Smarter buyer Iceland Gudrun Ogmundsdottir 15 May 2017

How the Icelandic gov. became better informed buyer 1. Governmental sector in Iceland its challenges 2. Why public procurement is important 3. Why there was a need for structural and organizational change in the procurement system 4. What we did 5. The results 6. The way forward 7. What we learned and why it worked

Smarter buyer – joining forces and breaking silos in public procurement delivers better performance • Joining forces with the private sector – – • Developing procurement policy Implementing the best practices and knowledge of the private sector Improve procurement processes and deliver savings. Benefit for private sector – more transparency Breaking silos and joining forces across all government organizations in public procurement – Delivers better products/services at lower cost. – All agencies needed to take part

Procurement is an important tool governmental operation Procurement expenditure 30% • • • Public procurement large portion of governmental expenditure Governmental expenditure 44% of GDP Public procurement 18% of GDP – 50/50 central/local government – 30% of governmental expenditure

Why was smarter buyer important • • • Awareness that there were flaws in the procurement system and changes were needed Agencies were not complying to the framework agreements Not many tenders Believed that the gov. was paying higher prices than other private sectors. Increased media attention

Workgroup - Key Findings • Workgroup appointed by the Minister of Finance 2015 – Public and private sector experts The government had limited information about its purchases in many categories and little overview of savings opportunities. • Framework agreements did not provide the government the lowest possible price. • The procurement policy had only been written but not fully implemented. • Opportunities in place to acquire significant savings by using new “methods” in purchasing goods and services. •

Same product sold to agencies at different prices by the same supplier. 0 8. 000 9. 000 10. 000 11. 000 12. 000 Highest 13. 000 Avarage Highest +97% • TEXT +68%

Work group recommendations • • • Implementation of long term procurement plans • Within all 160 agencies • Connect them with the implementation of the budget • Use strategicaly by informing the market well in advance about the State´s future needs. Procurement procedures applied in a targeted manner • by a joint procurement, mini tendering and making agreements with fewer suppliers. Improve IT-solutions for better overview of purchases and defining goals for optimization. By optimizing the purchasing process, in line with private sector best practice, will lead to more efficient sourcing – quality goods and services delivered on time. Create incentive programmes for agencies and suppliers

Implementation process defined in phases Phase 1 Proof of project Tasks force set-up within ministry • Procurement officers across the system + private market Joint procurement Set up procurement plans Need analysis eprocurement system Phase 2 Structural organizational changes implemented at central procurement New framework agreement. Strategic use of procurement plans E-procurement system pilot Comply or explain Phase 3 Full roll-out eprocurement Greater steering + standards and requirement defined Link budget to procurement plans More joint procurement

Pilot project – joint procurement. Lap-top computers 151. 042 Monitors -40% 113. 042 Paper -56% 48. 379 -35% 37. 736 -55% -49% -65% 67. 969 16. 700 Reg. Price Best price Joint procurement Reg. price Best price Joint procurement

Major challenges • Lack of information • • • IT solutions Capacity and culture in central procurement agency Mobilize support across all 160 agencies

Main lessons learned. • • • Implement changes with pilot projects Importance of high level political engagement by minister Policy was improved and co-developed by experts from the public and private sector Private sector best practices can be beneficial in the public sector. Easier to mobilize support for changes by focusing on low hanging fruits. Benefits implemented early in the process – short time span from policy change is announced and results are visible.

Thank You Guðrún Ögmundsdóttir Ministry of Finance and Economic Affairs Icleand