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Quality in public
Quality in the public procurement
procurement process
Åsa Rönnbäck
Viktoria Institute, Gothenburg, Sweden
447
Abstract Received 22 November 2010
Purpose – The purpose of this paper is to investigate four dimensions of how to integrate quality in Revised 24 May 2011
the public procurement process from three perspectives. The study was carried out in the public Accepted 30 August 2011
transportation industry where service provision has been outsourced.
Design/methodology/approach – An explorative case study was carried out using two data
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collection methods. The first involved a document study that considered the integration of quality in
the public procurement process. This led to the second method, which involved conducting in-depth
interviews to follow up on the procurement and the role of quality with the participants.
Findings – The findings provide insights into how quality can be included in the public procurement
process and, in particular, how self-assessment can be used to evaluate the “best quality practice”. The
quality maturity of the industry also has an influence on three dimensions: the choice of quality model,
the weighting between price and quality and how the tenders perform their self-assessments.
Research limitations/implications – The study focuses on one case and presents explorative
findings. This has implications for future research, for which the set of procurement decisions
regarding the integration of quality must be analysed.
Practical implications – The integration of quality in the public procurement process involves
choosing a future business partner according to the “best quality practice”, not just the lowest price.
Including quality in the public procurement process can help facilitate the delivery of high-quality
services to customers when service provision has been outsourced.
Originality/value – This study contributes to the service quality literature by empirically
investigating how quality can be integrated in the public procurement process, which is a prerequisite
for contracting a desired service supplier.
Keywords Sweden, Public services, Public procurement, Transport management, Outsourcing,
Service quality, Self-assessment, Public transportation
Paper type Research paper
Introduction
The Swedish public transportation industry is facing the challenge of providing
high-quality service for its customers with limited resources (Donnelly, 1999; The
Swedish Government Official Reports 2001, p. 106; 2003, p. 67; Enquist et al., 2005;
Rönnbäck and Witell, 2009). There are a number of explanations for this situation. The
Swedish law of public procurement regulates how the public transport authorities
(PTAs) conduct their procurement of services. The law favours the bidder with the
lowest price and does not allow previous relationships with certain suppliers/operators
and their former experiences to affect the outcome of the procurement process. Another
characteristic of the public procurement is that the relationship has a distinct starting
point and end. Furthermore, the contract is written in advance by the purchasing
authority, so there are few possibilities to negotiate about the contract and adjust
its contents after it has been signed (see e.g. The Swedish Public Procurement Act,
Swedish Code of Statutes 2007a, 2007b). These conditions have been shown to hinder The TQM Journal
Vol. 24 No. 5, 2012
the development of inter-organisational business relationships and trust (Erridge and pp. 447-460
r Emerald Group Publishing Limited
Greer, 2002). Also, the PTAs have become focused on cost rationalisation, which has 1754-2731
led to reduced profitability of their service suppliers (Enquist et al., 2005). DOI 10.1108/17542731211261593
TQM This focus on cost and the neglect of quality can be explained by general
24,5 misconceptions, a lack of knowledge and limited experience with how to evaluate
service quality in a public procurement process (Corcoran and McLean, 1998). A review
of previous research shows that little interest has been paid either to public
procurement (Thai, 2001) or to how quality can be managed in contracts in business
service (Fisk et al., 1993; Brown et al., 1994; Furrer and Sollberger, 2007; Camén, 2010).
448 Previous research has been reluctant to include quality in public procurement as it is
considered a difficult subject that may lead to bias from a procuring authority towards
certain tenders (Laffont and Tirole, 1993). As a result, price is the only award criterion
that the procuring clients use. This focus on price has resulted in services being
reduced and depleted for the passengers of public transportation (Enquist et al., 2005).
Currently, eight out of Sweden’s 26 PTAs have adopted systematic approaches to
evaluating quality in public procurement. There are three alternative models for
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evaluating tenders: price only, the use of key performance indicators (KPIs) and
self-assessment. Seven of the eight PTAs that have included quality in the procurement
have attempted a self-assessment model. However, no research has yet investigated
the pros and cons of using a self-assessment model to evaluate quality in the public
procurement process. Due to the limited experience in managing quality as a factor in
public procurement, this paper uses three perspectives to explore four dimensions of
how to integrate quality through the use of a self-assessment model in the public
procurement process. The four dimensions are:
(1) what model to use;
(2) the balance between price and quality;
(3) how tenders perform their self-assessments; and
(4) the use of internal and/or external examiners.
The dimensions are investigated from three perspectives: the tenders, the PTA and the
examiners, i.e. all participants that influence the results of the procurement process.
The study focuses on the business-to-business relationship between a PTA and
three tenders involved in public procurement with regard to contracting a future
business partner in train traffic for a period of nine years (2009-2018). Two data
collection methods were used. The first involves a self-assessment model in public
procurement as well as the study of the tenders’ quality reports and the results from
third-party evaluation. The second uses interviews to follow-up on the public
procurement with the parties involved, that is, the tenders, the PTA and the examiners
who conducted the third-party evaluation of the tenders’ quality reports.
requires the commitment among middle and top management, which is considered
as critical to obtain lasting improvements (Hillman, 1994; Van der Wiele et al., 1995,
Porter and Tanner, 1996; Van der Wiele and Brown, 1999).
The fourth and final dimension in this study concerns the use of internal and/or
external examiners. Previous research has illuminated a number of risks in third-party
evaluations. For example, Laffont and Tirole (1993) found the potential for firm-specific
favouritism by a purchasing authority towards a bidder. In addition, Loomba and
Johannessen (1997) identified the potential for conflicts of interest in third-party
evaluations. They found that examiners judging a third-party evaluation sometimes
also worked as consultants for competing organisations (Loomba and Johannessen,
1997). In addition, the accuracy of feedback given in third-party evaluation depends on
the training of the examiners (Coleman et al., 2000). This calls for experienced and
unbiased examiners in the public procurement process.
Empirical investigation
In order to achieve the aim of developing a better understanding of how to include
quality in public procurement, an empirical study was conducted using two data
collection methods: a document study followed by an interview study. The document
study comprised the results of the procurement regarding the quality aspect, that is,
the self-assessment work of the tenders, and the feedback reports from the third-party
evaluation. This was followed by the interview study, which involved the tenders,
the PTA and the examiners.
Results
The outcome of the public procurement process
The first data collection method consisted of studying the documents from the tenders’
self-assessment work and the third-party evaluation. Table I presents the results
of the third-party evaluation, showing the calculated percentages distributed on the
four criteria of the model: customer collaboration, leadership, development
and involvement of employees, processes, as well as the total calculated score and
percentage for each tender.
As Table I shows, the “development and involvement of employees” criterion had
the highest average score among the three tenders (28 per cent), while the “processes”
criterion had the lowest average score (13 per cent). Furthermore, the variation between
Development
Customer and involvement Total
Criterion collaboration Leadership of employees Processes percentage
tender % % % % and score
A 21 13 23 4 15 ¼ 150
points
B 13 20 29 8 18 ¼ 180
points Table I.
C 16 39 31 27 28 ¼ 280 The distribution of
points percentages and scores
Average 17 24 28 13 of third-party evaluation
TQM the tenders was also highest in this area (A: 4 per cent, B: 8 per cent, C: 27 per cent).
24,5 Interestingly, tender C had much higher scores for the leadership and processes
criteria. With 280 points, tender C was also the winner in terms of quality. Despite these
results, tender C’s costs were almost double those of tender B. Because the price factor
had been set to 80 per cent of the total evaluation, the winner of the total procurement
was tender B.
452 After the self-assessments of the tenders and the third-party evaluation, the aim
was to follow-up on the procurement by interviewing the involved parties, that is,
tenders A, B and C, the two participants from the PTA and two of the examiners.
Table II summarises the results of the interview study related to the three perspectives
and the four dimensions. Not all dimensions are relevant to all three perspectives.
The first dimension considered the model. Tender B preferred the self-assessment
model to the model based on KPIs. Tender A preferred the model based on KPIs and
the EFQM model. Another procurement process took place in parallel at another PTA
and involved all three tenders. The quality model used was a slightly modified version
of the SIQ model. Tender C was positive about this model, saying, “The criteria of the
model [y] are more connected to the concrete processes; for example, the launch of
traffic, the negotiations of time tables, preventive maintenance and assuring personnel
resources, instead of the more general criteria”.
The second dimension dealt with the balance between price and quality. Although
the quality factor was set to no more than 20 per cent in this procurement, tenders B
and C both felt that the quality factor would be of decisive importance. Tender B said,
“Yes, I thought [y] that we would be quite close concerning the costs [y] Calculating
costs is not that difficult”.
The third dimension concerned how the tenders performed their self-assessments.
Tender A engaged an external consultant since they did not have the necessary
experience. At tender B, the CEO himself took on the self-assessment despite having
any previous experience of self-assessment. Tender C had some previous experience in
this area and the quality manager performed the assessment, with help from the CEO
and other managers. The self-assessment took two weeks in total for tender A, about
one week for tender B and two weeks for tender C. The entire procurement process
took five weeks for tender A, three and a half weeks for tender B and about five weeks
for tender C. When estimating the level (percentage rating) for each criterion of the
model, two out of three tenders calculated their scores higher than the examiners did
and the third tender did not submit any ratings at all. Furthermore, when the interview
study was conducted about four months after the contract was signed, only one of the
tenders (C) had used the results from the self-assessment to improve their processes.
dimensions
Quality in public
procurement
for their service suppliers occurs during the public procurement process.
A procuring client must consider several issues when taking on a public
procurement. In order to capture these, the study took a comprehensive view covering
three perspectives (tender, PTA, examiner) and four dimensions:
(1) what model to use;
(2) the balance between price and quality;
(3) how tenders perform their self-assessments; and
(4) the use of internal and/or external examiners.
This study has produced four main implications derived from the dimensions
explored. First, purchasers must decide which model to use when evaluating tenders:
price only, use KPIs or self-assessment. When including quality, the model should
correspond with the quality maturity of the procuring client and tenders (see also
Sousa and Voss, 2002). In this procurement, the PTA considered the quality maturity to
be rather low and, therefore, used a basic quality model based on self-assessment
(see also Sousa and Voss, 2002). This research has shown that self-assessment
generates several improvement opportunities for the tenders (see Table I; see also Finn
and Porter, 1994; Gadd, 1995; Porter and Tanner, 1996; Van der Wiele et al., 1995;
Brown and van der Wiele, 1996; Eriksson, 2004). In addition, self-assessment takes
a comprehensive view that covers the whole system (Gadd, 1995; Zink and Schmidt,
1998), as opposed to alternatives such as KPIs that focus on performance, which can be
insufficient (see also Weimer and Seuring, 2009). Although self-assessment
incorporates measurements, this important aspect had an insignificant role when
using the basic “Springboard” model. A basic self-assessment model could therefore
increase its focus on performance by integrating KPIs. Another approach is to use
a self-assessment model such as the EFQM, which places greater emphasis on results
(see also Puay et al., 1998). Like the CMM, the self-assessment models have been
associated with negative aspects, such as resource-intensive and time-consuming,
which makes it more difficult for smaller organisations to work with these types of
practices (see e.g. Ghobadian and Woo, 1994; Eriksson, 2004; Persse, 2006), in
particular in a public procurement with a time limit.
The second implication is that, if quality is included, a suitable weight in relation to
price must be chosen. The balance between price and quality should also agree with
the quality maturity of the PTA and tenders (see also Sousa and Voss, 2002). This was
the first time that this PTA included quality in the public procurement and chose an
TQM 80/20 weighting based on the rather low-quality maturity in the industry. A review of
24,5 the eight out of Sweden’s 26 PTAs that have included quality in the procurement using
a systematic approach, they use different combinations for the weighting of price
and quality, such as 60/40, 75/25 and 80/20. Despite these forerunners, the public sector
as a whole, and specifically the public transportation industry, is highly focused on
price and uses the lowest bid as the solitary award criterion for contracts
456 (Palaneeswaran et al., 2003; Camén, 2003; Enquist et al., 2005; Waara and Bröchner,
2006). Although quality had a much lower weighting than price in this procurement,
two out of three tenders thought it could have had decisive importance since they
have experience of calculating their costs quite close. This shows that quality is an
important factor that has to be considered as it can determine the outcome of a
procurement process, despite having a low weighting compared to price.
The third implication deals with how the tenders perform their self-assessments.
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In line with previous research, this study showed that the tender with the higher
quality maturity – tender C – used internal resources to conduct the self-assessment,
engaged several managers including the CEO, calculated its scores more accurately
and followed up the feedback from examiners and established improvement plans.
This paper suggests to follow the process of conducting self-assessment that tender C
used in order to obtain lasting improvements (see also Hillman, 1994; Van der Wiele
et al., 1995; Porter and Tanner, 1996; Loomba and Johannessen, 1997; Van der Wiele
and Brown, 1999; Conti, 2001).
Fourth, a procuring client must decide whether to use internal and/or external
examiners. Three examiners were involved in this procurement, two of which were
external and one of which was internal. The external examiners were trained in self-
assessment, had previous experience of third-party evaluation in quality award
processes and were unbiased. The internal examiner had practised the “Springboard”
model within the PTA’s organisation and had a presumption of the quality of the tenders
involved in the procurement. Because the accuracy of feedback given in
the third-party evaluations is depended on the experience and training of the
examiners (Coleman et al., 2000), this paper suggests to engage experienced examiners in
a procurement process. Experienced, trained and unbiased examiners may also help
prevent possible favouritism. Still, previous research has shown that the compliance
level for having independent members in public auditing committees is relatively low
(Haron et al., 2005). As a final note, this paper has shown that by including quality in the
public procurement, the tenders are evaluating on the basis of “best quality practice”.
However, the public procurement is an isolated event and as this paper has shown, only
one of the tenders followed up the results from the third-party evaluation and established
improvement plans. Hence, the idea is to create a system that is dynamic and has a
service level that improves over time (Edler and Georghiou, 2007; Rönnbäck and Witell,
2009). There is minimal scope for this in the current tendering process in Sweden’s public
transportation system (Burwick and Sjövall, 2007; Enquist and Eriksson, 2007; Enquist
et al., 2011). The public transportation industry is characterised by a culture of quality
control. This research has shown that self-assessment is a promising approach to depart
from the culture of quality control towards quality management (see e.g. Dooley, 2000).
Self-assessment is not only useful for evaluating the quality of tenders in the public
procurement process but also for following up on the self-assessments with the operators
during the time of the contract, focusing on continuously improving quality for
customers (see also Edler and Georghiou, 2007). The ISO 9000 series are designed to be
used for internal and external audits, while organisations using self-assessment have the
possibility to participate in a quality award process which from the organisations’ Quality in public
perspective is a non-regular, non-compulsory proceeding. In order to transform procurement
self-assessment into a more dynamic approach, this paper suggests integrating the
procedure of certification, internal and external audits in the self-assessment process.
This paper is a first attempt to address the practice self-assessment in the public
procurement process. However, more research is needed in order to illuminate if these
implications are also valid in other contexts, both in those with policy and regulatory 457
constraints but also in non-regulatory environments.
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Further reading
Enquist, B. (1999), “Från produktionsparadigm till serviceparadigm? (From a production to a
service paradigm)”, Karlstad University Studies 1999:3, Karlstad University, Karlstad
(in Swedish).
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