Cost Overrun and Procurement Competence in Sweden

Last year, public procurement in Sweden was valued at SEK 683 billion, which is the equivalent of one sixth of the Swedish GDP. The effectiveness of public procurement directly affects the costs and quality of many goods and services provided by the public sector.

So-called mega projects, investments in buildings or infrastructure valued at over SEK 2.5 billion, are often associated with substantial cost overruns, causing outrage in the public debate. However, quality underprovision should concern people just as much as cost overruns.

»When effective monitoring and incentive mechanisms are not in place, which is often the case in Sweden, there is a high risk that the quality of publicly procured goods and services is lower than it could be. Therefore, collecting data in all stages of the procurement process is of the essence. That makes it possible to follow up on the price and quality of delivered goods, as well as to evaluate the performance of the procuring unit«, says Giancarlo Spagnolo, professor of economics at the Stockholm Institute of Transition Economics (SITE) at the Stockholm School of Economics.

According to Giancarlo Spagnolo, who is also the former Head of Research of the Italian Central Procurement Agency (Consip Spa), both cost overruns and quality shortages are largely the result of insufficient competence in public procurement.

»It is a big mistake to view procurement as purely an administrative task. The profession is much more complex. In addition to legal expertise, effective procurement requires skills in engineering, negotiations, economics, finance, and project management. Unless investments in competence are made urgently, the problems we have seen during the last years in Swedish public procurement will multiply«, Giancarlo Spagnolo concludes.

Giancarlo Spagnolo recommends that the Swedish government should:

> Create master’s programs in procurement management that include the specificities of public procurement and lead to a certified degree.

> Introduce clearer career paths with opportunities for promotions and higher wages for public procurers, as well as increase the demand on knowledge and skills when recruiting for public procurement positions.

> Enable and improve the evaluation of public procurement by systematically collecting and analysing data.

This report is published within the framework of the SNS research project Sustainable Urban and Rural Planning.