Public procurement spend analysis at a national level in Finland

DOIhttps://doi.org/10.1108/JOPP-06-2019-028
Publication Date03 June 2019
Pages108-128
AuthorTimo Kivisto,Veli Matti Virolainen
SubjectPublic policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public finance/economics,Taxation/public revenue
Public procurement spend
analysis at a national level
in Finland
Timo Kivisto
Timo Kivisto Consulting Ltd, Espoo, Finland and
School of Business and Management, Lappeenranta University of Technology,
Lappeenranta, Finland, and
Veli Matti Virolainen
School of Business and Management, Lappeenranta University of Technology,
Lappeenranta, Finland
Abstract
Purpose The purpose of this paper is to make a contribution for the unclear boundaries of public
procurement in accounting terms. International organizations, public organizationsnational control entities
and managers are interested in monetary spend. Public procurement literature and the system of national
accountslack proper denitions of public procurement in accountingterms or are framed by legal procedures.
Design/methodology/approach The authors draft clear monetary denitions for procurement
boundaries and develop an alternative, more rened bottom-up method of calculating public procurement
spend.
Findings The calculation for Finland is based on reliablesecondary data and shows considerably higher
procurementspend than traditional SNA statistics or procurement notices.
Originality/value The calculation can be replicated in othercountries using the 2008 SNA coding for
organizations.The paper highlights the need to addressin-house procurement in future research.
Keywords Public procurement, Spend analysis
Paper type Research paper
Introduction
Knowledge of the amount of public procurement (PP) is important for several stakeholders.
For example, international organizations (e.g. United Nations (UN), International Monetary
Fund (IMF), World Bank (WB)) are concerned about efcientuse of public money as part of
developing countriesfundsare subsidies from other countries.
Theoretically,the monetary value of PP, that is, PP size or spend, is either loosely dened
or not dened at all (Prier and McCue, 2009). Instead,researchers rely on gures provided by
international organizations (Patrucco et al.,2016) or national statistics on governments in
general or certain governmental departments (Pegnato, 2003;Coggburn, 2003). In a review
of the literature on public procurement (Patrucco et al.,2017), the topic was not even
mentioned. Usually, PP estimates are in the introduction part of the articles. Therefore, a
spend analysis of all publicentities on a national level is required.
The author would like to thank Jan Telgen, Michael Essig, Alessando Ancarani, Christine Harland
and the participants of IPSERA 2015 Conference for their invaluable contributions to this research.
JOPP
19,2
108
Journalof Public Procurement
Vol.19 No. 2, 2019
pp. 108-128
© Emerald Publishing Limited
1535-0118
DOI 10.1108/JOPP-06-2019-028
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1535-0118.htm
PP is relevant to several international organizations that providenational-level guidance
or information. For instance, the UNs legal body, UNICITRAL, developed a Model Law for
Public Procurement (UNICITRAL, 2011) and the WB examines processes, performs
evaluations and creates benchmarks related to PP (World Bank, 2017). Financial
information is collected in individual countries by statistical bureaus, central banks and
ministries of nance. The System of National Accounts (European Commission,
International Monetary Fund, OECD, United Nations, and World Bank, 2009) is a set of
guidelines for collecting informationsupported by the UN, IMF, Organization for Economic
Co-operation and Development (OECD), EU and WB. The IMFs Government Financial
Statistics (GFS) (InternationalMonetary Fund, 2014) is a slightly differentframework with a
similar purpose. The OECD also provides nancial statistics concerning PP, and the
European Commission uses SNA-basedreporting as a PP indicator. Collectively, these data
represent the total monetary volume in each country according to the denitions in each
organizationsrespective manual.
Other types of data collection involve a legal framework. The European Commission
cooperates with the OECD to produce the OECD SIGMA series of reports. However, the OECD
(2010) recognized monetary value beyond the EUs legal regulations. Further, the World Trade
Organization (WTO) collects statistics concerning procurement under the Agreement on
Government Procurement (GPA) (World Trade Organization, 2013), and the US General
Accounting Ofce used WTO statistics when determining the importance of the GPA for the
US economy (USA Government Accountability Ofce, 2015). Nonetheless, the World Bank
Group (2016,p.5)nds that reliable statistics on the size of PP in economies around the world
are still not available.
This article provides clear denitionsof PP to help identify monetary ow that can and
cannot be consideredprocurement. In particular, it considers European legislationregarding
PP, lists the organizations that must follow PP laws and identies monetary ows that are
beyond legal PP frames but are still regarded as PP. It then presents a calculation model
based on SNA denitions and supported by other secondary data sourcesto provide a valid
measure of PP size, especially for managerial purposes. Theoretically, the article provides
clear denitions of PP and reveals a neglected area in PP research: the use of in-house or
government-to-governmentsuppliers.
The paper is organized as follows. The literature review discusses national spend as a
topic in PP literature. The methodology section explains the data sources and calculation
methods. The denition section determines the boundaries of PP. The calculation section
presents both the calculation procedure and results from multiple angles. The discussion
section analyzes the results, and the conclusion section discusses the implications of this
study and highlightspossible future research.
Literature review
The theoretical foundation of the research is the supply chain management (SCM) theory.
Spend analysis, whichis a tool or process in strategic sourcing, is also applied. Harlandet al.
(1999) present four levels of supply chain: Level 1 is supply within the rm boundaries,
Level 2 is supply in a dyadic relationship, Level3 is supply in an inter-organizationalchain
and Level 4 is supply in an inter-organizational network. These all levels are present in
public procurement. This article is looking at supply chains at Level 2: supply in a dyadic
relationship.
There have been few systematic literature reviews related to PP. However, at least two
comprehensive literature reviews were published recently in the Journal of Public
Spend analysis
109

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