Time to scrap national framework agreements
The debate in Computer Sweden in recent weeks clearly reveals that the national framework agreements in IT have played out their role. With the goal of better public business in sight, we would rather see individual procurement or local collaboration.
The large central purchasing bodies, SKL Kommentus and Kammarkollegiet, procure framework agreements for several hundred organizations and try to cover all possible needs that may exist without knowing for sure what they are.
They attract a large estimated volume, but it is highly uncertain how much will actually be demanded. Despite the uncertainties about what needs exist and what volumes are in demand, companies are still asked to provide a price.
It goes without saying that it is difficult to calculate a deal when the customer does not know what it needs or to what extent.
Normally, these conditions should lead to a clear 'no bid' decision, but as central purchasing bodies procure framework agreements for - at least in theory - the entire public sector, companies still choose to participate in order not to risk being excluded from the public market for several years.
Of course, once the decision is made, every effort is made to win and suppliers adapt their bids according to the evaluation model in place.
This is a perfectly understandable and natural approach, but one that is unfortunately not sustainable in the long term for either public sector customers or the IT industry as a whole.
In 2011, the Swedish Competition Authority presented the report Unsound Strategic Bidding in Public Procurement, which, among other things, emphasized that a distinction must be made between unsound and sound strategic bidding.
The report states that it is not unhealthy just because "bidders adapt to an evaluation model that is substandard". Examples of sound strategic bidding can be "when a bidder has better information about future volumes than the public purchaser. The bidder can then exploit this knowledge and increase its chances of winning the tender, for example by pricing underpriced products highly, and vice versa".
According to the Procurement Inquiry (SOU 2013:12), two fundamental reasons for collaborative purchasing are that participating authorities can achieve better purchasing conditions by demanding larger volumes and that they can reduce their own transaction costs as they do not have to procure themselves.
To realize this potential, it is important that contracting authorities look at procurement from a strategic perspective, including asking themselves which goods and services are suitable for collaborative purchasing and which should be procured independently.
None of the above-mentioned basic motives for cooperative purchasing can be considered to be fulfilled if the requirements of the framework agreement do not satisfy the needs of the participating authorities and are therefore not used, nor if the estimated volumes are so uncertain that it is in principle impossible for the suppliers to count on the deal.
As these central purchasing bodies are financed by fees paid by the suppliers, it is easy to suspect that the search for revenue is the underlying reason for keeping as many framework agreements as possible.
However, it is necessary to put aside the pursuit of revenue and honestly ask whether a service area as complex as IT is suitable for national collaborative purchasing.
Based on how it works today, we are highly sceptical about it and would rather see individual organizations procuring on their own or collaborating locally.
At least then there is a realistic possibility to make a real volume estimate and to link the requirements to the real needs. Something that is needed to avoid tenders with prices around zero and nothing.
Niklas Fyhr, industrial policy expert at IT&Telecomföretagen