Public and private sector cooperation Observations and reflections from a Baltic Sea Region Perspective Ulf Johansson Sweco Eurofutures AB

Points of departure Observations – Market – Roles – Administrative frameworks Reflections – Four steps forward

One BSR market? Eight out of nine BSR countries are part of the European Single Market However in reality they still constitute nine single markets! – Nine languages – Nine business cultures – Nine (especially in the service sector) very domestic perspectives – Nine administrative “geographies” – Six different currencies with large fluctuations of rates – Different stages of rule of law (where de juris is not necessarily the same as de facto)

Roles The public sector versus the private sector mindsets In Sweden, Denmark, Finland and Germany – the public sector see itself as an important actor for business development – focus on price and quality. In Estonia, Latvia, Lithuania and Poland the public sector regards itself as a buyer of goods and services – focus on price. In Russia the public sector relationship to the private sector is somewhat hard to define In all countries the public sector puts emphasis on business development, competitiveness and innovation. But what to do to get results is more obscure... In all countries the public sector puts emphasis on business development, competitiveness and innovation. But what to do to get results is more obscure...

BSR public procurement Public procurement in in the BSR is estimated to about 700 billion euro (2010) BSR countries use different threshold values (Sweden  euro, Estonia – euro etc.) The threshold above which EU procurement directives become compulsory is euro. For the BSR the total cost of public procurement equates to about 10 billion euro in (2010). The private sector accounts for 75 % of these costs. Procurement costs are a big share of contract value for the smaller contracts. Procedures and the use of criteria in the BSR varies. Tenders can be selected by using the lowest price criterion or a combination of qualitative and quantitative aspects (economically most advantageous tender) On EU-level as much as 70 % uses the combined criterion. Measured in euros the share reaches nearly 80 %. There is somewhat higher propensity to use price only with works and supplies, reaching about 35 % – while the share for services is about 25 %. Source: European Commission study ”Public procurement in Europe– cost and effectiveness” (2011)

BSR public procurement The use of framework agreements has been increasing rapidly at an average 18 percent per year since Norway, Sweden and Denmark have traditionally made the most use of framework agreements. There are two award criteria for contracts: lowest price or economically most advantageous tender (EMAT), which looks at both qualitative and quantitative aspects of the tender. The price only criterion is relatively more common in smaller contracts. The EU procurement directives have to be applied when contracts are above certain thresholds. Below threshold procurement is subject only to national regulation.

Public procurement market size Source: European Commission ” PUBLIC PROCUREMENT INDICATORS 2010” (2011) Billion € Total market size in the BSR 2010 was 707 billion euro!

Public procurement Procurement costs are higher in economic and financial affairs Estimated effects of authority sector on person-days cost of procurement (Baseline: Health) Source: European Commission study ”Public procurement in Europe– cost and effectiveness” (2011)

Public procurement The system is full of fear which means that tender documents often focus on reducing the risk for mistakes and appeals. This makes tenderers to refrain from submitting innovative solutions and new ways of doing things. It also increases the threshold for market entry for new and/or small businesses. Instead; The public sector should work with the private sector to identify and address any key capabilities needed to meet future demand. The public sector should actively help to remove barriers and support growth through spillovers that boost exports and drive innovation. Instead; The public sector should work with the private sector to identify and address any key capabilities needed to meet future demand. The public sector should actively help to remove barriers and support growth through spillovers that boost exports and drive innovation.

Cross border provision of services is rare

Administrative frameworks Administrative frameworks make a difficult map to navigate through; – Legislation – Public procurement – Quality control – Fraud control and financial guarantees – Access to EU funding – E-services A common BSR market requires removal of private sector ”homemade” thresholds; – Banking services and fees – Insurance – Invoicing – Loyal customer programs

Four steps forward Open the market! All public procurement in national language and English and allow tender documents in both languages. Introduce innovative procurement! It is time to deve- lop a public procurement culture that both stimulates innovation in the economy and helps the public sector to meet its future needs at better value for money for the taxpayer! Secure the rule of law and increase transparency! Remove of administrative bottlenecks within the public and private sector (banking, invoicing, insurance, e-services etc)”