Utilization of private purchasing best practices in procurement of services in Finnish municipalities - The case of housing services for the elderly

The importance of purchasing in the private sector has been acknowledged, at least in successful organizations. Purchasing has transformed from being a clerical function to a strategic function. Public procurement has been criticized due to poor quality of the purchased services. Time after time the tendering is assessed by Finland's Market Court often due to an equivocal invitation for bid. Public procurement is claimed to be simply a legal-based function. In several studies it has been acknowledged that public procurement has focused too much on the competitive tendering process, rather than on the planning phase of the tendering as well as on the follow-up phase of the purchased service. The number of the elderly is growing fast in Finland and it is therefore important to organize the services provided by the municipalities in Finland effectively. The objective of this research is twofold. First, private purchasing best practices are identified via literature-based research. Second, a multiple case study covering municipalities in the metropolitan area is conducted with the aim of examining whether the identified private purchasing best practices are used in procurement of services. This study covers tendering for housing services for the elderly during 2007-2012. The study is a multiple case study covering Helsinki, Espoo, Vantaa, Lohja, and the Karviainen federation of municipalities. The study was conducted by interviewing persons involved in the tendering of housing services for the elderly. The best practices in private purchasing that were identified are market knowledge, purchasing strategy, total cost of ownership, cross-functional teams, co-operation, and sustainability. The results indicate that these best practices are indeed partly utilized in procurement of services in the cases studied. Cross-functional teams were used in all studied cases. Purchasing strategy was established in some municipalities during the study period. Only Helsinki studied properly the supply market prior to tendering. Total cost of ownership and co-operation were not utilized in a wider scale. The identified best practices in private purchasing can be criticized due to limited number of sources of information. The number of studied tendering cases could have been higher. This research is the only research that studies the utilization of private purchasing's best practices in public procurement of services. Its value is that it sheds light on the resources within public procurement organizations, showing the shortage in purchasing skills, purchasing strategy, and time. In the forthcoming social and health care reform the competences of the procurement personnel should be recognized and more clearly defined.