Strategies in pp essig140814

Strategies in Public Procurement: Is there a deficit?

Prof. Dr. Michael Essig, Dr. Markus Amann, Dr. Andreas H. Glas

Bundeswehr University Munich

Research Center for Law and Management of Public Procurement (FoRMöB)

Prof. Dr. Stefano Ronchi and Andrea Patrucco

Politecnico di Milano

MIP - School of Management

Strategic relevance of public procurement

Strategy content of public procurement

Strategy process of public procurement

Goal congruence in public procurement: Towards the need of a procurement strategy in

the public sector

Results of the literature review

Agenda

Deriving a research agenda for public procurement strategy

Method and analytical framework

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Goal congruence in public procurement: Towards the need of

a procurement strategy in the public sector

Dilemma of competing priorities and goals in public procurement

Social responsibility, protection of environment and promotion of innovations

Strong focus on public procurement legislation

Dominance of normative – political targets

Realization of secondary objectives (GPP, SRPP, PPPI) through public procurement

Strategy content

Strategy process

Business strategy aligning the different goals

Cost efficiency or legal conformity

3


Analogy to scientific debate in industrial PSM: e.g. Ramsay (2001a, 2001b)

Public procurement as potential lever: Marginal cost savings make billions of Euros available

High proportion of contracting volumes for goods and services of European member states:

Upto 21.5% of GDP; in total 1,550 Billion Euros

4


Estimated annual public contracting volume for goods and services in Germany 478 billion Euro

Increase in

efficiency

Savings This corresponds to…

0.5% 2.4 bn € Fiscal reform (Abolishment of duty on spirits, tax deficit of

2.55 bn €)

1.0% 4.8 bn € Development aid (Doubling the budget for the Federal

Ministry for Economic Cooperation and Development, costs

of 5.0 bn €)

1.5% 7.2 bn € Fiscal reform (Reduction of the value added tax rate from

19.0% to 14.0%, tax deficit of 6.3 bn €)

2.0% 9.6 bn € Fiscal reform (Abolishment of solidary tax, tax deficit of 10.0

bn €)

3.5% 16.8 bn € Public dept (Compensation of net borrowings in 2011 of 17.3

bn €)

5.0% 24.0 bn € Stimulus package (Doubling the financial volume in 2011,

costs of 24.0 bn €)

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Integration of different target dimensions of public procurement into a system of objectives:

e.g. Schapper et al. (2006)

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Method

Systematic literature review

Selection of scientific journals

• Focus on public administration/new public management journals and industrial PSM

journals (5 each)

• Publications from 2002-2013 plus selected papers

Execution of literature review

• Approach of Levy and Ellis (2006) in combination with Denyer and Tranfield (2011)

• Content analysis based on frameworks of Essig and Wagner (2003) in combination

with Hart (1992)

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Method

Selected scientific journals

International Journal of

Integrated Supply Management,

Journal of Business Logistics,

Journal of Purchasing and

Supply Management,

Journal of Supply Chain

Management,

Supply Chain Management: An

International Journal

Public Policy and

Administration,

Public Administration Review,

Public Administration: Research

and Theory,

Public Administration: An

International Quarterly

Journal of

Public

Procurement

Industrial PSM Public Administration

New Public Management

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Analytical framework

Dimensions of public procurement strategies

Supply environment in the broadest sense

Supply market in a narrow sense

Vertical integration strategy (outsourcingstrategy) in terms of a

multi-level strategic decision orpolitical decision

Tri-polarity of

the supply taskSupply

chaindesign strategy

Category strategy

Awardingstrategy

Processstrategy

Functionalstrategyprocurement

Operational tactical public tendering processes

„Political

strategies“

Other functional

strategies

Innovation

Environment

HR

Horizontal alignmentVertical alignment

Bottom-up

Top-down

1

2

34

5

6

7

8

9


10


11


12


13


14


15


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• 33 papers with a strong focus on strategy content

• Focus on make-or-buy decisions and the implementation of political goals

• Public procurement strategies are not really aligned to functional strategies

• Almost no consideration of purchasing category strategies and an awarding strategy within

public procurement strategies

++ 2 7 5 2 1 1 0 3

+ 11 5 9 6 12 5 10 9

(+) 8 2 5 1 8 3 8 7

- 12 19 14 24 12 27 15 14

Legend: ++ is the main topic of the paper

+ is explicitly considered within the paper

(+) is almost implicitly considered within the paper

- is not considered within the paper



Public procurement strategy content provides guidance for the operational procurement (what) and how the procurement function contributes to the overarching organizational objectives

The alignment of public procurement with other organizational functions (dimension 4), purchasing category strategies (dimension 6), and awarding strategy (Dimension 7) have been hardly discussed within the public sector so far .

Normative political settings dominate strategy content; public procurement is developing to become more supportive in the dimensions of social responsibility, environmental sustainability and the promotion of innovations

Public procurement strategies are “given” by law or defined by the policy (top-down approach); not entirely uncontroversial even in political science (Sabatier, 1986)

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Strategy process is a central element of strategy research (Pettigrew, 1992)

Core of the strategy development process includes the decision-making process of an organization to determine the need for products or services, to identify and evaluate alternatives to meet the demand, and the selection

Strategy process (dimension 8) is hardly discussed in business literature concerning public procurement; scientific debate about the development process of public procurement strategies is too much dominated by procurement legislation

“Governance“ is partially combined with strategy process; structural mode to define rules, power and relationships to efficiently and effectively allocate financial, material or human resources (Fearne und Martinez, 2012; Gereffi et al. 2005)

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Conclusion

Significant deficits are in particular the lack of connectivity between the political strategy setting and the strategic contribution of public procurement

Enforcement of general policy considerations through secondary objectives in public procurement (GPP, SRPP, PPPI); secondary goals are not the primary business objectives that attend (a) public procurement according to the principle of efficiency, (b) the restriction of market power of the public sector and (c) the liability of effective competition in the awarding of public contracts.

Requirement for a balance between formal (economic) goals and tangible (political) goals; no longer domination of formal goals

Top-down approach limits the influence of the public procurement function in terms of self-identified potentials (savings, performance) within the (political) strategy formulation

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