Government can save almost a billion euros a year through smarter procurement
The Dutch government can save hundreds of millions of euros annually by purchasing more often on the basis of the lowest price and better accessibility of purchasing data. This is evident from two recent literature reviews by the Utrecht University Centre for Public Procurement (UUCePP), carried out by Vitezslav Titl and Fredo Schotanus on behalf of the Ministry of Economic Affairs and Rijksinkoopsamenwerking (RIS). The studies offer concrete tools to focus more specifically on cost efficiency, while this does not have to be at the expense of quality, or only to a limited extent.
Tenders based on lowest price can lead to annual savings of €255 to €510 million
The first study shows that a 5 to 10% shift from standard use from best price-quality ratio (BPQR) to lowest price procurement could lead to annual savings of €255 to €510 million. These savings are particularly true for simpler tenders, such as office supplies and standard maintenance work, where quality may hardly differ between suppliers. The Netherlands currently uses BPQR much more often than almost all other EU countries, while this model does not always lead to a better price-quality ratio. This is partly due to a legal obligation, from which deviation is only allowed with motivation.
Transparency and national dataspace have annual savings potential of €140 to €465 million
In addition, the second study shows that better accessibility of public procurement data also makes substantial savings possible. Increased transparency and the use of a national public procurement data space – a central place for unlocking procurement data – will allow contracting authorities to enable suppliers to compete with each other in a more targeted and effective way, to purchase together more often, to learn better from each other, and to prevent corruption or nepotism more often. The researchers estimate the annual savings potential of this at €140 to €465 million.
All calculations in the report are based on scientific literature on lowest-price purchasing, BPQR, and data accessibility. The researchers have converted results from previous research in other countries to the Dutch context.
Even small improvements have a big financial impact
The large size of Dutch public procurement, €116 billion in 2023, means that even small improvements have a major financial impact
, says Fredo Schotanus. With targeted choices in pricing models and data access, the government can structurally purchase more efficiently.
Vitezslav Titl adds: In addition to the savings we quantified, there are probably other savings opportunities that we have not been able to calculate in these studies. Think of purchasing less often and critically reconsidering high quality standards where they do not provide high demonstrable added value.
This concerns, for example, situations in which existing solutions can be used for a longer period of time or situations in which very strict quality requirements are imposed in tenders, which, although guaranteeing quality, provide little added value compared to lower, cheaper alternatives. Especially in times of budget cuts, it is important to also take a closer look at these kinds of broader strategic choices.
Concrete tools and care
The researchers emphasize that not all tenders are suitable for the lowest price and that BPQR can be of added value for more complex or social assignments. They also argue for careful data management and limiting the administrative burden when setting up a data space.
The research reports offer concrete tools for policymakers and buyers to focus more specifically on cost efficiency in public procurement, while this does not have to be at the expense of quality, or only to a limited extent.
Learn more
Want to know more about these studies? Please contact Prof. Fredo Schotanus: f.schotanus@uu.nl or Vitezslav Titl: v.titl@uu.nl.
Or download the research reports: 'Analyse effecten verschillende prijsmodellen' ('Analysis of the effects of different pricing models') and 'Onderzoek naar een nationale dataspace voor overheidsopdrachten' ('Research into a national data space for public procurement').