Not always profitable joint and central contracts

Purchases made at the central level by the state administration, public authorities or local governments are not always profitable. NIK has found that in some cases individual contracts proved more beneficial. Most discrepancies to the disadvantage of centralised contracts were detected by NIK auditors in the judiciary. As opposed to local governments which usually can ensure profitability of central purchasing.

The reason is simple – public authorities believe that centralised contracts are more advantageous as they are handled on a large scale and so their efficiency is not evaluated on an on-going basis. As a result, the compliance with procedures does not always translate into more profitable purchases. NIK has underlined the need to change the law and implement an obligatory, systematic analysis of profitability. The best solution would be on a yearly basis as this is the rhythm of planning central purchases.

Under the Public Procurement Law Act of January 2004, contracts can be made jointly by the government administration units, other state authorities as well as local government units. It was assumed that centralised procurement would allow better pricing and other procurement conditions as compared with individual contracts. Such contracts can be awarded as central contracts – when a central contracting authority acts for the benefit of a group of contracting authorities or as joint contracts – when another entity acts for the benefit of a group of contracting authorities.

In case of the government administration, the President of the Council of Ministers indicated the Government Administration Support Centre as the central contracting authority for 69 units. They are obliged to purchase deliveries or services from the central contracting authority or contractors selected by that entity or take benefit of framework agreements concluded by that entity. There are also joint public procurement systems operating in the government administration.

In line with the guidelines issued by the Commander-in-Chief of the Police, some deliveries and services for the Police organisational units are provided by the Police Headquarters. They are among others related to armament, transport and special equipment as well as IT services.

The Minister of Justice established a joint procurement system for the judiciary, where courts of appeal were designated to contract selected deliveries and services for common courts of the appellate jurisdiction. Electric energy, fuel, cars as well as insurance, postal and telecommunications services were “centralised” nationwide and the Cracow Court of Appeal was designated to purchase them. The Court Director established the Judiciary Purchase Centre which operates on the Court’s behalf. At the same time, the Minister reserved for himself the purchase of services and deliveries related to central IT systems.

By way of a resolution, local government units may indicate or establish an entity performing tasks of the central contracting authority. In the same way they may also specify supporting units, e.g. joint service centres and supported units and define the scope of duties allocated to supporting units as part of joint service, in order to provide joint administrative, financial and organisational service to supported units.

Besides, all contracting authorities can jointly conduct public procurement procedures, designating from among themselves a contracting authority entitled to conduct the procedure and award the contract on their behalf and for their benefit.

NIK has compared prices in centralised and individual contracts. This comparison shows that centralisation is not always of benefit. Advantages of public contracts need to be further analysed in comparison with individual contracts. Though, the formal obligation to conduct such analyses functions only in case of the central system in the Chancellery of the President of the Council of Ministers. In other institutions, analyses were carried out at choice and not in case of all purchases. According to NIK, the auditees mostly adhered to applicable procedures when executing central and joint public contracts. However, in some cases such contracts were less profitable than individual contracts.

As for the Government Administration Service Centre, NIK made a detailed comparison of prices in six central contracts in 2018-2020 with prices obtained by 13 selected government administration units where the Chancellery Head approved an independent purchase of similar goods. The analysis revealed that office and antivirus software, cars and office paper were purchased in central contracts at lower prices. Higher prices were noted (except for one case) in a central contract for the delivery of office devices. Similar prices were related to the purchase of desktop computers and tablets.  

At the same time, the Government Administration Service Centre discharged its obligation to prepare and submit to the Chancellery Head a report for 2015-2017 on the effects of central contracts and related savings. The report included information on remuneration and costs of holding the function of the central contracting authority as well as costs and benefits related to central contracts. Savings at that time exceeded PLN 94 million and were mostly related to stationary telephony services. According to NIK, preparing analyses of this kind for shorter periods would help the central contracting authority to assess costs and benefits on an ongoing basis with regard to the executed central contracts and could be used to optimise the procurement planning process for the following year.

Detailed comparison of commodity prices in four joint public contracts awarded by the Police Headquarters with prices of similar commodities in public contracts awarded individually by four provincial commanders of the Police showed that in two contracts awarded by the Police Headquarters the prices were lower, in one case similar and in one – higher than in individual contracts.

In 2018-2020, the Police Headquarters did not conduct any formal or system analyses of economic results related to joint public contracts, e.g. by comparing prices in joint and individual contracts. The analyses actually conducted by the Police Headquarters referred only to selected contracts and usually were related to whether or not they comply with the requirements defined in technical specifications. They also dealt with standardisation of equipment and furnishing.

In case of individual purchases for the judiciary, in most contracts (63%) prices were lower than the ones obtained by the Judiciary Purchase Centre. Some goods were purchased individually even 84% cheaper. That was revealed by the detailed comparison (made by NIK auditors) of prices of 23 selected commodities in nine joint contracts awarded in 2019 with prices of similar commodities in individual contracts awarded by the directors of four courts of appeal - in Lublin, Poznań, Rzeszów and Warsaw.

The Judiciary Purchase Centre was not obliged to conduct system analyses of savings and effects of awarding joint public contracts. The analyses conducted by the Centre were unit-based and dealt with selected goods and services. According to NIK there is a need to consider, in consultation with the Court of Appeal in Cracow, obliging the Judiciary Purchase Centre to make system analyses of this type. Their results could help both the Centre management to optimise efficiency of joint contracts and the Director of the Court of Appeal in Cracow to evaluate the Centre’s operations, especially in terms of their profitability as compared with decentralised contracts.

NIK’s recommendation is confirmed by a good practice on part of the Judiciary Purchase Centre: following an economic analysis in 2018 it withdrew from central purchases of office supplies in subsequent years stating that more preferential terms can be achieved in individual purchases.

Prices of goods and services in contracts executed by joint service centres for local governments were in most cases more favourable than in individual contracts executed e.g. by schools or kindergartens. Detailed comparison of selected prices in 87 contracts indicated that the prices obtained by most joint service centres (8 in 14 auditees) were more favourable. In other cases the prices of purchased goods and services were at a similar level. Only in one of the audited joint service centres the purchase of services for supported units proved less profitable than individual purchases.

Half of the audited joint service centres analysed effects and savings related to public contracts. It is worth noting that the law does not impose such obligation, so NIK appreciates that fact even more. However, not in all cases such analyses were made in writing which makes it impossible to verify if and how they were conducted.

When preparing and executing central and joint contracts, the auditees usually complied with applicable principles and procedures. The identified irregularities did not disturb the task performance in a significant way. Some procurement participants in the state administration failed to discharge their reporting obligations or properly protect the interests of contracting authorities in local governments. NIK has addressed relevant recommendations to the auditees’ heads to eliminate the irregularities.

System recommendations

For improved efficiency, some regulations on central and joint procurement systems need to be amended. Therefore, NIK has made the following system recommendations:

  • to the Minister of Justice - to consider, in consultation with the Court of Appeal in Cracow, obliging the Judiciary Purchase Centre to make system analyses of savings and effects related to awarding joint contracts;
  • to the Head of the Chancellery of the President of the Council of Ministers – to consider more frequent analyses of savings and effects related to awarding central contracts;
  • to the Commander-in-Chief of the Police – to consider implementing systematic analyses of savings and effects related to awarding joint contracts;
  • to the presidents of towns and cities, mayors and commune heads  - to consider obliging joint service centres to conduct systematic analyses of savings and effects related to awarding joint contracts.

Article informations

Date of creation:
22 April 2021 23:36
Date of publication:
22 April 2021 23:36
Published by:
Marta Połczyńska
Date of last change:
22 April 2021 23:42
Last modified by:
Marta Połczyńska
An illustration: on the left a mini shopping trolley on the computer keyboard; on the right the same mini shopping trolley but knocked over © Adobe Stock

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