IPPC6

1. Strategies in Public Procurement: Is there a deficit?
Prof. Dr. Michael Essig, Dr. Markus Amann, Dr. Andreas H. Glas
Bundeswehr University Munich
Research Center for Law and Management of Public Procurement (FoRMöB)
Prof. Dr. Stefano Ronchi and Andrea Patrucco
Politecnico di Milano
MIP - School of Management

2. Strategic relevance of public procurement
 Strategy content of public procurement
 Strategy process of public procurement
Goal congruence in public procurement: Towards the need of a procurement strategy in
the public sector
Results of the literature review
Agenda
Deriving a research agenda for public procurement strategy
Method and analytical framework
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3. Goal congruence in public procurement: Towards the need of
a procurement strategy in the public sector
Dilemma of competing priorities and goals in public procurement
Social responsibility, protection of environment and promotion of innovations
Strong focus on public procurement legislation
Dominance of normative – political targets
Realization of secondary objectives (GPP, SRPP, PPPI) through public procurement
 Strategy content
 Strategy process
Business strategy aligning the different goals
Cost efficiency or legal conformity
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4. Strategic relevance of public procurement
Analogy to scientific debate in industrial PSM: e.g. Ramsay (2001a, 2001b)
Public procurement as potential lever: Marginal cost savings make billions of Euros available
High proportion of contracting volumes for goods and services of European member states:
Upto 21.5% of GDP; in total 1,550 Billion Euros
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5. Strategic relevance of public procurement
Estimated annual public contracting volume for goods and services in Germany 478 billion Euro
Increase in
efficiency
Savings This corresponds to…
0.5% 2.4 bn € Fiscal reform (Abolishment of duty on spirits, tax deficit of
2.55 bn €)
1.0% 4.8 bn € Development aid (Doubling the budget for the Federal
Ministry for Economic Cooperation and Development, costs
of 5.0 bn €)
1.5% 7.2 bn € Fiscal reform (Reduction of the value added tax rate from
19.0% to 14.0%, tax deficit of 6.3 bn €)
2.0% 9.6 bn € Fiscal reform (Abolishment of solidary tax, tax deficit of 10.0
bn €)
3.5% 16.8 bn € Public dept (Compensation of net borrowings in 2011 of 17.3
bn €)
5.0% 24.0 bn € Stimulus package (Doubling the financial volume in 2011,
costs of 24.0 bn €)
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6. Strategic relevance of public procurement
Integration of different target dimensions of public procurement into a system of objectives:
e.g. Schapper et al. (2006)
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7. Method
Systematic literature review
Selection of scientific journals
• Focus on public administration/new public management journals and industrial PSM
journals (5 each)
• Publications from 2002-2013 plus selected papers
Execution of literature review
• Approach of Levy and Ellis (2006) in combination with Denyer and Tranfield (2011)
• Content analysis based on frameworks of Essig and Wagner (2003) in combination
with Hart (1992)
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8. Method
Selected scientific journals
International Journal of
Integrated Supply Management,
Journal of Business Logistics,
Journal of Purchasing and
Supply Management,
Journal of Supply Chain
Management,
Supply Chain Management: An
International Journal
Public Policy and
Administration,
Public Administration Review,
Public Administration: Research
and Theory,
Public Administration: An
International Quarterly
Journal of
Public
Procurement
Industrial PSM Public Administration
New Public Management
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9. Analytical framework
Dimensions of public procurement strategies
Supply environment in the broadest sense
Supply marketin a narrow sense
Verticalintegration strategy (outsourcingstrategy) in terms of a
multi-levelstrategic decision orpoliticaldecision
Tri-polarity of
the supply taskSupply
chain
design strategy
Category strategy
Awardingstrategy
Processstrategy
Functionalstrategyprocurement
Operational tactical public tendering processes
„Political
strategies“
Otherfunctional
strategies
Innovation
Environment
HR
Horizontal alignmentVertical alignment
Bottom-up
Top-down
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2
3
4
5
6
7
8
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10. Results of the literature review
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11. Results of the literature review
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12. Results of the literature review
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13. Results of the literature review
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14. Results of the literature review
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15. Results of the literature review
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16. Results of the literature review
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• 33 papers with a strong focus on strategy content
• Focus on make-or-buy decisions and the implementation of political goals
• Public procurement strategies are not really aligned to functional strategies
• Almost no consideration of purchasing category strategies and an awarding strategy within
public procurement strategies
++ 2 7 5 2 1 1 0 3
+ 11 5 9 6 12 5 10 9
(+) 8 2 5 1 8 3 8 7
- 12 19 14 24 12 27 15 14
Legend: ++ is the main topic of the paper
+ is explicitly considered within the paper
(+) is almost implicitly considered within the paper
- is not considered within the paper

17. Deriving a research agenda for public procurement strategy
Strategy process of public procurement
 Public procurement strategy content provides guidance for the operational procurement
(what) and how the procurement function contributes to the overarching organizational
objectives
 The alignment of public procurement with other organizational functions (dimension 4),
purchasing category strategies (dimension 6), and awarding strategy (Dimension 7)
have been hardly discussed within the public sector so far .
 Normative political settings dominate strategy content; public procurement is developing
to become more supportive in the dimensions of social responsibility, environmental
sustainability and the promotion of innovations
Public procurement strategies are “given” by law or defined by the policy (top-
down approach); not entirely uncontroversial even in political science
(Sabatier, 1986)
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18. Deriving a research agenda for public procurement strategy
Strategy process of public procurement
 Strategy process is a central element of strategy research (Pettigrew, 1992)
 Core of the strategy development process includes the decision-making process of an
organization to determine the need for products or services, to identify and evaluate
alternatives to meet the demand, and the selection
 Strategy process (dimension 8) is hardly discussed in business literature concerning
public procurement; scientific debate about the development process of public
procurement strategies is too much dominated by procurement legislation
 “Governance“ is partially combined with strategy process; structural mode to define
rules, power and relationships to efficiently and effectively allocate financial, material or
human resources (Fearne und Martinez, 2012; Gereffi et al. 2005)
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19. Conclusion
 Significant deficits are in particular the lack of connectivity between the political strategy
setting and the strategic contribution of public procurement
 Enforcement of general policy considerations through secondary objectives in public
procurement (GPP, SRPP, PPPI); secondary goals are not the primary business
objectives that attend (a) public procurement according to the principle of efficiency, (b)
the restriction of market power of the public sector and (c) the liability of effective
competition in the awarding of public contracts.
 Requirement for a balance between formal (economic) goals and tangible (political)
goals; no longer domination of formal goals
 Top-down approach limits the influence of the public procurement function in terms of
self-identified potentials (savings, performance) within the (political) strategy formulation
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