total value share is 37%. The share of services contracts and values is approximately equal, with 21.5% of all contracts equalling 25.6% of the total value. As such, the figures for the goods category are the opposite of those for works category, as 66.4% of all contracts are awarded within this category, nevertheless, it only accounts for 36.1% of the total value share.
Source: e-Narocanje and e-JN systems
Across the three procurement categories, the works category has the lowest share of single bidding and the lowest market concentration as well as the highest average number of bidders. The procurement category also performs well in terms of the market entrants. Services, on the other hand, have the highest share of single bidding, more than 50%, and the lowest average number of bidders per tender, slightly above 2 bidders per tender on average. Concerning the average number of bidders and share of single bidding, the goods category, is somewhere between the other two. Its share of single bidding is slightly below 40%, while the average number of bidders is marginally above 2.5 bidders. However, the goods category is the most concentrated category and has the lowest share of market entrants. Regarding, the share of non-local suppliers, the three categories perform similarly, between 64% and 70% of all tenders being awarded to non-local suppliers (see Figure 2.7).
Source: e-Narocanje and e-JN systems
Top Buyers
Table 2.4 below shows the top 15 buyers by number of contracts sorted by single bidding share with at least 100 contracts.
Source: e-Narocanje and e-JN systems
Table 2.5 below shows the top 15 buyers by total value with at least 100 contracts sorted by single bidding share.
Source: e-Narocanje and e-JN systems
Competition differences across regions
This Section looks at two particular trends across regions in Slovenia. Regions are defined according to the NUTS-3 level classification of buyer locations. Figure 2.8 shows the share of single bidding across all 12 NUTS-3 regions in Slovenia. The numbers are quite high for all regions in Slovenia, with a share of single bidding of at least 36.7% in Central Sava region, and highest share in Littoral-Inner Carniola. This should also be considered in conjunction with the total number of contracts awarded within the different regions, ranging from 3,334 contracts in Central Sava region to more than 12,000 contracts in Central Slovenia and Drava statistical regions. This picture can be further sophisticated by investigating how the situation looks like when the tendering procedure receives more than one bid, i.e., what is the average number of bidders across the regions.
Source: e-Narocanje and e-JN systems
However, with regard to the average number of bidders, interesting trends can be observed (see Figure 2.9). The regions with the highest share of single bidding also have on average fewest bidders (Littoral-Inner Carniola). However, the region with the highest average number of bidders is Mura Statistical region with almost 2.8 bidders on average, and Drava Statistical region with over 2.7 bidders on average.
Source: e-Narocanje and e-JN systems
Sectoral Analysis
By examining competition both within and across sectors, valuable insights into the forces that drive various markets can be obtained. The degree of competition can have a significant impact on market dynamics, pricing structures, and overall economic efficiency. In Slovenia, IT services, repair and maintenance services, transport equipment, and software packages, and information systems are among the sectors most affected by a high percentage of single bidding, with at least 60%. However, there are also several sectors among the top 15 highest valued where single bidding accounts for less than 30%, such as food, beverages, tobacco, and related products (26.68%), office and computing machinery (26.02%), and construction work (20.52%) (see Table 2.6).
Source: e-Narocanje and e-JN systems
Source: e-Narocanje and e-JN systems
It is crucial to consider the findings from both tables (Table 2.6 and Table 2.7) as they provide valuable insight into the scale of various sectors in terms of contract numbers and values. Additionally, analysing the data can reveal the distribution of contract sizes within each market. For example, some markets might have a high number of contracts but with lower values, while others have fewer contracts but with higher values. In the next sections, several sectors will be analysed separately, taking into account factors such as the proportion of single bidders, the average number of bidders, and the relative size of submarkets.
Health sector: medical equipment and pharmaceuticals
Figure 2.10 uncovers nuanced variations in procurement practices within the medical equipment and pharmaceuticals sector, where the overall share of single bidding for essential goods stands at 43.9%. Notably, medical equipment procurement falls slightly below the sector average. Despite this, the substantial market, valued at EUR 873.8 million, underscores its significance. In contrast, pharmaceutical products surpass the sector average, indicating a distinct proclivity for single bidding. The pharmaceutical products market, valued at EUR 1.55 billion, notably contributes to the high single bidding share. This divergence highlights the sector's heterogeneity, prompting a deeper exploration into the factors influencing procurement strategies. Relatively lower reliance on single bidding in medical equipment (both within this sector and compared to the national average) may stem from product complexity, while heightened single-bidding share in pharmaceuticals poses the question to further explore into more details of what happens in its sub-markets and in relation to the average number of bidders. These insights can provide a valuable compass for stakeholders navigating the complexities of the sector, guiding strategic planning and decision-making effectively.
Source: e-Narocanje and e-JN systems
Following up on the findings from Figure 2.10, the analysis explores in more detail the relationship between the average number of bidders and the share of single bidding. Figure 2.11 shows that the personal care products submarket, in addition to the lowest share of single bidding, also has the highest average number of bidders. The challenges for the largest sub-markets, medical equipment, and pharmaceutical products, are further exposed with the relatively low average number of bidders. These trends underscore the importance of developing strategies for stimulating competition, as two competition indicators present challenging developments within the market.
Source: e-Narocanje and e-JN systems
It's worth noting that while there is typically a low number of bidders in the pharmaceutical sector, there is variation within its sub-sectors. Figure 2.12 illustrates this range, showing that smaller submarkets - such as procurement of medicines for the alimentary tract and metabolism - tend to have an average of 1.3 bidders, while larger markets, such as procurement of medicinal products for the dermatology and musculoskeletal system, have an average of over 3 bidders. The two largest sub-markets also have their differences in the average number of bidders: pharmaceutical products have an average of just under 3 bidders, while various medicinal products have an average of just over 2 bidders. This trend can potentially be explained by the dynamics between generic and patented medicines. Generics tend to have a more competitive supplier base, resulting in a higher average number of bidders. Patented drugs, on the other hand, often operate within a more restrictive supplier framework, resulting in a less competitive environment with a higher prevalence of single bidding. All in all, the pharmaceutical sector is a nuanced landscape where varying degrees of competition coexist, shaped by the nature of the medicines being procured.
Source: e-Narocanje and e-JN systems
Laboratory, optical and precision equipment (excl. glasses)
Laboratory, optical and precision equipment is not in the top 15 in terms of value, but it is in the top 15 in terms of contracts. Therefore, with the second-highest share of single bidding (69.8%) and a relatively high number of contracts, the analysis examines it in more detail (see Figure 2.13).
First, there are several CPV 3-digit markets with a much higher share of single bidding than 80% and one market with a 100% share of single bidding (time registers and the like). However, the latter market is an example of a relatively small market. Second, several medium-sized CPV 3-digit markets are positioned around the market average of around 70% share of single bidding, such as the measuring instruments market. Finally, it is encouraging to note that some larger markets, such as checking and testing apparatus and instruments for checking physical characteristics, are below or at least equal to the market average.
Source: e-Narocanje and e-JN systems
When the share of single bidding is cross-tabulated with the average number of bidders, a distinct cluster emerges within the CPV 3-digit markets (see Figure 2.14). A significant number of markets fall within the range of 60% to 80% single-bidding share, coupled with an average of 1.2 to 2 bidders. The concentration of markets in the range of 60%-80% of single bidding and the range of 1.2-2 average bidders suggests a common pattern in procurement dynamics. However, two markets in particular deviate from this cluster; the time registers and the like category has a 100% share of single bidding, resulting in an average of only 1 bidder. Conversely, industrial process control equipment shows a share of single bidding of less than 60%, accompanied by an average of around 2 bidders. The market for "laboratory, optical and precision equipment" faces significant competitive challenges. Both competition indicators, the high share of single bidders and the limited average number of bidders, underline the lack of intense competitive dynamics.
Source: e-Narocanje and e-JN systems
The market for laboratory, optical, and precision equipment is facing some significant challenges, as shown in Figure 2.15. The largest sub-market, which is instruments for checking physical characteristics, has an average share of single bidding for the market of 68.6%. It also falls in the middle when it comes to the average number of bidders, with all other sub-markets having fewer than two bidders. The second-largest sub-market only has an average of 1.3 bidders. This unique competitive landscape is a clear indication of the challenging position of the market. The consistently low average number of bidders across all sub-markets raises concerns about the level of competition and a potential lack of diversity in supplier participation.
Source: e-Narocanje and e-JN systems
IT sector
Figure 2.16 highlights the notable disparities within the IT services sector, revealing distinct procurement dynamics affecting different sub-sectors. Despite being the largest, both computer support and consultancy services and software programming and consultancy services demonstrate higher-than-average instances of single bidding. Conversely, smaller segments such as computer network services or internet services exhibit significant variations, with below-average rates of single bidding. Encouragingly, the third-largest sub-sector, IT services, consulting, and software development, surpassed the sector average, performing relatively well. However, it is important to note that even within this relatively successful sub-sector, the proportion of single bidding remains significant. This sector-wide trend of single bidding, exceeding 50% in most cases, necessitates a nuanced examination of the underlying factors to improve competition.
Source: e-Narocanje and e-JN systems
Within the IT services sector, the cross-tabulation of the average number of bidders and the share of single bidding unveils a concerning trend similar to the previous scenario in the Laboratory, optical, and precision equipment sector. Across almost all sub-sectors, there is a limited significant deviation in the average number of bidders, ranging from 1.2 to 2, although the share of single bidding ranges from 33% to 85% (Figure 2.17). Even the two largest sub-sectors, Computer support and consultancy services and Software programming and consultancy services, exhibit the lowest average number of bidders at 1.2 and 1.3, respectively. This uniformity is indicative of the overall lack of diversity and competition within the sector and highlights the need for increased attention and strategic interventions to stimulate and enhance competition. The persistence of this trend highlights a crucial area for improvement in fostering a more dynamic and competitive procurement landscape within the IT services sector.
Source: e-Narocanje and e-JN systems
A closer look at the IT services sector's largest market, software programming and consultancy, reveals a concerning trend across all submarkets (Figure 2.18). The problem becomes apparent when looking at the average number of bidders, a key indicator of competition. Only the smallest sub-market, systems analysis and programming services, exceeds an average of 2 bidders. In stark contrast, all other sub-markets struggle, with an average of less than 1.5 bidders. This significant uniformity raises alarms, as it suggests a widespread lack of diversity and competition within the Software programming and consultancy market. It is worth noting that the two largest sub-markets, software related services and software programming and consultancy services, are the worst performers in terms of the average number of bidders, with figures of 1.26 and 1.27 respectively. This worrying scenario raises questions about the accessibility and openness of procurement processes. The limited number of bidders suggests potential barriers to entry, preventing a more diverse pool of suppliers from participating in these critical segments.
Source: e-Narocanje and e-JN systems
Transport equipment and auxiliary products to transportation
The Transport equipment and auxiliary products to transportation sector exhibits a notable prevalence of single bidding, and a closer look reveals three distinct trends within this sector (Figure 2.19). First and foremost, the largest sub-sector, motor vehicles, stands out with an almost 75% share of single bidding. This trend is mirrored by motorcycles, bicycles and sidecars, making them the two sectors that exceed the sector's average in terms of reliance on single bidding. This concentration in the largest sector raises concerns about potential limitations in supplier diversity and competition.
Second, there is a contrasting pattern among the three smallest sectors within the transport equipment sector. These sub-sectors demonstrate a share of single bidding slightly below the sector average. While these smaller sectors may escape the high prevalence of single bidding seen in larger counterparts, the challenge remains to stimulate healthier competition.
Third, certain sectors within the Transport equipment market perform above the sector average in terms of share of single bidding. Notably, aircraft and spacecraft and miscellaneous transport equipment fall into this category. Despite outperforming the market average, these sectors still grapple with high shares of single bidding. This nuanced scenario suggests that, while these sectors may have relatively better competitive dynamics, the prevalence of single bidding remains a persistent challenge, emphasising the need for strategic interventions to enhance competition.
For the largest sectors that rely heavily on single bidding, initiatives to promote supplier diversity and streamline procurement processes are imperative. In contrast, the smaller sectors should explore mechanisms to maintain healthy competition, ensuring that their share of single bidding remains within acceptable limits. For those that outperform the market average but still facing high shares of single bidding, a nuanced strategy is required to strike a balance between promoting competition and addressing underlying challenges.
Source: e-Narocanje and e-JN systems
In contrast to the observed trends in the Laboratory, optical and precision equipment, and IT sectors, the cross-tabulation between the share of single bidding and the average number of bidders in the Transport equipment and auxiliary products reveals a distinct and noteworthy linear trend. Sectors such as aircraft and spacecraft and miscellaneous transport equipment and spare parts, have lower shares of single bidding, and exhibit a correspondingly higher average number of bidders (Figure 2.20). Conversely, the sector with the highest share of single bidding, motor vehicles, has the lowest average number of bidders. This linear relationship underscores a key dynamic within the sector, linking the prevalence of single bidding to the level of competition.
A notable exception within this linear trend is evident in the comparison between railway and tramway locomotives and parts and accessories for vehicles and engines. Although these two sectors demonstrate a similar share of single bidding, the average number of bidders introduces a nuanced distinction. Parts and accessories for vehicles and engines not only have a slightly lower share of single bidding but also stand out with a higher average number of bidders at 2.1. In contrast, railway and tramway locomotives, while sharing a comparable single bidding share, portray a lower average number of bidders at 1.7. This discrepancy highlights a more competitive landscape in the Parts and accessories sector, suggesting a more diverse supplier pool and potentially more dynamic procurement processes.
Source: e-Narocanje and e-JN systems
After conducting a thorough analysis of the motor vehicles industry, a worrying trend emerges (see Figure 2.21). There appears to be consistently low levels of competition across all sub-sectors. In particular, the two largest sub-sectors, passenger cars and heavy-duty motor vehicles, with average numbers of bidders at 1.28 and 1.36, respectively, illustrate this trend. The lack of competitiveness is prevalent throughout the industry, with even the most competitive sub-sector, Motor vehicles, boasting only an average of 1.6 bidders. This uniformity in the low number of bidders across sub-sectors indicates potential challenges for supplier diversity and potential barriers to entry.
Source: e-Narocanje and e-JN systems
Repair and maintenances services
The repair and maintenance services sector ranks among the top 15 sectors in both total value and total number of contracts. However, the sector's significant 63.37% single bidding share requires a closer examination to elucidate the underlying dynamics. Interestingly, while the majority of sub-sectors within the Repair and maintenance services sector exhibit a high incidence of single bidding, nuances in performance shed light on areas warranting further investigation. Among the sub-sectors, repair and maintenance services of building installations stand out as the sole sector with a single bidding share of less than 50%, underscoring potential differences in competitive dynamics within the broader sector. Conversely, three sectors within the Repair and maintenance services domain record single bidding shares surpassing 73%, with Repair, maintenance, and associated services to personal computers leading the pack with an impressive share of almost 78% (see Figure 2.22).
Nevertheless, amidst these variations, an encouraging development stems from the largest sub-sector, Repair, maintenance, and associated services to aircraft, railways, roads, and marine equipment. This sector demonstrates relatively better performance, managing to break the 50% share barrier for single bidding. Such resilience and competitive strength within a critical segment of the Repair and maintenance services sector are indicative of potential avenues for improvement across all markets. These trends underscore the significance of targeted interventions aimed at enhancing competition and efficiency. Despite the relative outperformance of the largest sub-sector, opportunities for improvement abound, signalling the need for comprehensive strategies.
Source: e-Narocanje and e-JN systems
When looking at the repair and maintenance sector, an important factor to consider is the number of bidders, which can indicate the level of competition. Interestingly, only one market, repair and maintenance of building installations, has an average of more than two bidders. This suggests a lack of diversity and competition within the sector, which warrants further examination. The repair and maintenance services for medical and precision equipment market is particularly challenging, with a high percentage of single bidding and an average of only 1.2 bidders. This can represent potential barriers to entry and limited competitive dynamics in an important domain. On the other hand, the largest market in the sector, repair, maintenance, and associated services for aircraft, railways, roads, and marine equipment, has a relatively high share of single bidding at 50.7%. However, a closer look at the average number of bidders reveals a ratio similar to markets with a 60% share of single bidding, at 1.68 (see Figure 2.23). Given the size of this market, its underperformance in terms of the average number of bidders is notable.
Source: e-Narocanje and e-JN systems
The sub-sector of repair, maintenance, and associated services for aircraft, railways, roads, and marine equipment faces a daunting challenge: a low average number of bidders (Figure 2.24). Interestingly, the repair and maintenance services for aircraft seem to fare better than the rest, with an average of more than two bidders. Unfortunately, this highlights a wider problem of limited competition, particularly concerning the Repair, Maintenance, and Associated Services related to Roads and other equipment, where the average number of bidders is a meagre 1.7. On the other hand, the repair, maintenance, and associated services related to aircraft and other equipment shows a more competitive landscape with an average number of bidders at 2.28.
Source: e-Narocanje and e-JN systems
Business services
While the business services sector has a share of single bidding below the national average and remains below the 40% threshold, Figure 2.25 reveals a nuanced landscape with substantial variability across its various markets. Notably, several medium-sized markets, including accounting, auditing, and fiscal services, business and management consultancy, and market and economic research, surpass the sector average, with single bidding shares ranging from 43% to 60%. In contrast, the largest market in the sector, recruitment services, presents promising results with the lowest share of single bidding at 24.3%. Similarly, office-support services (31%) and printing and related services (30%) showcase commendable performance, emphasising a competitive environment with a lower reliance on single bidding. These positive results may indicate a more diversified landscape and healthier competition.
Furthermore, the second-largest market, investigation and security services, outperforms both the sector and national average, with 37% of bids attracting only one bidder. This achievement signifies a competitive marketplace within this area. The positive performance of these key markets points towards opportunities that could benefit other segments within the business services sector.
Source: e-Narocanje and e-JN systems
The cross-tabulation of the single bidding share and the average number of bidders within the Business Services sector reveals interesting trends that contribute to a comprehensive understanding of market dynamics (Figure 2.26). One overarching trend shows a more linear relationship across most markets, where the single bidding share ranges from 24% to 60%, accompanied by an average number of bidders falling between 1.9 and 2.75. This linear progression suggests a consistent interplay between single bidding share and average number of bidders, i.e., those markets that have lower share of single bidding also have higher average number of bidders.
A notable deviation from this linear trend is observed in two markets, namely office-support services and printing and related services, both of which have a share of single bidding around 30%. Despite this seemingly moderate share of single bidding, these markets stand out by showcasing a higher average number of bidders at 3.5 and 3.9, respectively. This deviation hints at a nuanced market structure within these segments, where increased competition coexists with a substantial share of single bidding. The higher average number of bidders suggests a fragmented market with multiple participants actively bidding for contracts.
Source: e-Narocanje and e-JN systems
An examination of Figure 2.27 sheds light on the nuanced market dynamics within the Office-support services sector, revealing distinct characteristics among its sub-sectors. In particular, translation and interpretation services emerge as the largest sub-sectors, showing increased levels of competition with an average of 4.6 and 5.7 bidders, respectively. Contrastingly, the remaining three sub-sectors — office-support services, reprographic services, and telephone-answering services — display a closer alignment to the market average of around 2 bidders. These segments show a more moderate level of competition, indicating a balance between bidder numbers and the prevalence of single bidding in their respective markets. However, it's important to note that telephone-answering services faces a unique challenge, experiencing a notable impact on competition dynamics with only 1.5 bidders on average. The observed market split within Office-support services suggests varying degrees of competitiveness, with translation and interpretation services standing out as particularly robust markets. In contrast, the challenges faced by telephone-answering services highlight the need for targeted interventions to address specific barriers to competition.
Source: e-Narocanje and e-JN systems
Architectural, construction and engineering services
Examining the share of single bidding within the Architectural, Construction, and Engineering Services sector reveals an overall sector average below the national average at 38%. However, the sector shows substantial variability revealing distinct patterns. Among the three largest markets – Architectural services, Construction-related services, and Engineering services – only one in three tenders attracts single bids, underscoring a relatively competitive environment within these segments (see Figure 2.28).
In contrast, the three medium-sized markets - architectural, construction, engineering, and inspection services, laboratory services, and technical testing, analysis, and consultancy services - deviate from the sector average. These markets display an above-average share of single bidding, with Laboratory services facing a 67% incidence and technical testing, analysis, and consultancy services surpassing even higher at over 73% single bidding. This indicates a more restrictive procurement landscape within these medium-sized markets, where single bidding is more prevalent.
Within the two smallest sectors — monitoring and control services and urban planning and landscape architectural services — variation in the share of single bidding is also apparent. The former falls below the sector average at 28.4%, suggesting a less restrictive procurement environment. Conversely, the latter reports a slightly higher share of single bidding than the sector average at 43.8%, highlighting a moderately competitive landscape. While the larger markets exhibit a healthier competition landscape, the medium and smaller markets present challenges that may require targeted measures to enhance competition.
Source: e-Narocanje and e-JN systems
Figure 2.29 presents linear trends between the share of single bidding and the average number of bidders within the Architectural, Construction, and Engineering Services sector. A notable overlap among the largest sectors can be observed, where the share of single bidding hovers around 33%, accompanied by an average number of bidders approximately at 2.7. This convergence suggests a relatively healthier competition landscape within these major markets, contributing to a more dynamic and competitive environment.
Conversely, sectors with a share of single bidding substantially higher than the sector average — specifically, architectural, construction, engineering, and inspection services, laboratory services, and technical testing, analysis, and consultancy services — show the lowest average number of bidders, falling below the 2-bidder threshold. This divergence in trends indicates a less competitive procurement environment, where the prevalence of single bidding is accompanied by a lower number of active bidders. While the largest sectors demonstrate a relatively robust competition landscape, specific markets may require greater attention to address challenges posed by the higher incidence of single bidding in specific markets.
Source: e-Narocanje and e-JN systems
Figure 2.30 provides a comprehensive view of the variability within one of the largest sectors, architectural and related services, shedding light on the diverse dynamics across its medium-sized sub-sectors. Notably, these sub-sectors exhibit distinct developments, emphasising the need for a nuanced understanding of competition within the sector. The Organisation of architectural design contests sub-sector stands out with an average of only 1 bidder. In contrast, another sub-sector, architectural, engineering, and surveying services, reports an average of 5 or more bidders, suggesting a more competitive environment. This contrast in the number of bidders underscores the diversity of competition dynamics even within medium-sized markets.
Furthermore, the share of single bidding within the largest sub-sectors is marginally below 3 bidders on average. This aligns with the expectations for the larger sub-sectors, where the procurement landscape tends to attract a moderate number of bidders, thus creating a relatively more competitive environment. It should be noted that one sub-sector, advisory architectural services, stands out in Figure 2.30. Despite having no single bids, the sector only receives an average of two bids per project.
Source: e-Narocanje and e-JN systems
Negotiated procedure without prior publication
Year
A clear trend emerges when it comes to the distribution by year (see Figure 2.31). There is a constant increase in the use of this procedure between 2017 and 2021, with a particularly sharp upward trend between 2017 and 2018 when it increased by almost 50%. A minor positive sign represents the marginal decline between 2021 and 2022, when it decreased from 508 to 484 contracts.
Source: e-Narocanje and e-JN systems
Buyer type
The utilisation of the negotiated procedure without prior publication type is notably diverse across different entities4 (see Figure 2.32). For the purpose of the analysis, the buyer types are divided following the nomenclature of article 9 of the PPA, which lists, among others, authorities of the Republic of Slovenia, authorities of self-governing local communities, and other public bodies governed by public law. The latter category, i.e. public bodies/agencies governed by public law (such as Geological Institute of Slovenia, Institute of the Republic of Slovenia for Commodity Reserves or Utilities etc.) emerges as a predominant user, accounting for over 60% of all procedures of this type. National authorities, i.e. authorities of the Republic of Slovenia (such as Ministries) have half as many contracts awarded through this procedure compared to public bodies governed by public law, indicating a more restrained usage. Furthermore, regional authorities, i.e. self-governing local communities use it even less frequently. Few entities that lack sufficient information in their name are categorised as Unclassified. The usage of this procedure type is substantially lower compared to entities with complete name classification.
Source: e-Narocanje and e-JN systems
Buyers
Upon a closer examination of the top 15 buyers who frequently utilize this specific procedure type, with each having at least 30 contracts awarded and the highest value share, a notable and expected consistency pervades in terms of the share of single bidding (see Table 2.8). Although a substantial majority of these buyers receive only a single bid through these procedures, there are instances of two buyers that either approach or fall below the 50% threshold. Notably, the share of “Urad Vlade Republike Slovenije za oskrbo in integracijo migrantov” stands out as particularly encouraging, with only 28% of its 36 contracts through this procedure receiving just one bid.
Source: e-Narocanje and e-JN systems
Sectors
Figure 2.33 shows the top 15 sectors (2-digit CPV) where this procedure is used. The top 3 sectors, medical equipment, pharmaceuticals and personal care products, IT services, and Repair and maintenance services are responsible for almost 40% of all contracts awarded through the negotiated without prior publication procedure. Sewage and cleaning services is the only other sector that has more than 100 contracts awarded through this procedure. The rest of the top 15 sectors, have 97 of fewer contracts.
Source: e-Narocanje and e-JN systems
Regions
When it comes to the regional distribution of the negotiated procedure without prior publication, Drava Statistical Region is by far the most frequent location for these contracts, where almost one-fifth of all contracts are awarded. In contrast, the Central Sava Statistical Region and Littoral-Inner Carniola Statistical Region are the least frequent locations with fewer than 100 contracts awarded (see Figure 2.34).
Source: e-Narocanje and e-JN systems
Summary of the analysis
Looking at the descriptive overview of the use of the negotiated procedure without prior publication, different temporal, regional and sectoral trends can be observed. In recent years, in 2020-2022, there is an increased tendency to rely on the negotiated procedure without prior publication. The peak of this procedure was in 2021 when more than 500 contracts were awarded through this procedure, with more than 150 contracts in April. Not all buyers tend to use this procedure type to the same extent. On the one hand, regional authorities, i.e. authorities of self-governing local communities, rarely use this procedure. On the other hand, public bodies (such as \public institutions and centres) and national authorities (such as ministries) rely more frequently on it. More than 40% of the contracts awarded through negotiated procedure without prior publication come from public bodies, i.e. bodies governed by public law, while only a minority of contracts awarded through this procedure come from regional authorities i.e. authorities of self-governing local communities . Although there is a propensity for single bidding through this procedure compared to the open or small value procedures, encouraging trends are noted in some sectors and regions, in which the use of this procedure is less prevalent compared to others. The procurement of medical and pharmaceutical products as well as IT services have the highest number of contracts awarded through this procedure (Figure 2.33), In addition, Table 2.8 shows that contracting authorities within these sectors have the highest share of single bidding on average. Figure 2.33 and Figure 2.34 show that there is a substantial variation of the number of contracts awarded through this procedure across sectors and regions. To better understand why some sectors or regions tend to have a higher likelihood of using this procedure, it would require qualitative analysis to determine whether similar types of contracts across regions and sectors are less or more likely to use this procedure. The large variation across sectors and regions therefore calls for a deeper analysis to investigate whether there are comparable contracts that experience substantial variation, or whether it comes down to the different propensity of some sectors within some regions to rely on it. In the first case, a cross-learning comparison can help better understand the drivers behind the more extensive use of this procedure. In the second case, a closer investigation of the most affected sectors can put it into perspective under which conditions these sectors tend to rely on this procedure. Slovenia would therefore benefit of undertaking such an in-depth analysis regularly. The analysis may be standalone, or may be undertaken as part of an overall performance measurement framework of the procurement system (see Chapter 3).
References
[7] Cingolani, L. and M. Fazekas (2017), “The administrative capacities behind competitive public procurement processes: a comparative assessment of 32 European countries”.
[3] Coviello, D. and S. Gagliarducci (2017), “Tenure in Office and Public Procurement”, American Economic Journal: Economic Policy, Vol. 9/3.
[4] Duguay, R., T. Rauter and D. Samuels (2023), “The Impact of Open Data on Public Procurement”, Journal of Accounting Research, Vol. 61/4, pp. 1159-1224, https://doi.org/10.1111/1475-679X.12479.
[5] Fazekas, M. (2022), Single bidding and non-competitive tendering procedures in EU co-funded projects, Publications Office of the European Union, https://doi.org/10.2776/751156.
[6] Lewis-Faupel, S., Y. Neggers and B. Olken (2016), “Can electronic procurement improve infrastructure provision? Evidence from public works in India and Indonesia”, American Economic Journal: Economic Policy, Vol. 8/3.
[1] OECD (2023), Government at a Glance 2023, OECD Publishing, Paris, https://doi.org/10.1787/3d5c5d31-en.
[2] Spagnolo, G. (2012), “Reputation, competition, and entry in procurement”, International Journal of Industrial Organization, Vol. 30/3.
← 1. The market concentration indicator uses the Herfindahl-Hirschman Index (HHI), and it is used to determine the competitiveness of the market. In essence, the indicator measures the share of contract values for one year compared to the total annual market value. It looks at the total number of companies on a specific market and the share of each company from the total market value in a particular year. Higher values indicate higher concentration of some companies, lower market concentration, expressed through the HHI, indicates more competitive markets. The index has been standardized on a scale of 0 to 1. 0 indicates highly competitive markets. For instance, in a monopoly a single firm controls the entire market, or if there is a moderate concentration, there are several large firms that control large share of the market.
← 2. The Common Procurement Vocabulary (CPV) system is used to standardize the references for procurement contracts within the European Union. CPV-2 is a broader category and CPV-3 is a more specific sub-category.
← 3. NUTS 2 (Nomenclature of Territorial Units for Statistics) region in Slovenia, is a specific level of geographical classification used to subdivide the country for statistical and administrative purposes.
← 4. National authorities include the authorities of the republic of Slovenia as per article 9 of the PPA, such as Ministries (Ministry of Health, Ministry or Public Administration). Regional authorities include authorities of self-governing local communities, such as Municipalities (Municipality of Maribor, Municipality of Ljubljana). Public bodies governed by public law are bodies established for the specific purpose of meeting needs in the general interest, they have legal personality and are financed to more than 50% by state or local authorities, for example the Medical Centre in Ljubljana, National Library, Institute for Employment. The other category includes unclassified institutions or agencies in the data processing section.