Making Spend Matter Toolkit - Bistriţa basic and advanced spend analysis case studies

The following case studies provide practical examples of how Bastriţa carried out the following two processes to understand, explore and adapt the Making Spend Matter Good Practice into their city:

Core transfer (basic spend analysis)
Optional transfer (advanced spend analysis, developing a strategic approach to public procurement, SME engagement and using social and environmental criteria)

Basic spend analysis case study

Bistriţa is based in Northern Romania and has historically viewed procurement as a process as being complicated and bureaucratic. They wanted to get involved in Making Spend Matter to transform the way in which procurement was undertaken in Bistriţa and by other institutions. By this they meant making the process more straightforward, making it more open to SMEs, and making it more focused not just upon price but other factors such as quality and social and environmental considerations.

Bistriţa understood the process of undertaking spend analysis as being part of this transformational approach. It would enable them to have a better understanding of how much they spend on an annual basis through procurement, who they spend money with, and where that procurement spend goes. Bistriţa already had lots of information about procurement, including a procurement plan, and viewed spend analysis as a way of filtering this information and using it more effectively.

Adapting the methodology

Bistriţa largely used the spend analysis tool and guide as developed through Making Spend Matter to undertake their spend analysis. However, they made some important adaptations to fit it to local circumstances and contexts:

First, they utilised an existing system to generate the analysis reports within, called SEAP. This is a national system utilised to characterise procurements, and it made sense to use this, rather than to introduce something completely new;
Second, Bistriţa had to add a lot of information manually into the spend analysis tool, particularly around the sectors of suppliers and whether suppliers were SMEs or not. There was no national database through which these considerations could be cross-referenced in a straightforward way;
Third, Bistriţa split the entries into the spend analysis tool into two types - competitive procedures and direct awards.

The spend analysis findings

Bistriţa undertook spend analysis for the financial year 2018/19 and undertook the analysis at three geographical levels - Municipality of Bistriţa, 'Regiunea Nord-Vest', and Romania. The analysis explored nearly 20 Million lei of spend, which accounts for 51 suppliers. Bistriţa split their analysis down by both the percentage spent with different types of organisations, for example, and the number of suppliers that were those different types of organisations. Overall, the findings of the spend analysis were as follows:

26% of spend in 2018/19 was with organisations based in Bistriţa, (20 suppliers); 58% of spend was within the wider region not including Bistriţa, (11 suppliers); with 16% in wider Romania, (20 suppliers);
99% of all spend was with SMEs in 2018/19 (46 suppliers);
The sectors with the greatest amount of procurement spend were construction and repairs and maintenance.

The Municipality of Bistriţa has also looked to transfer the spend analysis methodology and the principles of the project to other municipally owned organisations and wider anchor institutions in the locality.

Interpreting the findings

Bistriţa is utilising the findings of their spend analysis to inform their wider approach to procurement moving forward. They recognise that spend analysis is a simple to use tool, that is flexible and unlimited. In terms of interpretation, they see spend analysis as having three key purposes:

First, it can generate statistical indicators that can be used to demonstrate the achievement or otherwise of objectives detailed in local strategies and plans.
Second, it can be used to explore and evaluate where public money goes and can be used to demonstrate achievements around local economic development, for example.
Third, it can form part of the supporting information that informs the setting of Municipality budgets on an annual basis.

As I said in my brief presentation, I find this project extremely challenging, mostly because in Romania we are dealing with constant law changes. Although every city involved in this project has its own struggles, it's good to know we are not alone! We can find a way to achieve what we all aim for: a better procurement system, and why not, change the way our citizens think about how we spend public money.
Coralia Bulcu, Bistriţa Project Team Member

Re-using the transfer

Whilst recognising the value of the spend analysis tool, Bistriţa were keen to stress that it should not be used by contracting authorities to limit the 'import' of goods and services to the local level from other areas, as this is in contradiction with legislation. It can however be used to identify sectors, where there may be scope to support different enterprises to develop their capacity and bid for procurement opportunities in the first place. Bistriţa are going to continue to encourage other institutions to utilise spend analysis, and additionally engage with them on the importance of procurement in achieving wider local economic, social and environmental benefits.

Advanced spend analysis (anchor institutions) case study

The City of Bistriţa is based in the North West region of Romania, alongside cities such as Satu Mare and Cluj Napoca. It is one of 3 cities that make up the County of Bistriţa Nasaud and has a population of 75,076. In geographical terms the city has an area of 145 square kilometres, with a mix of urban and rural land use. The vast majority of residents are from Romanian and Hungarian backgrounds.

In economic terms, the City of Bistriţa has a strong manufacturing sector including around metallurgy, machine building, electro-technics, plastics, wood, textiles, and glass. There is also some primary industry in the form of mining and a growing service sector. The largest employer and private sector anchor institution is a German cable and wiring system company, which employs some 5,000 people from Bistriţa and its surrounding villages.

In social terms, the presence of a large private institution and a strong manufacturing sector means that unemployment in Bistriţa is extremely low at around 1%. However, there are challenges around the quality of employment with much work low skilled and low paid. The Municipality of Bistriţa is seeking to address such skills challenges through working in partnership with schools, colleges, and branches of universities, and with major employers based in Bistriţa.

Why engage with anchor Institutions

Public anchor institutions are important to a place and play a significant role in the local economy of that place. This is because they:

spend money buying goods, services and works through procurement;
employ people, often from the locality in which they are based;
own land and assets;
are unlikely to leave a place and re-locate elsewhere.

Most cities will have a number of anchor institutions based within their city boundaries, depending on their size.

The core anchor institutions based in Bistriţa include the Municipality of Bistriţa, the County Council of Bistriţa Nasaud, two branches of national universities, and several colleges. There is also the County Police Department and several other County level departments including the County Department for Culture and the County Payment and Inspection Agency.

Each of these institutions spends money buying goods and services. Engaging with them to understand what they spend their budgets on, and how this can potentially be used to bring additional economic, social, and environmental benefits is important both for progressing procurement in a more strategic way and also for maximising the opportunities these benefits present for the economy and communities of Bistriţa.

Barriers / challenges

There are a number of barriers / challenges which the Municipality of Bistriţa faces in relation to engaging with anchor institutions in their locality:

Procurement, because of the technical and legal constraints, is not an area where institutions have historically collaborated with each other;
The business of the anchor institutions can be quite specialised, which impacts their scope in terms of to undertake procurement more strategically;
Some of the anchor institutions based in Bistriţa are branches of larger institutions rather than entities in their own right. Therefore their procurement spend is largely determined elsewhere, thereby limiting the scope to maximise the impact of their procurement spend;
Building relationships - there are about twenty anchor institutions in Bistriţa - takes time;
Covid-19 has impacted on momentum, as the stakeholder group of anchor institutions has been focused elsewhere, and there have not been any meetings for a number of months;
Lack of interest from private companies as they are not obliged to use public procurement platforms;

Actions taken / changes made:

The Municipality has undertaken a number of actions. It has:

Set up a local stakeholder group comprising Municipality departments,
- e.g. Local Police, Social Department, Municipal Culture Department and the branches of Cluj Napoca University and the Technical University of Cluj Napoca, along with the Chamber of Commerce to explore the extent to which collaboration around procurement was possible;
Started to share the spend analysis tool with anchor institutions - this has been partially done with some institutions and has yet to be done with others.
Explored how the Municipality can engage with wide range of other anchor institutions based in Bistriţa.

What worked

As a result of these actions, there is:

A greater awareness of the role that anchor institutions play in the local economy, leading greater joined up thinking;
A willingness of anchor institutions to engage in something very new;
A greater understanding amongst the anchor institutions of the importance of procurement and how this can be used more strategically;
Recognition of the importance of personal connections: Building relationships takes time and those institutions who engaged initially did so more because of collaborations with the Municipality which existed as a result of participation in previous projects, than because they understood the potential of undertaking spend analysis and using procurement more strategically. As the project, progressed, the initial members, using their own personal contacts, invited other institutions and thus the original local stakeholder group was enlarged to encompass a greater number of institutions thereby enabling greater impact potentially;
Understanding of the benefit of one-to-one contact: With the onset of Covid-19, face-to-face group meetings were no longer possible. Instead there have been a number of one-to-one discussions which have enabled the spend analysis tool to be discussed directly with those likely to be using the tool and undertaking the analysis. These discussions have been very useful in persuading those institutions of the potential of understanding their procurement spend in more depth and how they can use that knowledge further.

What worked less well

At the beginning of the Transfer Network, the Municipality envisaged that the anchor institutions would be the big public institutions, which had originally agreed to take part in the local stakeholder group. But then, as the project was getting a stronger shape, other interests were at stake, so they shifted to smaller institutions, the majority being subordinate to the Municipality;
The pandemic situation changed the original schedule the Municipality had planned for the transfer of the spend analysis tool, so everything was delayed for some months. However, positively, the Municipality is confident that by the end of the project most of the anchor institutions will have finished the analysis;
The constraints of the national legal framework have meant that it is difficult for the Municipality to implement at local level all the lessons learned within the Network, and therefore limited the transfer of knowledge.

Lessons learned

Baby steps are important - making changes as to how public procurement is undertaken one step at a time through showing how it is done, and then helping others to put it into practice too;
Change has to start somewhere - despite the challenges of the public procurement framework, the Municipality is leading the way in being an example to others, particularly anchor institutions, with regards to how public procurement can be done differently
Need to create a snowball effect, start with smaller anchor institutions and then larger anchor institutions will become more interested in being involved;
Things do not always turn out the way they are originally foreseen. Sometimes it is those who seem the least likely to get deeply involved are the ones in the end who engage the most and become the real champions of progressing public procurement.