Public procurement policy is the process of acquisition, usually by means of a contractual agreement after public competition, of goods, services, works and other supplies by the public provider. Public procurement today is indispensably connected to the private sector, which delivers services previously reserved just for the public sector. The public procurement policy in Denmark is exclusively based on the strive towards greater transparency, efficiency and effectiveness in the public sector. For several years, the Ministry of Science, Technology and Development of Denmark has worked to implement the government’s strategy to promote the use of e-procurement in the public sector. The primary goal is to make the public sector more efficient via the use of e-procurement in close partnership with the private business sector. One of the latest initiatives is the Law on Public Payments. As part of the implementation of the law, the public authorities in Denmark must, as of February 2005, receive all invoices electronically. This initiative is intended not only to make the public sector more efficient but also to encourage a wider use of electronic invoicing in private companies. With its public sector e-invoicing initiative Denmark is setting a new standard for public government initiatives, for which the Ministry of Finance received the EU’s government 2005 award. As in any other country in the EU Denmark has to comply with the EU procurement rules, which are established as a preventive measure against distortion of competition in procurement policy and discrimination on geography or national bases. Thus, in order to understand how the procurement policy in Denmark is exercised, it is of crucial importance to comprehend what is the general trend in the European Union concerning procurement policy.

EU Procurement Policy

It is estimated internationally that there is high correlation between high levels of e-procurement activity and high business performance. The savings for the budget are around 10% and for the private businesses the savings are around 30-40%. The e-procurement leads to greater organizational efficiency and reduced costs and cycle times. E-procurement encourages good practices, opens new markets and answers the need of innovation and that’s why it is so highly appreciated in the EU. There is recognized need in the EU member states of greater adoption of sophisticated e-business process throughout the economy. The small and medium sized enterprises are of special importance for the EU since they need to adopt modern procurement techniques in order to be more flexible and competitive.

EU requires from each member state in its public procurement policy to test critically for cost efficiency, effectiveness and affordability of the procurement deal. EU requires decreased bureaucracy and increased access of small and medium enterprises to the public procurement deals. Innovation, whole-life costing, efficiency (which does not equal lowest price), job creation and encouragement of ideas with growth potential is critical in the assessment of the bidding firms. The procurement policy is not only seen as a tool for achieving economic objectives but wider public goals like environmental sustainability, creation of jobs and wealth in society. The general trend in the EU is move towards electronic procurement; this leads to modernization and elimination of the red tape and of course positive effort to slash the procurement budgets of the member states. A massive volume of administration areas are covered by public procurement legislation and the use of electronic procurement can realize huge savings both for the private businesses and for the governments’ budgets. The EU Directive which came into force on 1st of January, 2006 has the sole objective to enable any business with a PC and Internet connection to bid for public contracts electronically anywhere in the EU, again with the aim to cut red tape and prevent barriers that can arise from incompatible systems in different member states. The public tendering is more bureaucratic and favorable for bigger firms with time and human resources to deliver the process. In the new e-procurement any bidder using simple and common equipment and with a minimum degree of IT Literacy should be able to participate in a public procurement conduced electronically, thus the whole process will become more simple, transparent and accessible.

There is list prepared by the EU Commission of legal and functional requirements for e-procurement systems and tools in different member states which comes to assure compatibility and consistency in adoption of the EU directive and fair public procurement rules. The EU directive has the objective to modernize and simplify the EU procurement practices as well as to make coherent EU framework. It increases the accessibility of companies to the procurement process and the cross-border sharing of e-procurement software developments. The EU target is to make public procurement 100% electronic till 2010. The Nordic countries are among the first to embrace this target and make attempts to develop common patterns and standardize the procurement procedures amongst them. A universal business language has been developed to identify, classify and codify procurement items and assure transparency. Simultaneously a process of intense sharing of resources, responsibility, information, and know-how between the countries is progressing which leads to a drastic decrease of administrative costs and increase of effectiveness. What has been observed in this first attempt to harmonize procurement matters across Europe is not achievement of the lowest price possible but fulfilling an economically advantageous tender in which price, quality, delivery time, environmental and societal factors all matter at the same time.

The EU directive has the sole aim to raise productivity and prosperity through transparency, effectiveness, and decreased bureaucracy. A successful example in this direction is the Danish procurement policy in which a high share of the procurement process is electronic and internet based, and where the highest results regarding transparency and fair competition has been fulfilled.

Procurement process in Denmark

In Denmark an ambitious effort to modernize and computerize the whole procurement process has been undertaken and the results from this are estimated by the high industry satisfaction. The horizontal solution of e-procurement across sectors answers the small and medium sized enterprises’ need of usable standards and make them more competitive in regards bigger companies. As an instrument to increase efficiency, strengthen competitiveness and enhance modernization, e-government has become an explicit com¬ponent of public sector reform. Conversely, reform of the public administration in Denmark has pro¬vided a general framework for defining e-government goals and responsibilities by setting an overall vision and objectives for improving the qual¬ity and efficiency of public services. IT officials in Denmark report that e-government has helped to improve planning, increase efficiency of working processes, enhance a customer-focused orientation and assist in the application of good governance principals of trans¬parency and accountability. Efficiencies arising from e-govern¬ment, for the most part, have been channeled towards improvements in the quality and availabil¬ity of online services rather than being recouped as cost savings. This is consistent with the Danish government’s service orientation.

The forthcoming Forfás eBusiness Monitor Report highlights Denmark as one of the best
performing case study countries in terms of e-business adoption. One of the key factors
underpinning its good performance is the strong exemplar role being played by Government in the rollout of services for enterprise and citizens, in particular the establishment of an e-procurement portal for government services. The public procurement policy in Denmark is seen as an instrument for support for the small and medium enterprises and the ethnic minorities’ businesses for which the competitive opportunities are relatively restricted by the powerful and dominant companies. Denmark tries to make the government marketplace more attractive to SMEs by decreasing the barriers to entry and driving excessive bureaucracy out of the public procurement policy. The procurement policy in Denmark also strives to achieve fair trade and to give advantage not only to local firms but also to foreign companies in the bidding process for undertaking particular public project. The requirement for non-discrimination based on nationality is fundamental in the public procurement policy. Also under consideration is the ability of the bidding firm to put resources into innovation, provide race and gender equality, and promote not only purely economic objectives but also idealistic goals like greater accessibility, efficiency, etc. for the population. In addition, public procurement in Denmark should adhere to “value-for-money” principle, which comes to say that decisions in public procurement should be based on an assessment of whole life cost and quality, rather than lowest price alone.

The Danish public procurement is considered as highly cost-effective both commercially and socially since it decreases the excessive bureaucracy in the whole public procurement process and is accountable to the citizens. Another interesting characteristic of the Danish public procurement policy is its consistency across all sectors, as well as integrity between social and economic considerations in public procurement. Thus, the whole process is easier for the companies since they understand their rights and obligations in any sphere of public procurement irrespective of the field. It is also crucial for the procurement process to be legal –to comply with the EU public procurement directive, integrative – to lack any trace of corruption and collusion, and informative –to provide enough information to companies and to allow them to make informative decisions. Other criteria that need to be met in the public procurement process in Denmark are the responsiveness – public bodies should endeavor to meet the aspirations, expectations, and needs of the community served by the procurement, and transparency – openness and clarity on public procurement and its delivery. For the Danish officials it is of critical importance to constantly develop and modernize the public procurement policy. The modernization of the sector is indispensably connected to decreased government spending and increased efficiency. In Denmark the so-called e-procurement and e-auctions are highly developed and wide-spread. The e-procurement increase savings and improve the standardization and accessibility of the process. Further, it increases the transparency and audit ability of the procurement expenditures, as well as promotes openness and use of fully integrated information systems. The deployment of e-catalogues and history of undertaken projects and their development leads to increased functionality and progress in the whole system of public procurement.

The peculiar thing in Denmark is the constant training programmers for the people occupied with public procurement in order to increase their professionalism and introduce them to the best examples of public procurement across the world, thus stimulating greater innovation in the sector. In Denmark the so-called strategic shaping of the market is targeted, which comes to mean shaping and innovating at the earliest stages of the public procurement policies with the expectation that early innovation will improve the standards of delivery of the service and motivate further innovation on later stages. The need of new technologies and processes is estimated and further steps are taken to develop in this sector of capacity. It is critical to understand that problems are not always with the procurement process itself or the public bureaucracy, but with the culture and habit of doing things as well, thus decisive action is taken in Denmark to change the behavioral old-fashioned practices and introduce wider public to the e-procurement practices.

E-public procurement is ensuring accountability, integrity and greater efficiency. It also prevents the corruption in public bidding and ensures increasing competition and transparency among suppliers. E-procurement is a horizontal solution to the whole administration in Denmark. System of checks and balances is established and constant monitoring of the whole system is exercised. Financial and budget limitations, together with the EU legal requirements are respected at any stage of the e-procurement process. Update of the accessible information is made regularly. The increased knowledge of best practices and principles and the improved access to procurement resources and expertise develop the process to answer better to societal needs. The e-procurement in Denmark leads to broader accessibility to state services, and increases fair competition.

A Procurement Board has been established in Denmark to develop the procurement sector, to disseminate information for the best procurement methods, to co-ordinate public procurement policy across sectors and to monitor the implementation of approved procurement projects. Environmental considerations have critical role in each public procurement assessment. The procurement board estimates whether a scheme is workable or not. The criteria are money and time, savings for the administration and quality improvements and expenditure avoidance. It also assesses the extent to which departments meet their procurement goals. The Procurement Board works in close cooperation with the Danish competition authority which comes to ensure that all procurements in the public sector take place in free and equal competition. The Danish Competition Authority is an agency under the Danish Ministry of Economic and Business Affairs. The Danish Competition Authority has been the responsible authority in the procurement area since 1993. The reason for placing the matters concerning the public procurement under the auspices of the Danish Competition Authority is the increasing importance of the public procurement rules as being a part of the competition rules. The Danish Competition Authority strives to ensure the development of effective and free competition in the field of public contracts. In addition the Danish Competition Authority plays an important role as a complaint authority in the procurement area. The rules established by the Danish competition authority for the exercise of public procurement are important instruments in gaining advantages such as lower prices, more and better products to choose among, better service from suppliers, better knowledge of the market and a better overview of the actual needs before entering into a contract. The rules for public procurement contain procedures for the award of public contracts – both in relation to supplies, services and works. The procurement rules are primarily to be found in the EU public procurement directives, which regulate the procurement of supplies, services and works. Public contracts are also regulated by the principles of the EC-Treaty, e.g. the principles of free movement, non-discrimination, mutual recognition, proportionality and transparency.

Denmark is a unique example of a country that managed to save its peculiar national characteristics in the exercise of public procurement by modernizing the whole process and respecting the EU requirements. The progressing e-procurement in Denmark shows what are the gains from a new way of public contracting which is more transparent and cost-effective. The budget share of the government going towards the public procurement sector is considerably lowered after the introduction of e-procurement, the businesses have better information and reduced costs, and the whole public has improved access to the process and respectively more rights to ask questions and to monitor for fair-dealing and fair competition.

The transition to e-procurement and e-commerce represents a challenge not only for public sector authorities but also for the private business sector – particularly small and medium-sized businesses. Being “e-ready” will, however, become an important competitive factor in the global market and it is important that smaller businesses are also included in this development. In Denmark the public procurement officials try to develop a service-oriented infrastructure that will make it as easy for businesses to exchange electronic business messages, as it is to send an e-mail. Private companies of any size are able to participate in electronic supply chains and other business interactions due to the low technical, administrative, and economic barriers.

Denmark is the first country to implement a national initiative of this kind. And it is setting the standards for all Europe now by its highly effective public procurement with clear rules, improved financial and societal efficiency, accessibility and transparency of the process.