Centralization Of Procurement Research Articles

Indirect Savings from Public Procurement Centralization

Centralization of public procurement can lower prices for the government’s direct purchase of goods and services. This paper focuses on indirect savings. Public administrations that do not procure directly through a central procurement agency might benefit from the availability of centrally procured goods. We exploit the introduction of a central purchasing agency in Italy and find that prices came down by 22 percent among administrations that bought autonomously. These indirect effects appear to be driven by informational externalities, especially for less competent public buyers purchasing technologically more complex goods. Accounting for indirect savings increases the estimate of direct ones. (JEL D83, H57, H83)

The Practice of Competition Regulation in the International Procurement and State Procurement Administration in Georgia

Under conditions of the emerging economy, together with the mobilization of the state income, it becomes increasingly important to rationalize the expenses. Under the market economy the government has to intervene in the market functioning in order to protect competitive mechanisms that ensure democratic choice. The regulations of the government includes the implementation of state economic policy, as well as addressing the issues that otherwise are impossible to be solved with self-regulating market mechanisms. The function of supervision the competition legislation is shifting to the judiciary and the special regulatory institutions, but the state procurement administration and anti-monopoly regulations still remain the prerogative of the executive body(the government). In the international practice the systems of the international procurement differs from each other, though they have common characteristics mainly regarding the general principles and applied methods. In addition, the level of procurement centralization and the administration quality varies from country to country. Also in each state there is at least one governmental body(in form of an agency, department, office, etc) that regulates and exercises the overall coordination of the procurement policy throughout the country. Generally this very body is responsible for the monitoring state procurement and administrating the signed contracts. In some countries additionally a special governmental office of public provision is made up that carries out the procurementof standard products and services through tenders on the basis of orders placed by state managing bodies and different organizations and then supply appropriate companies. As it turned out, the similar body is to be established in the near future in Georgia.In order to successfully introduce in Georgia the positive experience existing in the international procurement-management practice, it is equally important to have high quality law, also appropriate institutional infrastructure, the support from the authorities. In addition, it is essential to ensure the availability of the information necessary for public monitoring and the professionalism of the parties participating in the procurement process. In Georgia the law regulating the state procurement is mainly harmonized with internationalstandards, though some indirect related legal acts need further refinement. The experience of the international procurement proves that it is equally important to correctly plan the state procurement, as well as correctly organize the procurement procedures and sign fair contracts. In addition, it is important that obligations written in the contracts are fully implemented and public monitoring requires that the accountability system is strictly defined.

What explains delays in public procurement decisions?

Delays in contractor selection are widespread and often costly in public procurement. This paper is the first thorough empirical examination of a common view held by practitioners and in the theoretical literature that negotiation as a selection process causes delay. We adapt an established framework of decision-making process in the wider organisation literature to identify the determinants of decision speed in public procurement. Employing data for all UK public procurement contracts during 2009-2015, our results using both logit models and duration analysis suggest that organisational factors (e.g. the centralisation of procurement) and contract features (e.g. contract complexity) account better for delay. We also find that the choice of simpler procurement procedures, whether these involve negotiation or not, can reduce the decision time. Such time efficiency further justifies the use of negotiation for complex contracts, where this procedure has been proved cost-efficient.

Indirect Savings from Public Procurement Centralization

Indirect Savings from Public Procurement Centralization

Procurement procedures: centralization and categorization

Centralization and categorization of procurement are currently extremely popular and popular ways to improve the efficiency of economic activity, both in private and public organizations. Optimization of procurement activities, centralization and categorization help to reduce the costs of the enterprise by obtaining economies of scale, strengthening the negotiating position and increasing the transparency of procurement, which is reflected in the reduction of the likelihood of corruption and fraud during their conduct. The authors analyzed in detail the processes of centralization and categorization, as well as the advantages of a centralized procurement system, proposed approaches to the centralization of the procurement system, focused on the specifics of the functioning of an economic entity.

Same same but different: dynamics of a pre-procurement routine and its influence on relational contracting models

To improve the performance of construction projects, the use of relational contracting (e.g. Project Partnering, Alliancing, Early Contractor Involvement, Integrated Project Delivery) has increased among public clients in the last few decades. Despite widespread use, there are still large variations in contracting arrangements. In addition, the outcome of relational contracting remains unpredictable. The aim of this paper is to investigate how these variations may originate from internal dynamics and practices in the project-based client organisation. Adapting organisational routines as an analytical lens, the study investigates the pre-procurement routine applied to develop project-specific relational contracting models (e.g. contract schemes, reward systems, and award criteria) for large construction projects in the Swedish Transport Administration. The study contributes to research on organisational routines in project-based settings, illustrating how flexible enactment of a pre-procurement routine may balance two conflicting organisational goals: centralisation of procurement and project-level flexibility. However, while mitigating conflicting goals, the routine enactments create a variation in project-specific procurement models that hampers long-term goals of predictability and shared practices of relational contracting. Consequently, findings indicate that public clients seeking to transform contracting practices must increase their ability to develop procurement routines that can balance organisational goals and simultaneously benefit long-term goals.

Indirect Savings from Public Procurement Centralization

Indirect Savings from Public Procurement Centralization

Savings from public procurement centralization in the healthcare system

We show that the introduction of the procurement centralization within the regional healthcare systems in Italy reduced per capita health expenditure approximatelyt by 2–8%, without affecting the level of health-related public services. Our results also indicate that the effect is persistent after six years, and is not influenced by the coexistence of other organizational models, such as amalgamation and hybrid systems. Finally, we document that the reduction in public expenditure is effective only in areas characterized by poor quality of institutions, indicating that procurement centralization might be an effective tool to reduce corruption-related inefficiencies in the health sector.

The effect of procurement centralization on government purchasing prices: evidence from a field experiment

A fundamental question in public policy and management research is whether large-centralized or small-decentralized organizations perform best. Perhaps nowhere is this tradeoff more tangible than in the context of government procurement of goods and services, where even small differences in organizational efficiency can lead to significant differences in purchasing prices. In this article, we put the theoretical arguments concerning centralized versus decentralized procurement to a systematic empirical test. We conduct a randomized field experiment of public purchase of air travel in the Danish central government. Our findings suggest that centralized procurement is not associated with lower purchasing prices; if anything, centralized purchasing is slightly more costly than decentralized purchasing of identical products. However, centralized procurement may offer other benefits, such as economies of process, information, and compliance. We discuss theoretical and managerial implications of our findings and propose avenues for further research on centralized versus decentralized government purchasing.

EU Solidarity and Policy in Fighting Infectious Diseases: State of Play, Obstacles, Citizen Preferences and Ways Forward

In this paper we confront the role the EU traditionally plays in the domain of health with the urgent need for collective action triggered by the corona virus pandemic. In the face of such a crisis, we argue that the joint procurement, stockpiling and allocation of medical countermeasures is a key component of true European solidarity, besides maintaining the integrity of the Single Market. We present the first results of a survey experiment taken before the current crisis on citizens’ attitudes towards centralizing at the EU level of policies to combat infectious diseases, which indicates considerable support. We conclude that a more robust policy framework with substantial centralization of procurement, stockpiling and allocation is warranted.

EU Solidarity and Policy in Fighting Infectious Diseases: State of Play, Obstacles, Citizen Preferences and Ways Forward

In this paper we confront the role the EU traditionally plays in the domain of health with the urgent need for collective action triggered by the corona virus pandemic. In the face of such a crisis, we argue that the joint procurement, stockpiling and allocation of medical countermeasures is a key component of true European solidarity, besides maintaining the integrity of the Single Market. We present the first results of a survey experiment taken before the current crisis on citizens' attitudes towards centralizing at the EU level of policies to combat infectious diseases, which indicates considerable support. We conclude that a more robust policy framework with substantial centralization of procurement, stockpiling and allocation is warranted.

ЦЕНТРАЛИЗАЦИЯ ЗАКУПОК И КАРДИНАЛЬНОЕ ИЗМЕНЕНИЕ КОНТРАКТНОЙ СИСТЕМЫ В РОССИЙСКОЙ ФЕДЕРАЦИИ: ПРОБЛЕМЫ И ПЕРСПЕКТИВЫ

The article is devoted to the problems and prospects of the existing model for the contract system of procurement. The Russian Federation, like most countries of the world, faces a key challenge today in formulating policies to address the economic recession caused by the emergence and spread of the COVID–19 virus. Sound and coherent public policies are needed to effectively stabilize and restart the economy as a whole. At the same time, Russia’s system of public procurement, which is under constant reform, cannot today be used as a tool of fiscal policy. This area has long evolved into an autonomous branch of government and needs to be transformed especially in public administration. At the same time, the basis of the «re-engineering» of the contract system should be the transition to a centralized procurement model based on the institution of centralization of procurement already successfully carried out in the public procurement sector.

THE PRACTICE OF CENTRALIZING THE FUNCTIONS OF PERSONNEL TRAINING IMPROVEMENT IN THE CONTRACT SYSTEM OF THE CITY OF CHELYABINSK

One of the important elements in the procurement management system in the city of Chelyabinsk is the practice of centralized procurement staff training, which is based on the Municipal Budgetary Institution (MBI) “Chelyabinsk Training and Consulting Center for the Professional Development of Procurement Personnel”. The Institution provides training services in accordance with the requirements of the Federal law, dated 05.04.2013, No.44-FZ “On the contractual system for the procurement of goods, works and services for the state and municipal needs” and the Federal law, dated 18.07.2011, No. 223-FZ “On the procurement of goods, works and services by the different types of legal entities”. The article considers the successful experience of procurement centralization in Chelyabinsk, aimed at ensuring quality compliance the requirements of Russian procurement legislation, growing the efficiency of procurement processes and reducing the risks of ineffective funds’ spending.

Centralisation of Procurement and Supply Chain Management in the English NHS: Some Governance and Compliance Challenges

This paper provides a critical analysis of the new operating model for NHS procurement that is being implemented in 2018 (the ‘NOM’). The NOM is expected to generate significant savings through centralised procurement and strategic supply chain management, which can then be dedicated to frontline NHS healthcare services through newly devised ‘sustainability and transformation plans’ (STPs). The NOM rests on a complex network of contracts resulting in a layer of contractualised governance that creates opacity about its architecture and decision-making processes. The paper maps the changes that the NOM introduces in the operation and governance of the NHS supply chain and identifies key challenges in ensuring that the NOM is subjected to adequate oversight and accountability mechanisms, in particular from the perspective of public procurement and competition law. The paper advocates for the location of all NOM relationships to the NHS Business Services Authority, in particular to facilitate judicial review.

Centralisation of procurement and supply chain management in the English NHS: some governance and compliance challenges

This paper provides a critical analysis of the new operating model for NHS procurement that is being implemented in 2018/2019 (the NOM). The government expects NOM to generate significant savings through centralised procurement and strategic supply chain management, which would then be dedicated to frontline NHS healthcare services through newly devised ‘sustainability and transformation plans’ (STPs). The paper stresses that the NOM rests on a complex network of contracts resulting in a layer of contractualised governance that obscures its architecture and decision-making processes. It maps the changes that the NOM introduces in the operation and governance of the NHS supply chain and identifies key challenges in ensuring that the NOM is subjected to adequate oversight and accountability mechanisms, in particular from the perspective of public procurement and competition law. The paper advocates for the location of all NOM relationships on the NHS Business Services Authority, especially to facilitate judicial review.

Corruption, Centralization and Competition: Evidence from Russian Public Procurement

ABSTRACTThis paper estimates the impact of corruption on the incentives of procurers to maintain honest competition in tenders. Customers, who procure for themselves, and Agencies, who procure for the customers in their region are considered. Basing on a large dataset of open auctions conducted by Russian regional-level authorities in 2011, the analysis shows that in highly corrupt regions, Agencies fail to arrange competitive tenders and most of auctions have one bidder. Customers attract more bidders for large contracts, but rebates are usually low. Therefore, procurement centralization may reduce the corruption of Customers, but cannot solve the problem of low competition.

Centralization of procurement – essence and current trends

Centralization of procurement – essence and current trends

The benefit of horizontal decentralization in durable good procurement

A conventional wisdom in industry and academia is that firms suffer from decentralized procurement. In this paper, we demonstrate an important and counter-intuitive benefit of procurement decentralization in a common setting where a firm with multiple divisions procures a durable good from a supplier. We start with a two-period model and obtain analytic equilibrium results on the supplier's wholesale prices, and the firm's procurement quantities and profits under procurement centralization and decentralization. These results show that the firm's profit will benefit from decentralization if and only if the product is durable. We further show that the profit improvement always increases in durability and the number of divisions. To generalize the basic model with two periods, we design an iterative algorithm to compute the equilibrium results for any number of periods. Our extensive numerical simulations show the robustness of our analytic results and managerial insights.

Procurement in public & private hospitals in Australia and Costa Rica – a comparative case study

This article summarizes exploratory research conducted on supply chain management practices in public hospital systems in the Australian State of Victoria and in Costa Rica. Victoria is the site of a clearly articulated (centralized) supply chain strategy as opposed to Costa Rica, where there is a strong presence of government procurement rules but no such articulated strategy. Importantly, both systems have mixed governance structures (public vs private) and had a willingness to share information pertaining to their purchasing practices. Relatively open-ended interviews, analyzed utilizing MAXQDA 11, allowed us to scrutinize the influence of public policy, supply chain integration, supply chain/clinician collaboration, value analysis teams and group purchasing. We found that centralization of procurement was prevalent in public hospitals in both countries, with more regional centralization in Victoria, Australia due to its size. Also, Private hospital systems are encouraged to take advantage of the centralized procurement policy of the government in both the countries. While standardization was achieved in both countries by better integrating procurement and information technology functions, collaboration between clinicians led to more standardization.

Adopting New Medical Technologies in Russian Public Hospitals: What Causes Inefficiency?

The adoption of new medical technologies in Russian public hospitals is an important part of healthcare modernization and thus is a subject for public finance and regulation. Here we examine the decision-making process on adoption of new technologies in Russian hospitals, and the institutional environment in which they are made. We find that public hospitals operate within a strategic-institutional model of decision making and tend to adopt technologies that bring indirect benefits to their heads/physicians. Unlike Western clinics, the interests of Russian hospital heads and physicians are driven by the possibilities to obtain income from a part of hospital activities: the provision of chargeable medical services to the population, as well as receiving informal payments from patients. The specifically Russian feature of the decision-making process is that hospitals are strongly dependent on health authorities’ decisions about new equipment acquisition. The inefficiency problems arise from the contradiction between hospitals’ and authorities’ financial motivation for acquiring new technologies: hospitals tend to adopt technologies that bring benefits to their heads/physicians and minimize maintenance and servicing costs, while authorities’ main concern is initial cost of technology. The main reason for inefficiency of medical technology adoption arises from centralization of procurement of medical equipment for hospitals that creates the preconditions for rent-seeking behaviour of persons making such decisions.