The Danish National Procurement Ltd. (Statens og Kommunernes Indkøbs Service A/S – SKI) How can we get more money for those that it’s really all about? Innkauparáðstefna Ríkiskaupa Grand Hótel Reykjavík, 8. nóvember 2005 Modernization of public procurement. By Søren Jakobsen, CEO.

How can we get more money for those that it’s really all about? 2. Modernization of public procurement. Agenda. A few facts about the company SKI The company’s current strategy (as from Dec. 2002) SKI in an European perspective Our electronic tendering system; ETHICS The future strategy of SKI Comments and questions

How can we get more money for those that it’s really all about? 3. A few facts about the company Established in 1994 as a limited company. Business model A percentage (typically 1%) of turnover on contracts from vendors Field of activity Contributing to greater efficiency in the area of public purchasing by establishing and maintaining attractive framework agreements Number of employees: 43 Number of framework agreements: approximately 55 Owners Ministry of Finance (55%) KL, the National Association of Local Authorities (45%) The company is situated in the heart of Copenhagen

How can we get more money for those that it’s really all about? 4. A few facts about the company. SKI’s turnover % 30% 10% 13% % 25% 15% 4% (million DKK.) ,2%+20,4% +8,5% -3,5% ,8% % 2004 Total turnover: = m. DKK = 880 m. EUR Result: 9,1 m. DKK Est Ordinary turnover: >+25% ,3% +24% +36% +37% +13%

How can we get more money for those that it’s really all about? 5. Turnover 2004 (DKK) %-growth from ’03 to ’04. XY= 342 m.DKK/23,3% Travel services Telephony & datatrans. Cars IT Furniture Auditing serv. Cover articles Kilde: Regnskab 2004 Energy Food Electrical articles Lab. equipment Kicthen hardware Paper Clothing Office supply A few facts about the company. Turnover breakdown by product areas, 2004.

How can we get more money for those that it’s really all about? 6. A few facts about the company. SKI’s focus on products and services. Potential turnover Level of Standardization Large High Small Low SKI’s focus in 2003 SKI’s focus in 2006 IT-standard hardware IT-standard software Tele- and data communication Vehicles Food Travel services Office stationary Electricity Gas IT- and management consultancy services Open Source Printed matters IT for education Building and construction Roadwork Cleaning Craftsman services Hospital articles Medicine Eldercare Special software Special hardware Ambulance-service & patient transport IT operation Clothing Window-cleaning Lawyer- and accountant- service Handicap aid Cleaning articles White goods Financial services Newspapers/ magazines Advertising Office machines 8 billion DKK 4 billion DKK 125 billion DKK Furniture Fuel Hospital equipment IT-outsourcing Scanning of construction drawings

How can we get more money for those that it’s really all about? 7. The company’s current strategy (as from Dec. 2002). Mission. National Procurement Ltd. creates increased returns of scale in public procurement to the benefit of its customers and the welfare of the Danish citizens. The advantages are secured by maintaining close ties between customers as well as suppliers, but at the end of the day National Procurement Ltd. acts primarily in the interest of the public sector. The customers are secured a more attractive price and quality than they would be able to obtain themselves, procurement expenses are held to a minimum as there is no need for them to carry out own tenders and electronic procurement systems secure efficient buying. The suppliers are secured lower costs due to reduced public tendering and reduced marketing costs due to National Procurement Ltd.’s centralised marketing and e-procurement systems. National Procurement Ltd acts in accordance to commercial principles and at the same time promotes green and energy saving procurement.

How can we get more money for those that it’s really all about? 8. The company’s current strategy (as from Dec. 2002). Vision. By securing attractive framework agreements the Danish National Procurement Ltd. wants to play a central role in contributing to greater efficiency in the public procurement. By establishing close partnerships with the public procurement agents, National Procurement Ltd. wants to establish and maintain framework agreements that are in demand, make a difference for our customers and strengthens the company. National Procurement Ltd. wants to improve the professional dialogue and cooperation with public procurement agents, suppliers to the public sector and consultants. National Procurement Ltd. is committed to a policy of acting as an innovative and committed employer with the capacity for attracting, maintaining and developing skilled and motivated staff.

How can we get more money for those that it’s really all about? 9. The company’s current strategy (as from Dec. 2002). Vision. Product oriented Introvert Customer focus Framework contracts Passive Defensive Operator A place to work Market oriented Extrovert Partnership focus Framework contracts and services in demand Proactive Active Developer and integrator An effective and challenging job In other words; SKI is in the midst of a fundamental restructuring of the company …

How can we get more money for those that it’s really all about? 10. The company’s current strategy (as from Dec. 2002). Strategies and specific action plans. 1. Attractive framework agreements 1. Attractive framework agreements 4. Focused marketing activities 4. Focused marketing activities 5.Focus on profitability 6.Active supplier-policy 7.Dissemination of e-procurement 7.Dissemination of e-procurement 8.Strengthen close partner-relationships Discontinue unsatisfactory framework agreements Strengthen analyses and follow-up Strengthen user-involvement Extend co-ordinated purchasing Dissemination of knowledge Meetings for procurement agents New marketing strategy Partnership programmes Education and training of customers Offer consultancy Publish guides to public procurement Adjustment of the organisation Project-groups regarding tendering Further improvement of qualification Involvement of employees Further improvement of management Benchmarking of efficiency Secure key qualifications Customer prioritisation Differentiated targeting of customers Prioritise use of resources to match potential turn-over Partnerships with consultancy firms and architects Commercial use of ETHICS Strengthen financial control Strengthen debtor control Strengthen employees knowledge of expenditure Create benefits for suppliers Marketing in cooperation with suppliers Consultancy regarding choice of supplier Precision of demands to suppliers The Public Procurement Portal must function according to demand Development of an e-procurement catalogue that is independent of e- marketplaces Establish close relationships to: Shareholders Interest groups Trade organisations Consultants Media Why?How? Priority By securing attractive framework agreements National Procurement Ltd. wants to play a central role in contributing to greater efficiency in the public procurement By establishing close partnerships with the public procurement agents National Procurement Ltd. wants to establish and maintain framework agreements that are in demand, make a difference for our customers and strengthens the company National Procurement Ltd. wants to improve the professional dialogue and cooperation with public procurement agents, suppliers to the public sector and consultants National Procurement Ltd. is committed to a policy of acting as an innovative and committed employer with the capacity for attracting maintaining and developing skilled and motivated staff 2. Partnerships with public procurement agents 3. Revitalising the organisation

How can we get more money for those that it’s really all about? 11. The company’s current strategy (as from Dec. 2002). SKI’s primary goal. SKI’s main challenge: How can SKI secure attractive framework contracts, that are better than the contracts that each of our customers in the public sector can obtain themselves? –Exact knowledge concerning the demands and needs of the customers through their active involvement in SKI’s process of generating framework contracts –Co-ordinated purchasing where the customers before and during the tendering process are invited to pool their expected turnovers on the different framework areas –Secure an effective competition amongst the potential suppliers.

How can we get more money for those that it’s really all about? 12. The company’s current strategy (as from Dec. 2002). SKI’s turnover and result. Years result (in million DKK) Total turnover from framework contracts (in DKK)

How can we get more money for those that it’s really all about? 13. SKI in a European perspective. A study of 12 central procurement agencies in 11 countries. Belgium Denmark Finland France Greece Ireland Italy United Kingdom Sweden Germany Austria

How can we get more money for those that it’s really all about? 14. SKI in a European perspective. The size of the procurement agencies. Relatively small specialised agencies. Consultancy and coordination of tendering and purchasing Focused on framework contracts. All three agencies in this group are limited companies. A more varied group. UK resembles the above group in most aspects. Greece concentrates on consultancy services. Ireland has many other responsibilities – and is therefore a very large organisation. Ireland and France are characterised by a large degree of decentralisation.

How can we get more money for those that it’s really all about? 15. SKI in a European perspective. The size of the procurement agencies DK has the second largest turnover if compared to the size of the population

How can we get more money for those that it’s really all about? 16. SKI in a European perspective. The size of the procurement agencies. SKI has relatively few framework contracts In comparing one must remember that there is a difference in the breadth of the framework contracts Ireland has not supplied data

How can we get more money for those that it’s really all about? 17. SKI in a European perspective. The size of the procurement agencies. SKI’s relatively high turnover and few frame- work contracts results in a high average turnover per framework contract.

How can we get more money for those that it’s really all about? 18. SKI in a European perspective. SKI’s characteristics. The business oriented strategy has resulted in framework contracts that had modest turnovers, were time-consuming or complicated have been unrolled. The companies’ status as a limited company and the actions of the companies’ board means that the strategy is very focused and that political considerations are reduced to a minimum. SKI has been spared from time-consuming political accounts.

How can we get more money for those that it’s really all about? 19. Our electronic tendering system. ETHICS is a central element in our new strategy. Efficiency Compliance with EU rules Transparency Internal productivity Development and re-use of knowledge and legal terms Workflow controlled execution Document Library Easy involvement of new users Management overview and control Growth in turn-over Strengthen user-involvement and accelerate use of contracts Efficient use of experts in the evaluation phase Help customers run own tenders No complaints from vendors have lead to legal issues Ability to handle an increasing number of complaints in the future Involvement of users easy and meaningful Besides being an exciting business opportunity ETHICS offers: Complies with thresholds, time frames, methods and standards [inno:vasion]

How can we get more money for those that it’s really all about? 20. The future strategy of SKI. Primary focus points. 1. wave2. wave3. wave Market orientation Revitalisation of the organisation Processes and systems Building up of competences A deepening and broadening of partnerships Knowledge sharing & value- based leadership Today2007

How can we get more money for those that it’s really all about? 21. Comments and questions …