Professional Documents
Culture Documents
to decide for themselves what goods and services they will get to fulfill
their administrative duties. They are reluctant to subdue individual
choices and preferences to broader strategic procurement goals. German
municipal law gives the mayor the power to decide on organizational
matters (Plckhahn, 2014). Very much depends on whether (s)he is
willing to pick up concepts of centralization and strategic management or
not. Sometimes a difficult financial situation will trigger a readiness to
change and improve. It can be observed that resourceful municipalities
tend to have less incentive to engage in organizational reforms.
The goal of the paper is to determine the current status of organizing the
procurement function in German municipalities using the concept of
procurement maturity. Furthermore, the variety of competences and roles
along the public procurement process are identified and allocated by
means of semi-structured interviews with senior purchasing managers of
selected municipalities. The paper is structured as follows: after the
description of maturity as the fundamental concept for the determination
of the evolution stage of purchasing a maturity model for municipal
public procurement is derived. The model is applied analyzing five
German medium sized municipalities in terms of organizing the
purchasing function and the underlying competences of the involved
municipal members. Finally, theoretical and managerial implications are
drawn from the findings.
CONCEPTS OF MATURITY FOR PUBLIC PROCUREMENT
In a business-management context the concept of maturity expresses
a certain process or performance level in terms of organizational
output/outcome (Rglinger et al., 2012, pp. 328f.). Economy, efficiency
and effectiveness are understood as control goals of business
administration determining the performance of (public sector)
organizations in general and especially the performance of public
procurement authorities (in terms of the 3-e concept see Sheldon, 1996,
p. 5, or Reichard, 2003, p. 794). In the field of public procurement
further relevant performance objectives are e.g. rule of law, welfare
principles and environmental compatibility (Eichhorn, 2003, p. 415). In
this regard, Schapper et al., (2006) developed a framework for the
management of public procurement, which is illustrated in figure 1. This
framework explicitly takes premises into account regarding policy
objectives, efficiency and conformance with public procurement
regulations. One major goal of Schappers management framework
includes policy objectives that also imply other policy objectives such as
10
11
closely with the user unit and in many cases just confirm a decision or
concept proposed by the user unit. But the final say rests with the central
procurement unit.
In the cities 110, 161 and 186 the responsibility for the performance
description and the evaluation of the bids lies with the user units. Their
central units have responsibility for decision-making elements which
typically require less technical expertise and are more orientated towards
applying public procurement law. In the cities 161 and 186, the decision
whether to split the required product in lots and if so the design of the
lots is in the hand of a central procurement unit while in city 110 it is the
user units which have the final say. The choice of the award procedure is
in the hand of a central procurement unit in all three cities while the user
units select the bidders if there is no open award procedure. In an open
award procedure the user units decide on the suitability of the bidders.
Finally, the decision to terminate an award procedure in case of an
irremediable obstacle to an award lies in the hands of the central
procurement units in city 186 and in the hand of the user units in the
cities 110 and 161.
SECOND MATURITY LEVEL
On the second maturity level, the role of the central procurements unit
role goes beyond ensuring the legality of the procurement process. Its
main task is to analyze the market and bundle similar needs for frame
agreements where possible.
All cities reach this maturity level for some products, first and foremost
construction procurement. It has always been acknowledged that
procurement in that area requires a certain degree of professionalism (see
section 2). Traditionally, construction procurement is split between road
and canal construction on the one hand and building construction on the
other hand. This split can be found in all five cities.
City 160 uses frame agreements for construction maintenance services
extensively. The other cities operate with frame agreement in that area
too, although probably to a lesser extent. Exact information could not be
obtained as, with the exception of city 160, none of the analyzed cities
has an exact overview over all procured products.
Outside of construction procurement all cities procure some products in a
central way where a decentralized approach would self-evidently be
inefficient. This concerns products whose procurement require technical
expertise. Information technology is the prime example here, its
12
13
one unit for construction procurement and one unit for procurement
outside of construction. This approach reflects the classical distinction
between these two areas of procurement. City 121 has four units, two in
construction and two outside of construction. The second type of units is
in charge of procuring certain products for the whole administration as
described in the sections on the second and third maturity level.
City 160 is again the only of the analyzed cities which has an overview
about all procurement activities which is used to systematically identify
new similar needs and bundling opportunities. It is the only city with a
fully-fledged controlling system. Its central procurement unit is also in
charge of drafting the internal regulations on procurement. This task is
also assigned to central procurement units in the cities 110, 161 and 186.
14
Indicators for
maturity level
Maturity level 1
Involvement in
tender procedure
Maturity level 2
Centralized
procurement of
goods (includes
market analysis)
City12
1
City110
City16
1
City18
6
City160
(X)
Maturity level 3
Setting of goals
Definition of the
need / setting of
standards (in
cooperation with
user units)
Maturity level 4
Central unit in
overall charge of
procurement
Identification of
similar needs to
create new
bundling
opportunities
Established
controlling system
Drafting of
internal rules
15
innovation. A telling example for this is the case of electricity supply for
the administration. For many years city 160 bought its electricity from its
own subsidiary energy company. The lead buyer for energy then noticed
that the city produced electricity itself through a waste incineration plant
which was subsequently sold on the electricity market. City 160 decided
to use its own electricity instead of selling it and having then to buy it
from its own subsidiary. The savings generated from this change of
strategy were considerable, mainly from saving the VAT for the used
electricity. Table 1 summarizes the maturity indicators assigned to the
cities; their pigmentation indicates the corresponding maturity level.
DISCUSSION
Our results show that at least within our sample a highly mature
procurement level in municipalities can be interpreted as an exception,
but not as the rule. From the selected five municipalities only one city
possesses a procurement department that can be allocated on the highest
maturity level. In terms of a centralized purchasing unit, this finding is
also in line with the research of Glock and Broens (2013) who found that
German municipalities tend to allocate responsibilities for purchasing
products and services closer to the user unit. In contrast to the
quantitative study of Glock and Broens (2013) we conducted an in-depth
analysis that enables us to specify different types of centralization
According to this, it is evident that the level of centralization differs
within the procurement of a municipality regarding different product
categories. Information technology or office supplies are typical
examples being often centrally procured by a single unit which has the
exclusive responsibility for this category.
Interestingly, the size of a city does not influence the number of units
with procurement responsibility. This result is also supported through the
findings of Glock and Broens (2013) as they were not able to identify a
significant correlation between the number of inhabitants of a
municipality and the degree of centralizing procurement. The third
largest city of our investigation in terms of inhabitants is the city with the
highest maturity level regarding its procurement. Furthermore, in the
case of city 160 we are able to align the existence of a controlling system
with a high degree of maturity. Gianakis and Wang (2000) also correlate
the use of performance measurement systems with the degree of
decentralization. They propose that the financial condition of a
municipality effects its centralization of procurement what we can
confirm in the case of city 160. Because of financial constraints city 160
16
17
18
19
des
20
21
22