e-procurement implementation history and best practices from Lombardy Region

e-procurement implementation history and best practices from Lombardy Region Francesco Gardenal 26/11/2014, Torino ITCILO - ELECTRONIC GOVERNMENT PROCUREMENT MANAGEMENT course

A G E N D A Q u i c k f a c t s a b o u t L o m b a r d y R e g i o n a n d A R C A A R C A e - p r o c u r e m e n t s o l u t i o n s B e s t p r a c t i c e s a n d l e s s o n l e a r n e d D e m o s e s s i o n w i t h S i n t e l 2

About Lombardy Region The most populated Italian region (~10 millions) The highest number of municipalities (1.546) 12 provinces, with the biggest one in Italy (Milan) 3rd Region in Italy for geographical extension (~23.000 km²) The real regional GDP is 20,9% of the Italian GDP! Lombardia Region (headquarter): ~300 mln /year Health sector, 50 authorities: ~2.100 mln /year Public procurement value Regional sector, 70 authorities: ~60 mln /year Local Entities, 1600 authorities: ~1.500 mln /year Total amount: ~4.000 mln 3

About ARCA Lombardia Central procurement agency Palazzo Lombardia, Milan the new offices of Lombardy Region (built in 2012) ARCA is a public utility 100% owned by Lombardy Region Awards bundled tendering procedures which may be joined by every public entity within the region, thus realizing scale economies e-procurement service provider ARCA manages a full range of public e- procurement solutions which are available to use free-of-charge for both contracting authorities and suppliers Procurement center of excellence ARCA offers consultancy to public authorities over procurement and change management issues. ARCA can also directly award tenders on behalf of other public entities Among the ~1.700 public entities existing in Lombardy, 1.163 (~70%) are actively using ARCA services 4

ARCA international activities Collaborates with the most relevant international networks working on public procurement UE projects on e- procurement Cross-border public procurement Policy making Projects Research Events e-procurement Change and performance management Green Public Procurement Best practice sharing Opening of local markets Marketing 5

A G E N D A Q u i c k f a c t s a b o u t L o m b a r d y R e g i o n a n d A R C A A R C A e - p r o c u r e m e n t s o l u t i o n s B e s t p r a c t i c e s a n d l e s s o n l e a r n e d D e m o s e s s i o n w i t h S i n t e l 6

ARCA e-procurement solutions NECA (2010) Neca is a contract management and e-catalogue solution, it allows to manage orders and delivery requests Procurement needs detection FOL (2009) FOL is used to carry out complex procurement needs and requirements analysis BUDGET (2015) Contract management Planning and programming Budget allows contracting authorities to effectively plan their procurement initiatives SINTEL (2008) EFT (2011) Sintel allows contracting authorities to carry out any type of tendering procedure by electronic means Tendering Supplier selection EFT allows enterprises to show their expertise in a comparable, transparent way. It also includes a vendor rating system 7

Focus > FOL Procurement needs detection What is FOL? FOL is an e-survey solution, used to gather structured information about procurement needs. ARCA uses FOL to assess procurement needs prior to publish a bundled tendering procedures, other authorities are free to use FOL as required List of required products Historical prices Required quantities Desired technical specifications Required service levels 8

Focus > BUDGET Planning and programming What is Budget? Budget is the newest e- procurement solution developed by ARCA. It allows contracting authorities to plan together their procurement initiatives. Afterwards, spending managers can decide which planned initiatives to program, in order to maximize spend-efficiency within the Region Multi-user software: several public entities may operate in the same initiative, by sending adhesion requests Expenditure control: Budget allows to control which procedures may actually be published in a given year Smart data-management: Budget allows to easily manage a big quantity of constantly changing procurement data 9

Focus > EFT Vendor management What is EFT? EFT is a shared vendor list between all contracting authorities registered to ARCA e-procurement services, which can customize it by requiring economic operators to upload particular certifications. Through EFT economic operators can create their VCD (virtual company dossier) and use the information in their profile to submit bids faster and more effectively Vendor rating: EFT allows every contracting authority to rate economic operators according to their performance Accurate classification: EFT organizes economic operators according to the sector they operate in, specific commodities offered or characteristics of their profile 10

Focus > SINTEL Tendering - sourcing What is Sintel? Sintel is used to manage tendering procedures. It supports every type of procurement procedure supported by the EU legislation, including the DPS (Dynamic Purchasing System). It allows to run e- auctions as well User-friendy: Sintel is designed bearing the user in mind. Tuning to existing functionalities are deployed every month in order to guarantee the smoothest user experience Time-saving: Sintel functionalities try to exploit the benefits of digital procurement. Several activities can be automated and computer-aided evaluation of bids permit significant time savings (when compared to paper-based procurement) 11

Focus > NECA Contract management What is Neca? Neca allows to issue orders and delivery requests to the supplier of an awarded contract. It manages e-catalogues, and may be used to manage both framework agreements (multiple CAs issuing orders to the same supplier) or complex procedures by single authorities Multi-user software: NECA allows multiple CAs to operate in the same contract E-invoicing: NECA allows to issue electronic invoices for every delivery request 12

Total value of public procurement in Lombardy ~ 4 billions Achieved results: e-procurement take-up in Lombardy 2008 Sintel was launched in March 2008. At that time almost all of public procurement within the region was paper-based 2009 2010 2011 2012 2013 Spending review 2014 90,9 % 3,6 billions Paper-based traditional Procurement law by the Italian government promotes the use of e- procurement, which is now compulsory below 38,3 % the EU treshold of 1,5 bln 200.000 0,1 % 5 millions and other e-proc solutions 9,0 % 460 millions * 10,2 % 408 millions 19,7 % 790 millions 52,7 % 2,1 bln Ambitious purpose: can e-proc reach 100%?! * Acquistinretepa.it is the e-marketplace of the Ministry of Finance Data update 21/11/2014 (data are based on estimates, except Sintel information) 13

Achieved results: e-procurement benefits on organizational performance Extant research shows that e- procurement has the potential to improve the organizational performance through transformative changes Efficiency + 14,0 % reduction of procedure length ARCA uses a strategic performance measurement system* to implement strategy and drive performance improvements Competitiveness + 4,0 % suppliers participation Effectiveness + 16,3 % discount on reserve price Dematerialization + 5,5 % reduction of paper usage Transparency + 6,1 % documentation availability Baseline performance (paper based procurement) Current situation Target (full disclosure of e-proc performance benefits) *Gardenal (2009, 2013) 14

A G E N D A Q u i c k f a c t s a b o u t L o m b a r d y R e g i o n a n d A R C A A R C A e - p r o c u r e m e n t s o l u t i o n s B e s t p r a c t i c e s a n d l e s s o n l e a r n e d D e m o s e s s i o n w i t h S i n t e l 15

Best practices from the ARCA e-procurement experience (1/2) Commodity categorization system Use of internationally recognized standards for commodity categorization allows interoperability with other system and ease access barriers for foreign economic operators Consider the peculiarity of procurement types Procurement of public works and pharmaceuticals products are very different. Sintel allows to tailor its functionalities according to the type of procedure Fight attachments! In order to fully disclose e-procurement performance benefits it is better to ask for data to be entered online and let the software compare and analyze them 16

Best practices from the ARCA e-procurement experience (2/2) Automatic production of reports and minutes Sintel produces PDF reports regarding relevant events and it can produce as well the committee minutes which include the details of every evaluation operations Documentation standards ARCA produced templates for every document that a contracting authority needs to produce when publishing a tender. This greatly helps reducing the risk of inadequate documents and spreading best-practice Support and consultancy! ARCA offers specific consultancy and operational support to final users with the goal of empowering them Gratuity and autonomy ARCA solutions are free to use (optimization of public expenditure is a better pay-off!) and users are completely autonomous to decide how to e-procure 17

Lesson learned? Although potential benefits have certainly been assessed, research efforts have proven that in the last two decades e-procurement implementation has generated limited transformative changes! Major factors behind the underwhelming current status of e-procurement Local and fragmented implementation (Hardy and Williams 2008) Strategy-free character of the initiative (lack of a clear vision of the possible benefits and how to disclose them) (Barnes et al., 2002; Croom & Johnston, 2003; Bof & Previtali, 2007; Varney 2011) Procurement professionals as passive user (Mota & Filho, 2011) Limited and pricey software options, unsuitableness of platforms developed for the private sector (Bof & Previtali, 2007) e-procurement not legitimized as an expected institutional characteristic (Chang & Wang, 2010) Unavailability of e-procurement specialists and consultants within the public sector Lack of evaluation research (Fountain, 2001) Inadequate legislative framework 18

Future developments End-to-end integrated solution Gamification All of ARCA e-procurement solution are already accessible through a single login service. The next evolution will be to integrate all services in a single platform in which every solution will be a module. > 70% of enterprises belonging to FORBES Global 2000 index (2013) have gamification initiatives in use. ARCA believes that public e- procurement can greatly benefit from such a new way to engage users to compete to procure better. More system integrations ARCA e-proc solutions are integrated with the EU journal (to automatically publish a tender notice) and with the ERP systems of the users. Further integrations will include ANAC systems (Italian anti-corruption authority), completely eliminating the need to enter the same data twice. Automated spend analysis ARCA Budget solution will allow users to automatically calculate the average awarding prices of procured items. This will permit to carry out structured spend analysis, define the standard costs and reducing the chance of getting a sub-optimal award price. 19

A G E N D A Q u i c k f a c t s a b o u t L o m b a r d y R e g i o n a n d A R C A A R C A e - p r o c u r e m e n t s o l u t i o n s B e s t p r a c t i c e s a n d l e s s o n l e a r n e d D e m o s e s s i o n w i t h S i n t e l 20

Thanks! Francesco Gardenal francesco.gardenal@arcalombardia.it Numero Verde 800.116.738