eProcurement at the Austrian Federal Procurement Agency (FPA)

The Federal Government founded Bundesbeschaffung GmbH (Federal Procurement Agency, FPA) in 2001 by the Federal Procurement Agency Act (FPA Gesetz) to provide central procurement services to federal agencies, in particular to negotiate framework contracts and make them available to the agencies. Its primary tasks are to bundle requirements to obtain better prices and terms from suppliers and to standardise public purchasing to reduce processing costs and legal risks. From the beginning it was clear that only e-enabled services would lead to consistent usage of the framework contracts and would also strengthen the complete auditability of the procurement process. The eProcurement solution hence comprises of an electronic publication and notification platform, a desktop purchasing system, a travel booking tool and a data warehouse and analysis tool where the purchase data is saved for analysis and reporting.

Within the scope of the applicable EU and national regulations, the processes underlying the e-services were designed by FPA. However, FPA does not develop software or run a data centre. Wherever possible, standard software solutions were used which were to some extent adapted to the needs of the public sector, for instance, to support complex approval and proxy workflows and the enforcement of budget constraints. The IT services as such were outsourced to the Federal Computing Center (BRZ). This enables FPA to focus on its core competences in procurement, its processes, the processes of its customers (=the agencies using the e-services), and the management of its application portfolio to ensure optimal fit to the processes supported.

FPA also supports agencies by holding regular trainings both in the usage of the systems as such and on the details of new framework contracts if their complexity is high. Extensive hotline and customer support centre services are available to the users and a system of regular user satisfaction surveys is in place covering both the services of FPA itself and the service deliveries of the vendors that were awarded the contracts.

Via Portal.Austria users in agencies are offered single sign on, in a next step the applications will be integrated in the public sector Austrian Portal Federation, which will enable the delegation of rights and access management to the participating institutions (eg, ministries deciding themselves what a certain civil servant may order from the desktop purchasing system offered by FPA).  

Impact

Usage of the central framework contracts is mandatory for federal agencies, but several Federal Provinces and a large number of municipalities have joined. The systems serve 10,000+ users; in 2008, the combined purchasing volume of FPA amounted to EUR 830m with savings of EUR 178m in procurement prices alone. The annual costs to maintain the system amount to EUR 5m, which is not even 3% of the annual savings.

Lessons learnt 

• Central framework contracts lead to massive cost savings in public procurement, even if only the price savings are considered.
• Central procurement needs e-enabled services to bring the framework contracts to the agencies and ensure high acceptance.
• Standard software originally designed for private sector eProcurement may successfully be adapted to public sector needs without foregoing the advantages of standard software in terms of future development, software maintenance and support.
• Usability of the system, training, user support and customer care are essential elements in a successful eProcurement system.
• Central procurement and SME-friendliness can be reconciled by incorporating regional lot-splitting capabilities in the system.

 

Policy Context

Reasons for setting up Federal Procurement in Austria

In 2001, government was - due to an enormous budget deficit -  forced to cut down public spending and rethink efficiency of public administration. One initiative for which Minister of Finance was in charge of was reforming public purchasing.

The reforming project was developed with participation of experts of whole federal administration. The outcome of was the establishment of a common procurement organisation for all Federal Ministries and subordinated departments. The Federal Procurement Agency which is 100% owned by the Ministry of Finance was founded in April 2001 to reduce central administration's procurement cost by at least 10%.

The most important advantages of central purchasing were identified as follows: 

1. Using strong bargaining power of public sector: bundling needs for predefined, standardizable goods, coordinating buying activities, specialising in procurement issues leads to attractive prices and purchasing conditions
2. Optimized procurement process decreases transaction costs

Responsibilites and Legal Framework

According to the Federal Procurement Agency Act 2001(BB-GmbH-Gesetz Nr. 39/2001) the main tasks of FPA are:

1. Needs analysis - bundling needs for federal authorities
2. Organise public tenders, establish frame contracts in the name and for the account of the Republic of Austria
3. Organise public tenders on special request for public entities in their name and for their account
4. Up to date documentation (catalogue management) regarding concluded contracts, goods and services
5. defining purchasing strategies, developing purchasing marketing (market research, supplier analysis etc.)
6. Implementation of standards and specifications
7. Procurement Controlling

The FPA, a public limited company, is a non-profit organisation providing free services to their mandatory clients. Federal Ministries are obliged to order from these contracts - unless they are able to obtain the same product to better conditions. Other public sector organisations like universities, communities, states, state owned organisations may take advantage of FPA's contracts and services for a modest fee. Delivery and payment is done directly between supplier and requesting public body.

The different departments of Federal Ministries are obliged to provide the necessary support to FPA. FPA is supervised by Minister of Finance which nominates the four members of the Supervisory Board. The User council (Nutzerbeirat) consisting of deligated representatives of the several ministries meets every quarter to improve information flow between users and FPA. FPA has a lean organization, staff amounts to 80 people at the moment

Beside the 'BB-GmbH Gesetz', FPA has to respect the regulations of the Austrian Federal Procurement Law (Bundesvergabegesetz, BVergG 2006) in accordance to the rules and regulations of the European Union.

Goods and services to be procured by FPA are determined in a regulation and an amendment ('Verordnung' BGBl II Nr. 312/2002) enacted by the Ministry of Finance.

Some examples of products procured by FPA:

Energy, Fuels, Transport, Information Technology (Hardware, Software), newspapers, books, insurance cleaning.

Description of target users and groups

The Federal Procurement Agency (FPA) was founded in 2001 to conduct the public tenders of the federal authorities: Ministries, parliament, federal president, supreme courts etc. These entities are committed to use the goods and services listed by the FPA.

It didn't take much time that also local authorities requested for using the FPA for their procurement needs. Therefore the act founding the FPA was amended twice. Meanwhile all contracting authorities, that are obliged to apply public procurement law, are allowed to use the services of the FPA. In the meantime nearly 1000 non-federal entities use the FPA, 40 percent of the purchased volume are contributed to authorities, that aren't obliged to use the FPA. The wide fields of action and the wide range of costumers are unique in Europe.

Public procurement has an estimated share of the GDP of 16 percent. Regarding to this large impact contracting authorities are expected to be role model for various concerns: Public tenders ought to be exemplary in an ecological aspect, at the same time they shall advance small and medium enterprises. The FPA makes great efforts to balance these often disagreeing demands and the primary goal of saving costs.

Besides savings by bundling und standardisation of goods the unexpressed goal of the legislative body was to increase the appliance of the federal procurement law and to reduce corruption at public tenders.  

The federal procurement law is based on the European directives 2004/17 and 2004/18. The increasing demands on public procurement have lead to short ranges of amending the procurement act and to continuous accretion of paragraphs. Especially small contracting authorities have serious trouble applying the terms of the procurement law. Therefore they are grateful for the services of the FPA. Goods and services purchased by a central procurement agency like the FPA can be ordered without regarding the regulations of the procurement act.

Description of the way to implement the initiative

Effective coordination and decision-making

The central procurement done by FPA is based on Frame contracts, which themselves are founded on need analysis and standardisation elaborated in working groups with major clients.

The e-procurement is based on the so called procurement cycle which is split into pre-awarding and post-awarding phases. The pre-awarding process is regulated in its needs and prerequisites by European rules and national law. The post- awarding process is by now not regulated in detail. We decided in favour of the clients to invest in an electronic ordering system. Based on a need analysis and a return on investment calculation the supervisory board and the user council agreed in the investment.

The project itself is based on professional project management und accompanied by a steering committee for major decisions. Supervisory board is informed regularly at least 4 times a year and the users quote once a year their satisfaction and their wishes for potential improvement.

Partnership strategy

The partners in e-procurement, which means in our case focused on e-ordering, are in the role as enabler FPA with its strategic partners IBM and Healey Hudson, the public administration in the role as beneficiaries and the suppliers who offer their products and services via electronic catalogues.

As a result of a European wide public Tender the realisation partners are elected for a 5 year period with an option to choose 5 more years of strategic cooperation. Suppliers, who use the electronic shop to sell their products and services, are elected by public tenders and accompanied by an expert team of FPA to launch their catalogues correctly.

Implementation and change management strategy

FPA has a strong change management process in place tying up with effective risk control. FPA issued the General Contracting Terms (AVB-IT) for IT procurement in the Federal Administration. AVB-IT regulates all service level agreement aspects, particularly concerning adaptations to increased needs by FPA and technological change. The steering committee is built by FPA and the suppliers. It equally applies to standard software vendors, individual software implementers and the Federal Computing Center as hosting provider. The main aim in all change management procedures laid down in AVB-IT is to minimize the financial and technical risk exposure to FPA.

Information and training of suppliers and clients is a precondition for the acceptance of electronic ordering. Regular reporting and discussions in the user board level up the acceptance of electronic ordering. User workshops help to improve the system.

Leadership, management of ICT

FPA is a very lean organisation and consistently aims to focus on its core competencies. The operation of FPA's IT infrastructure is therefore outsourced to the Austrian Federal Computing Center.

Being the system owner, however, FPA manages all application related activities such as:

• Project/application management for implementation projects and maintenance activities (including ongoing quality assurance, bug fixing, testing, change requests, SLA monitoring)
• Provision of helpdesk and procurement expertise
• Consultation for optimal use of available IT systems including support of necessary organisational changes

Multi-channel strategy, management of resources

Despite the high operational efficiency of highly integrated electronic interaction, FPA has to take a wide variety of different services on one side and very heterogeneous process participants (suppliers and buyers) on the other side into account. Therefore, FPA offers multiple channels for communication and different modes of interaction between FPA and the users of its services.  

• E-Shop: Suppliers can download their orders as PDF-document or have them sent to their ERP-system as XML-document.
• E-Shop: Approvals can be handled purely electronically within the application. However, the application also provides a printout for traditional paper approval.
• E-Shop: Suppliers may submit their electronic catalogues in BMEcat standard or simply enter the data in an Excel-like template.
• End user support & training: is provided via help functions within the applications, eLearning tutorials, classroom trainings, telephone helpdesk.

Knowledge management

In its role as application owner, FPA takes responsibility for knowledge management in a number of ways:

• Knowledge transfer to its customers and suppliers (provision of eLearning, classroom trainings, helpdesk)
• Knowledge sharing among the different parties of the FPA operations via structured processes (e.g. operations handbook, end user documentation) and collaborative tools (e.g. incident management tool which also serves as knowledge database)

Human resource management, risk management

Identification and management of risks is crucial for FPA as it offers unique services for public organisations with a high availability and containing sensitive data. For these reasons, FPA has taken several steps in order to identify and contain risks:

• Concentration on core competencies
• Outsourcing of IT infrastructure operations to an ISO certified computing center
• Ethical hacking of its own applications
• External audits
• Implementation of access management based on separation of duty principle
• Multi layer application model
• Separate pilot-systems for initial/complex implementations

Technology solution

Standardisation and risk control were key elements of Federal Procurement Agency (FPA) on all levels, technically and organisationally:

All solutions in FPA are based on industry standard Microsoft platforms, which ensure customer support, patches and further development. However, for all solutions absolute compatibility with all widely used operating and browser systems including reasonable backward compatibility was realised. This facilitated rapid dissemination and minimised user resistance.

The eShop is based on standard software by Healy Hudson which ensures constant development and maintenance as well as a strong 2^nd level support. The solution had to be adapted to the public sector and the role of FPA as a mere mediator that offers framework contracts to buyers in other organisations. This adaptation entailed the handling of complex organisational assignments, release workflows, budget checks, proxy rules and SME friendly quota systems, most of which are irrelevant to private sector applications. Most of the adaptations, however, were included in the standard product of Healy Hudson and have become part of the vendor's standard release and quality assurance measures.

Prior to the awards procedure for the e-Shop solution, a simple e-Shop was piloted for one year with a very limited range of products, which enabled FPA to enter into the final selection of a solution with much more knowledge and discrimination. The future outsourcing partner (the Federal Computing Center) was involved in the awards procedure to ensure seamless integration of organisation, software and operations. On the same token, the system was audited in advance by the General Accounting Office and the Internal Revenue Service for compliance with the applicable legislation and the application is run in an ISO 27001 certified operations environment.

Offering a standard technical interface to the eShop based on BMEcat and standardised procedures facilitates the participation of SME with limited IT know-how; for many participating SME the eShop was the first contact with eProcurement and in conjunction with the training offered contributed to the "efitness" of Austrian SME. It also ensures that the FPA interfaces are compatible with the industry standard.

All agencies order from the same catalogue and use the same ordering interface to the vendors. Also, reporting on the orders issued via the e-Shop is centralised and hence standardised across agencies. This does not only concern the technical interface, but above all the use of unified semantics as far as products, product classes, regional codes etc. are concerned. This makes transactions by government agencies comparable and hence strengthens transparency and accountability of agencies.

The roll-out of Travi was a challenge as the software was originally designed as a specialist tool for travel agencies. However, adaptations to the software and user education contributed to the success of the booking tool in the public administration.

In all applications user training and support play an important role as they do not only facilitate usage of the applications, but they also ensure that agency staff knows and follows standard procedures as implemented in the software. Since due to price and processing cost savings more and more Federal Provinces and municipalities (which are nor legally obliged to use the system) increasingly join FPA, this standardisation is disseminating beyond federal agencies. Standardisation not only reduces costs, it also leverages experience and existing investments and hence reduces risks considerably.

Summarising, the FPA solutions have lead to a procedural and technical standardisation in Austrian public procurement which is unprecedented in the EU and beyond.

 

Technology choice: Standards-based technology

Main results, benefits and impacts

Qualitative impacts

The Federal Procurement Agency is a company for public procurement, dedicated to purchasing via innovative channels nearly all kinds of goods and services mainly for the State of Austria, but also for regional or local authorities, bodies governed by public law and associations formed by one or several of such authorities or bodies.

The FPA is therefore focused on the following goals:

• Rationalization of purchasing decisions by standardizing and consolidating demands
• Promotion of e-commerce
• Diffusion of e-procurement tools such as the e-shop of the Bundesbeschaffung GmbH concerning the execution of contracts
• Simplification of internal procurement procedures

The fields of activity of the FPA are determined in several legal provisions such as the BB-GmbH-Gesetz or the BeschaffungsgruppenVO.

e-Shop

The managed infrastructure e-Shop is an eProcurement solution that allows FPA's customers to call off from electronic framework agreements and contracts. The purchasing process - from raising a purchase requisition, approval workflows, completing the purchase order to dispatching the PO to the vendor - is covered within the e-Shop.

Main results comprising the e-Shop:

• the e-Shop simplifies and speeds up the internal processes by using flexible, customer-orientated electronic workflows
• it improves the quality of business process documentation for users and their organisations
• the e-Shop brings an improvement of the FPA Service Architecture. Standardized interfaces enables integration in several ERP systems on buyer and supplier side.
• the system provides better information for customers about the product assortment covered by BBG contracts.
• as an "one stop shop" the e-Shop represents on face to the customer. In the past the customer had to handle several different supplier shops and with the increasing number of contracts - around 380 so far - supplier shops would not be practical anymore
• the system achieves processing costs savings
• the implementation of e-Shop is not only a change of a tool, it also influences the work in the public administration and brings better regulations for procurement processes
• all information is transparent and traceable at any time in the purchasing process to any stakeholder involved
• the e-Shop makes suppliers "e-fit". It provides a platform to create an approve e-catalogues and handles in particular the subject of SMEs, who are often not aware of these technologies.
• establish a reporting and evaluation module for the fulfillment of a procurement controlling in the case of the FPA
• e-Shop is an outstanding and unique project on European level so far, what is also demonstrated by its figures

Online booking tool Travi

The managed infrastructure Travi is an online booking tool that allows FPA's customers to organise their travel planning including flight booking, hotel reservation and rental car reservation.

• The system evaluates a best-buy recommendation that the user can easily select instead comparing offers manually
• Travel arrangements can be administrated in the system on organisational level and are compulsive for booking (e.g. only economic class is allowed).
• Sophisticated easy search and professional search
• "all in one" booking tool for public authorities

Quantitative impacts 

• The BBG holds 1145 contracts with 664 suppliers in 30 procurement groups.
• 1004 customer agreements: 738 with provinces and townships, 211 with outsourced companies, 28 health organisations, 27 universities
• The BBG asks the customers every year about their satisfaction with the BBG. In 2008, the customers rated the BBG with a note of 1,69 (best note ever).
• 2008 the procurement volume reached 829 866 000 €. Since the establishment of the BBG in 2001 a total of 4 221 716 766 € was procured by the BBG.
• 2008 the savings by procurements throught the BBG were 177 742 062 Euro. Since 2001 the savings come to a total of 704 933 090 Euro.
• In 2008 the BBG executed 153 tendering procedures, of which only two were set as invalid by the Federal Public Procurement Office. Since 2001 the BBG executed 828 procedures, of which only seven were set as invalid.
• Most of the tendering procedures are scheduled by NUTS-3-regions that eases the participation for small and medium-sied companies. In 2008 76% of the suppliers were small and medium-sized companies, only 24% were big businesses.

e-Shop

• 14,000 users
• 2,500 registered organisations (federal, country, regional level, state-owned organisations, etc.)
• 3,000 orders per month
• Order volume of about 12 Million Euro per month
• A growth rate of volume and number of orders of about 25% per year
• the shop contains more than 300,000 items from about 380 contracts with different suppliers in 30 product categories
• 70% level of use of service within the contracts that are placed in the e-Shop
• The remaining 30% are managed traditionally. A circumstance for example is, that the ministry of defense doesn't have an comprehensive  IT Infrastructure
• approximately 63 € processing costs savings per order
• 2.2 Million Euro processing costs saving per year

Online booking tool Travi

• 5,000 users
• 2,500 registered organisations (federal, country, regional level, state-owned organisations, etc.)
• 21,000 tickets per year
• reduction of booking service costs to the range of 90 cent to 9.90 Euro instead of 18,17 Euro
• approximately 14 € processing costs savings per order
• 290,000 Euro processing costs saving per year

Return on investment

Return on investment: Larger than €10,000,000

Track record of sharing

As a centralised procurement agency we have to supply customers with contract. By doing that the sales and marketing department acquires customers with interest in our eProcurement solutions. Customers can use the system to call goods and services out of FPA contracts or they use it for their own needs, which we call system hosting (housing). These kind of services and also the integration in their back end systems is part of our consulting services. The software is not open source, neither are our services for free, but we just charge a cost-covering compensation, with no additional profit margin.

Replication of the software e-Shop is only possible on national level. Our current project is together with the Federal Real Estate Management Agency. They will integrate our system with their SAP system and fulfil the whole procurement cycle electronically - from the order to the credit memo procedure. Before we customized the system for another major austrian public authority - the ministry of justice. FPA adopted the system to manage the MoJ's bulk processing, so that around 4.000 judical officers can easily order their clothing in a single mouse click, whereby the goods are either taken from current stock or a replenishment order is issued.

The FPA participates on a quite number of national and international projects and expert groups, where we exchange and transfer knowledge.

On national level we are member of the austrian ICT-board, tracing the main target to define a standardised and sustainable ICT-strategy for the republic of Austria, concerning also international activities. We also cooperate with national an international standardisation bodies, like e.g. ÖNORM, DIN, CEN.

Our sustainable international activity is the participation in the PEPPOL project. The PEPPOL project is expected to facilitate and promote e-business between public entities and suppliers across Europe. Austria is participating in this initiative with the Federal Ministry of Finance (BMF), the Federal Procurement Agency (BBG) and the Federal Computing Center (BRZ). The long-run and broader vision of PEPPOL is that any company (incl. SMEs) in the EU can communicate electronically with any EU governmental institution for all procurement processes. The FPA has the work-package lead in the WP4 e-Ordering and participates in WP3 e-Catalogue.

Lessons learnt

In the beginning the general conditions for launching a central procurement agency were tough and challenging. This belongs to the matter that the procurement activities have been carried out by the federal departments themselves and with the foundation of the FPA these activities have been hand over. Another fact is the federalist system of the public body. Therefore FPA was regarded as a 'foreign' agency, which nobody knew how to deal with.

It is evident that the incorporation of the FPA by law was an essential advantage. Important to mention is the persistent political intention to settle the concept of a centralised procurement agency and to see the FPA as a contribution to the administrative reform.

One of the success factors has always been the involvement of the numerous and different stakeholders. The objective of the FPA is to initiate a dialogue with the stakeholders, to identify their needs and to discuss the business opportunities. FPA shows initiatives over the whole procurement lifecycle: Stakeholders e.g. define their demands, they assist in the tender process and they design and implement the ICT infrastructure together with the FPA. All this activities have forced the willingness to cooperate and awareness of business activities and finally the acceptance of the FPA.

When we designed the IT-infrastructure - in particular e-Shop and Travi - we soon recognised the different purchasing procedures at our customers. A school has a completely different purchasing procedure compared to a centralised ministry. Therefore we decided to implement a powerful solution with flexible workflows and different role sets. The evaluation and definition phase - we published around 1,000 pages in our concepts - took us more than a year.

Our customers organisations have recognized the power of our systems and started redefine their processes. For example many of them replaced their stock by desktop delivery. The exciting fact about that was the more they engaged in the system the merrier they started to redesign their processes on their own initiative.

We decided to contract a standard software provider and had the requirement that customizing and changes done by FPA over time have to be adopted by the contractor in the next standard release and not extra paid by the FPA. This release policy allowed us to focus on our core business.

FPA generally focuses on outsourcing activities which are not core competence. For that reason the IT-infrastructure operations are outsourced to service partners. Only the system administration is done by a core service team within the FPA.

Coming back to the IT-awareness, our first guess proved to be true: public servants are often not so familiar with ICT. A lot of public servants were not used in ecommerce from their own private behaviour and therefore they insisted on a classroom training. We found a compromise in a classroom training program, organized in form of a lecture that was voluntary and quarterly. Our customers were satisfied and we saved a lot of money instead of doing pc classroom training. It is worth to mention that only 8% of the user attended this program. Further support is given via eLearning tutorials, a telephone helpdesk, a context sensitive guide, templates for orders, etc.

An indicator of a successful eProcurement application is not whether a system is electronically available, but rather if it is used in fact. Using of standards and general acceptance should help to build area-wide applications, which will then show sustainable use and become a standard.

Scope: National, Regional (sub-national)