Standard terms for public sector IT procurement in Finland. Antti Ristimäki Specialist, Legislative Affairs

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1 Standard terms for public sector IT procurement in Antti Ristimäki Specialist, Legislative Affairs

2 JIT 2007 Definitions Terms and conditions for public sector IT procurement Published in 2007, currently in use JIT 2014 Proposed terms to replace the JIT 2007 terms Still being prepared, will be published later in 2014 Public-Private cooperation

3 JIT Standard Terms for Public Sector IT JIT 2007 Procurement Consists of general terms and 5 categories of special terms: Procurement of customized applications Procurement of IT services Procurement of consulting services Procurement of standard software Procurement of hardware Whenever the JIT is applied in a procurement contract, the contract must refer to both the general terms and the appropriate special terms

4 JIT 2014 compared to JIT 2007 The JIT 2007 has 5 categories of special terms The proposed JIT 2014 Consists of general terms and 7 categories of special terms: Customized applications Services Consulting services Standard software (not present in the JIT 2014) Hardware Cloud computing services (new category) Agile software development (new category) Open source software (new category) The special terms for procurement of standard software were dropped because they were never used in practice. This is because the special terms for standard software are always provided by the supplier

5 Põhjustest veel There are several reasons for updating the JIT terms. terms are 7 years old and many things have changed Some terms have also become obsolete and need to be removed. Cloud Computing services pose some new questions Another important issue under review is copyright, Open source software is another specific new issue 5

6 When is the JIT applied? The JIT is recommended to be used in all public sector IT procurements This includes both government and municipal procurements However, using the JIT is not mandatory Statistics: There are no statistics about how widely the JIT terms are used, but the gut feeling of my colleagues at the Ministry of finance was that the JIT terms are used more often than not (meaning that the terms are used in at least 50% of public IT procurement contracts)

7 How does the JIT become part of a procurement contract? The JIT never constitutes a complete procurement agreement by itself In addition to the JIT, the parties must always make a procurement contract The JIT also comes with templates for different procurement contracts There are templates for contracts concerning: customized applications, services, consulting services These templates are basically lists of things that the procurer should take into account when drafting the contract

8 How does the JIT become part of a procurement contract? In order for the JIT to become part of the procurement contract, the contract must clearly refer to the JIT general terms and JIT special terms The JIT is not automatically applied to all public sector IT procurement contracts, but only if the individual procurement contract specifically refers to the JIT The procurer can freely make exceptions to the terms of the JIT These exceptions should be clearly stated in the procurement contract The procurer cannot make changes to the text of the actual JIT document

9 How does the JIT become part of a procurement contract? JIT general terms and conditions Procurement contract JIT special terms and conditions Together, these 3 documents form the complete agreement between the procurer and the supplier

10 History of the JIT terms The JIT terms were published in 2007, replacing the previous VYSE 1998 terms The JIT terms were drafted cooperatively by representatives from central government, municipalities, central procurement units and suppliers The JIT is formally approved by JUHTA, which is an advisory board consisting of representatives from central government and municipalities. JUHTA operates independently, but in conjunction with the Ministry of Finance

11 Who uses the JIT terms? JIT terms in practice Government units and municipal authorities acting as procurement units in accordance with the Act on Public Contracts The government s central procurement unit (Hansel) The municipal central procurement unit (KL-kuntahankinnat) Anyone wishing to use the JIT terms (private companies) What is the role of Central procurement units? Central procurement units can invite suppliers to bid on blanket agreements The Central procurement unit makes a blanket agreement with the suppliers that have won the bid Government units or municipal authorities can invite the chosen suppliers to bid on the individual procurement according to the terms of the blanket agreement If the blanket agreement is made with only one supplier, the procurer may buy goods or services directly from the chosen supplier

12 JIT terms in practice The JIT has a well-established position as an important part of public sector IT procurement. It is widely used in both government and municipal procurements Hansel uses the JIT terms in every blanket agreement concerning IT procurement KL-kuntahankinnat uses the JIT terms in nearly every blanket agreement concerning IT procurement

13 Maintaining a balance of interests Standard terms for procurement should be drafted in cooperation with the private sector Negotiating terms is easier on a larger scale Public sector as a whole has better leverage than individual government units. The public sector is a significant buyer of goods and services, therefore maintaining this relationship is often very important to the suppliers The terms should not favor the procurer disproportionately The public sector cannot simply dictate the terms for procurement If the interests of the supplier are not sufficiently considered in the procurement terms, the procurer will only receive bids that are too expensive or will not receive any bids at all

14 Advantages of the JIT terms The JIT terms provide certainty to both the procurer and the supplier The suppliers have come to know the terms well and consider them reliable The suppliers trust the terms more if their interests have already been considered when the terms were drafted Using standard terms saves time and money on both ends

15 Advantages of the JIT terms The JIT terms provide a good basis for drafting procurement contracts The procurers are often less knowledgeable about drafting contracts, the JIT is familiar and reliable The JIT comes with a basic template for drafting a procurement contract Making exceptions to the JIT terms is simple Large scale developments in public sector IT procurement are much easier to control with standard terms With standard terms, it is much easier for the procurer and the supplier to reach a consensus on how the terms of the agreement should be interpreted

16 Risks in using the JIT terms The procurer should always consider whether the JIT suits the needs of the procurement in question Blind faith in the JIT terms can be risky The procurer should always carefully consider in advance what it wants from the procurement Collision of standard terms Other standard terms may be applied to the procurement, for example the supplier s own standard terms The procurement contract should state how differences are resolved between different standard terms, i.e. in which order the terms are interpreted

17 Important matters to consider in drafting standard terms Standard terms yield advantages only if the terms are widely adopted into practical use The terms must be widely usable in different sorts of procurements If the terms are too specific, they can only be used in some procurement agreements Drafting good standard terms is a balancing act Drafting the terms must be made in cooperation with the private sector The goal should be to benefit both the procurer and the supplier There is no magic trick for making standard terms that are highly favorable to the procurers and will be widely accepted by the suppliers

18 Important matters to consider in drafting standard terms It is essential that the public sector and the individual procurer knows their needs in advance! What is absolutely necessary from the public sector s point of view? What can be negotiated? The supplier rarely gets to negotiate the terms of a procurement contract, they only bid on the contract that the procurer has provided For example: is it absolutely necessary that the procurer gains all copyright to the product? If getting all copyright is not necessary, it is better to obtain a license A license is much cheaper and easier to negotiate Few suppliers agree to surrender their copyright, therefore demanding copyright rules out many potential good suppliers and their products

19 Contact details Antti Ristimäki Specialist, Legislative Affairs JIT 2007 and its English translation are publicly available: