Aiming at a functional market

Hansel’s activity and its framework agreements, worth €826 million, have a direct impact on the operation of the various markets. Hansel’s tasks include the promotion of market operations and competition, as well as meeting customer needs to as great an extent as possible.

Hansel has 380 suppliers, 29 of which are foreign. Foreign operators are involved in, for example, framework agreements for accommodation services in Brussels and for flight services. Suppliers for framework agreements related to information technology equipment are often large international companies, while the actual service providers are mostly subsidiaries in Finland.

“We treat all tenderers equally and do not discriminate them; a supplier’s place of domicile or size does not matter to us. Instead, our task is to ensure that Finnish and international service providers of various sizes have equal chances to participate in the tender competitions”, says Chief Category Officer Susanna Närvänen.

Forty-two percent of all Hansel’s suppliers are SMEs

Because Hansel’s customers often have large procurement volumes, it can be difficult for small companies to meet the order volume.

Hansel improves the chances for SMEs to participate in tender competitions by paying attention to turnover requirements and dividing purchases into smaller segments. The tendering competitions for the framework agreements for light motor vehicles, for example, have been arranged in product-group-specific parts, and the framework agreement suppliers chosen include several suppliers instead of one large supplier.

Hansel has also enhanced SME participation by encouraging the use of subcontractors and the establishment of consortia. The 400 or so contract suppliers used by Hansel have over 3,000 subcontractors.

“One way we take companies of various sizes into account is the use of operating-mode type tendering competitions. The framework agreement for office and IT supplies, for example, has been rewarded through a two-part tendering competition: one part covered direct deliveries and the other filling services. The suppliers selected are two different companies”, Susanna Närvänen explains.

SMEs as contract suppliers*

2017 2016 2015 2014 2013
Number of SME contract suppliers 158 159 170 164 173
Percentage of SMEs of all contract suppliers 42 43 44 43 46
Central procurement from SMEs, M€ 109 102 96 92 71
Share of central procurement from SMEs, % 13 13 14 13 10
*In 2012, the classification criteria for associations and for municipality and city-owned companies were revised; these are now included in “Other”. Classification has similarly been revised for some companies that are part of international groups, if these companies were previously classified as SMEs due to the small scale of operations in Finland.

Serviced for the entire country

A regional tendering process is arranged for approximately 15% of Hansel’s framework agreements. In 2017, the number of suppliers that had participated in regional bidding for Hansel’s framework agreements was 197. This translated to 52% of all contract suppliers.

In regional bidding, the tenderer only competes in its own region instead of a nationwide tendering competition. The decision on regional bidding is made separately for each framework agreement, on the basis of supplier market analysis and customer needs. Regional tendering processes can be used, for instance, when the framework agreement customers are located in different parts of Finland. Examples include chartered bus services, conference and accommodation services, and the most widely used framework agreement, occupational healthcare.

In some cases, product-specific distribution may be more appropriate than a geographic one. In translation services, for example, the language pair and field of translation offered by a supplier matter more than the company’s location. Tendering for scheduled flights is also arranged by city pairs.

What matters most in ensuring the functionality of the markets is the prevention of unhealthy price competition.

What matters most in ensuring the functionality of the markets is the prevention of unhealthy price competition. Hansel monitors the prices offered and steps in if it suspects that the prices offered are lower than the actual costs of producing the service. In addition to distorted competition, another risk is that the supplier won’t be able to provide the service at the offered price. If the price in an offer is suspected to be lower than costs, the offer can be excluded from the tendering process.