Savings through centralised procurement

The very purpose of Hansel’s operations – generating savings for the government – is responsible in itself. The company’s mission is to increase the productivity of the government’s procurement functions, and thereby to save taxpayers’ money.

The savings achieved through Hansel’s operations have been examined through research into the cost impact of central public procurement, commissioned by the Ministry of Finance and conducted by the Helsinki School of Economics (Karjalainen et al. 2008)1. This research concluded that, when compared to distributed procurement operations, the use of a centralised operational model in procurement generates significant savings of approximately 20–25 per cent.

Based on the model presented in the study and the potential calculations of Hansel’s framework agreements, the savings achieved through central procurement are estimated to have reached €240 million in 2013.

Hansel has defined the potential maximum volumes for its existing framework agreements and assessed their utilisation rates2. The utilisation rate can be used to estimate which customers or framework agreements, for example, still have unused potential, allowing the company to focus its resources as efficiently as possible in its effort to generate savings for the state.

Estimate of savings achieved through Hansel’s operations

    2013 2012 2011 2010 2009 2006
Hansel's potential:  centralised procurement, M€ 1 177 1 014 1 036 854 904 850
  distributed procurement, M€ 1 584 1 365 1 395 1 149 1 217 1 144
Savings percentage (Karjalainen et al. 2008) 25,7 25,7 25,7 25,7 25,7 25,7
Procurement volumes under the centralised model, M€ 695 687 676 553 534 281
Utilisation rate, % 59 68 65 65 59 33
Procurement volumes if distributed model had been applied 935 925 909 744 719 378
≈ estimated yearly savings, M€ 240 238 234 191 185 97

Through more efficient operations, Hansel has been able to decrease the service fees charged from contract suppliers. Currently, the maximum service fee that can be charged is 1.5 per cent of contract value, while the average service fee in 2013 was 1.19 per cent.

Hansel operating model

 

 


 

1 This research was conducted using Hansel’s central procurement figures for 2006. The research concluded that the savings achieved in 2006 already amounted to approximately €95 million. The study suggested that if all potential central procurement were conducted in a fully centralised manner, the savings could amount to 25.7%. As it was assumed that a 100% utilisation rate could not, realistically, be achieved, this figure was viewed as a theoretical maximum value for savings through central procurement. The study estimated a utilisation rate of 80% to be realistic.

2 More information on calculations of potential and the utilisation rate is available in the section “Key figure formulae and calculation principles”.