Post on 28-Dec-2015
EU Public Procurement Learning Lab
““Public e-procurement in Italy: Public e-procurement in Italy:
Consip’s experience”Consip’s experience”
Rome, November 28th 2003
Gustavo Piga – Chairman of Consip S.p.A.
2Rome , November 28th 2003
Legal Framework
The Financial Act of year 2000 (Law n.488, December 23rd, 1999) has laid down the foundations of the “Rationalization Program on Public Spending for Goods and Services”
According to article 26:
The Ministry of Economy and Finance (MEF), according to the in force regulations regarding suppliers selection, stipulates national frame contracts with suppliers. Within the frame contract, selected providers assume the commitment to accept orders coming from Public Administrations
Central Government (e.g. ministries) is obliged to purchase within these frame contracts
All other Public Administrations (e.g. municipalities, health agencies, etc.) may purchase within the frame contracts. Alternatively, whenever they run their own tenders, they have to take price and quality of the frame contracts as a reference
1. Legal framework
2. Public spending in 2002
3. Objectives and strategies
4. Electronic shops
5. Marketplace
6. Open issues
3Rome , November 28th 2003
Legal FrameworkE-procurement regulation
In year 2002 the Italian Government has issued an innovative Presidential Decree (n.101, April 4th 2002), that regulates the use of digital procedures in public procurement. Public Administrations can now use digital procedures as a whole, or as a partial replacement of traditional tender phases
Two different digital procurement procedures for goods and services are taken into consideration:
- on-line auctions, for purchases above and below EU threshold, whereby the whole tendering process is managed on-line
- marketplace, (type B2G) only for purchases below the EU threshold
Italy has been the first EU Country to have an e-procurement regulation allowing purchases above EU threshold. This anticipates the approval, in a near future, of a similar EU Parliament directive
1. Legal framework
2. Public spending in 2002
3. Objectives and strategies
4. Electronic shops
5. Marketplace
6. Open issues
4Rome , November 28th 2003
Rationalization Program on Public Spending Objectives and strategies
Objectives Strategies
Focus on “state of the art” in supply market Wide range of goods and services Constant assessment of service levels
Direct costs, through: - demand aggregation (economies of scale)- competition among suppliers- product standardization
Indirect costs, through: - on-line bidding and ordering- process simplification- centralization of litigation
To guarantee quality standards in P.A. purchases …
… while reducing
Change Management in the Public Administration Industry dynamics
Sideeffects
1. Legal framework
2. Public spending in 2002
3. Objectives and strategies
4. Electronic shops
5. Marketplace
6. Open issues
5Rome , November 28th 2003
Electronic shops Operational model
1. Legal framework
2. Public spending in 2002
3. Objectives and strategies
4. Electronic shops
5. Marketplace
6. Open issues
Contracts reporting
Monitoring tools
NeedsFeedback
Delivery
On-line/fax order
Public Administrations
Consip Suppliers
Frame Contracts (public tender)and e-shops activation
Payments
Portal www.acquistinretepa.it
6Rome , November 28th 2003
Frame contracts Process simplification
1. Legal framework
2. Public spending in 2002
3. Objectives and strategies
4. Electronic shops
5. Marketplace
6. Open issues
From the traditional….…to the new process of goods and services procurement
Fax / on-lineOrder
... achieving, in addition, administrative procedures reductions for both P.A. and suppliers…
Needs analysis
Goods/ Services delivery
PaymentSupplier selection
Possible litigation
with suppliers
Contract and
tender document
ation
Contract signing
Consip activities
7Rome , November 28th 2003
Frame ContractsSome examples of unit cost reduction
31% 31% average average savingsaving
Goods
Utilities
TLC
% unit cost reductions
Productivity SWLaptop PCsPhotocopiersPrintersDesktop PCsFax MachinesCarsStationeryMeal tickets
Facility ManagementFuelsElectric power
Mobile line telephony Fixed line telephony and IP connectivity
60 signed frame contracts and 31 product categories by 31/12/031. Legal
framework
2. Public spending in 2002
3. Objectives and strategies
4. Electronic shops
5. Marketplace
6. Open issues
Source: Consip estimates
404739302544151510
1610 - 30
5
81
62
8Rome , November 28th 2003
Frame contracts and electronic catalogues Usage and break out by public sectors
(*) Total amount of potential Administrations is about 45.000
Despite their non-compulsory participation to the Rationalization Program on Public Spending, 21% of orders comes from Local Government
1. Legal framework
2. Public spending in 2002
3. Objectives and strategies
4. Electronic shops
5. Marketplace
6. Open issues602
11.719
19.91221.955
25.546
29.27832.266
34.11135.796
36.78737.148
38.440
233.075orders
5.000
10.000
15.000
20.000
25.000
30.000
35.000
40.000
2000 2001 2002 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03
Cumulated registrations Cumulated orders
N
Registrations: 38.440 (*)
Central Government – 52%
Health – 3%
Local Government – 34%
University – 10%
Others P.A. – 1%
Source: Consip estimates
Registrations break out by public sectors (%)
9Rome , November 28th 2003
Innovative e-procurement toolsOn line auctions
Base Price:€ 199,000
Saving:€ 83,000
N° of competing vendors: 8
Awarding Price:€ 116,000
% cost reduction:42%
1. Legal framework
2. Public spending in 2002
3. Objectives and strategies
4. Electronic shops
5. Marketplace
6. Open issues
110
120
130
140
150
160
170
180
190
200
Tender awardedWinning bid at 116,000 Euro
(-42%)
200 10 30 40 50 60 70 80 90 100 110 120
Minutes
7 vendors 3 vendors6-5-4 vendors8 vendors 2 vendors
Extension time startsBest bid at 137,000 Euro
(-31%)
Last 10 min.Best bid at 147,500 Euro
(-25.8%)
€ M
10Rome , November 28th 2003
Innovative e-procurement tools Public Administrations’ Marketplace
The Marketplace is a virtual market in which P.A. can select goods and services offered by several suppliers, for purchases below EU threshold
The Marketplace is open to qualified suppliers (and goods) according to not particularly restrictive selection criteria
The entire process is digital, using digital signature in order to guarantee transactions legally
Public Administratio
n Marketplace
Qualified suppliers selected through a qualification process, starting from the date of publication of the “qualification notice”
Suppliers
Central Government
Universities Local
Government Health bodies
Buying administrations
Mark
et
Qualification notice(public announcement)
1. Legal framework
2. Public spending in 2002
3. Objectives and strategies
4. Electronic shops
5. Marketplace
6. Open issues
11Rome , November 28th 2003
MarketplaceMajor advantages
To Public Administrations:
costs and process cutting
potential broadening of suppliers base
easy access to selected goods (pre-defined quality standards)
information transparency and ease of comparison among goods
purchases logging and subsequent expenditure monitoring
To Suppliers:
selling cost reduction (due to broadening of potential customers base and lower intermediation cost)
major visibility
more competitiveness especially in local markets (for small and medium sized enterprises)
B2G introduction, especially for large sized enterprises, in addition to existing B2B and B2C
1. Legal framework
2. Public spending in 2002
3. Objectives and strategies
4. Electronic shops
5. Marketplace
6. Open issues
12Rome , November 28th 2003
Through nation-wide frame contracts, large competitors lever on economies of scale, while it is difficult for small and medium enterprises to exploit their specific comparative advantages
Price vs. Quality: a high level of competition in auctions drives prices down so much that suppliers are “forced” to cut all those aspects of supplies that are non-contractible; the less quality can be defined with objective criteria, the more critical this aspect becomes
Transparency vs. Collusion: when auctions are repeated, providing more information increases transparency and reduces the “winner’s curse”, but can help collusion between bidders
Different auction formats (single round vs. multi-round) are suitable to different contexts (known vs. unknown value), requiring different trade offs with collusion risk
The use of two different e-procurement tools (e-shops and marketplace) implies the identification of a proper policy to avoid risk of “cannibalization” of products to be offered
Open issues
1. Legal framework
2. Public spending in 2002
3. Objectives and strategies
4. Electronic shops
5. Marketplace
6. Open issues