DFØ 2024 Survey: Public Procurement in Norway

Public procurement serves as a driving force in Norway’s public sector, involving an annual expenditure of approximately NOK 742 billion. To ensure that this significant spending is managed efficiently and sustainably, the Norwegian Agency for Public and Financial Management (DFØ) conducts a bi-yearly survey to assess the market’s current state and development initiatives. 

This year’s 2024 survey offers a well-rounded, behind-the-scenes perspective on the procurement landscape. With a growing interest in participating in the benchmark, over 600 central and municipal agencies, responsible for everything from office supplies to infrastructure projects, accepted DFØ’s invitation.

The survey dives into a series of key procurement areas, shedding light on both progress and areas of improvement. From governance, collaboration, competence, digitization, to environmental practices and innovation, DFØ offers valuable insights into procurement strategies and practices. 

But DFØ isn’t merely observing these changes. By offering tailored management panels, DFØ helps organisations in identifying their strengths and areas needing improvement. 

 

What did this annual check-up reveal? 

The survey highlights: 

• Streamlined Procurement Processes. A notable rise in strategic maturity, as more public agencies transform their routine operations into strategic powerhouses, with a focus on streamlining all procurement processes.  

• Environmental Work and Innovation. A keen emphasis on climate, environment, and innovation, with more companies adopting low-emission solutions and circular economy measures, reflecting a strong commitment to environmental sustainability.

• Digitalisation. The growing use of digital tools in procurement, indicating a shift towards more efficient and transparent processes. Contract follow-up remains a high priority, ensuring that procurement contracts are executed effectively and that the intended benefits are realised. 

 

Looking ahead, it is clear that Norway's procurement sector is moving towards a more data-driven, unified, and sustainable approach, with a strong focus on regulatory compliance. The launch of our new platform, Mercell Tendering, aligns perfectly with the forward-looking prospects of the Norwegian public market. 

Let’s delve into the survey’s findings across key areas for a more advanced and responsive procurement system in the Norwegian market.

 

1. Strategy Beyond Documentation

Almost half of the DFØ respondents, about 48 percent, have a central unit handling purchases. A team that cares for commercial assessments, contract follow-up across the purchasing portfolio, and systematic reporting to management. 

Having a strategy in place, which goes beyond mere paperwork, is critical. It gives clear direction and implementation power for all procurement activities. It also helps keep everyone focused on purchasing goods and services through follow-up and measurement. 

Companies that have a procurement strategy have better senior management buy-in, as well as greater collaboration across the organisation. They are also generally more mature in all areas. About 62 percent of respondent companies have a procurement strategy, whereas 29 percent lack clear rules and governance documents. 

Strategic use of procurement requires management to do more with the resources they have and stay informed about all procurement key areas. Mercell enables public buyers to stay in control of the entire procurement process from planning to ordering and analysis. All modules are connected on a common architecture, ensuring seamless transfer of data and reducing time spent, manual effort and reuse of information, which in turn contributes to more and more efficient processes.

 

2. Value-added Procurement Phases

Looking at the different procurement process stages, the Norwegian public agencies conduct the most value-added work in the requirements and planning phase, followed by the contract management one.

 

 

Overall, buyers tend to prioritise operational tasks over strategic activities. Essential tasks like market and risk analyses are occasionally sidelined, while activities related to competition implementation (keeping up with deadlines) are diligently addressed. 

Moving forward, for optimal procurement outcomes, public agencies are advised to strike a balance between operational efficiency and strategic foresight.

 

3. Expertise Deficit

Shockingly, only one in five contracting authorities feel adequately equipped in procurement to foster innovation and uphold human rights standards. This deficiency extends to areas like contract follow-up and market dialogue. 

Contract Follow-up: A Critical Component

Among the various procurement processes, contract follow-up emerges the weakest link, with a mere 46 percent reporting a satisfactory level of expertise. Adequate proficiency in contract follow-up is indispensable for the public sector's successful transition toward sustainability and careful resource use. Recognizing this, 1 in 2 companies plan to invest in a Contract Lifecycle Management (CLM) tool in the next three years, according to PWC. 

More public organisations take a proactive approach to ensuring that wages, working conditions, and other critical factors are rigorously monitored and upheld throughout the contract lifetime. The evolution of contract follow-up and procurement strategies highlights the growing importance of ethical considerations in procurement.

At Mercell, Contract Lifecycle Management is seen as a strategic tool that offers a clear overview of all contracts, which empowers public buyers to act proactively, minimise risks, and unlock potential savings from drafting to execution. Even the less experienced procurement professionals can create new contracts with templates and expedite the process with electronic signatures, reducing manual work and increasing process efficiency. With tools to monitor deadlines and address deviations through direct claims to suppliers, we offer dynamic follow-up within the system. Automatically alert suppliers about needed actions or quickly propose contract claims in case of violations or disputes.

 

Analytical Skills: Bridging the Gap

Analytics readiness remains another area of concern, with only 21 percent of procurement professionals indicating sufficient expertise. This poses a significant challenge in providing businesses with the analytical insights needed for informed decision-making and prioritisation.

Public buyers are tasked with the critical role of allocating resources effectively, ensuring transparency, and delivering value for public funds. By leveraging data analytics, professionals within the purchasing unit can identify trends, anticipate market fluctuations, and prioritise purchasing decisions. 

Mercell recognizes the importance of integrating detailed cost analysis into procurement systems, leading to real-time data analysis, predictive analytics, and performance tracking. By connecting the invoice data, Mercell Spend Analysis empowers public buyers to track individual supplier spend, or track spending across suppliers.

 

Positive Trends in Market Dialogue

While the market is posed by challenges, there are great positive developments. The Norwegian public space engages in more dialogue with its suppliers. This engagement enables a deeper understanding of current and future needs, competitive landscapes, and environmental considerations. 

Mercell Tendering provides a structured framework for supplier development and innovation. The platform includes tools for supplier follow-up, evaluation, and development, enabling agencies to build strong and effective supplier relationships.

 

4. Environmental Work and Innovation

As per the DFØ survey, environmental goals are no longer an ‘elective subject’, but an area of high priority. Encouragingly, more public sector companies are introducing measures for the majority of prioritised categories, and with stricter climate and environmental requirements for public procurement set to take effect from January 1, 2024.

Despite these advances: 

• Only 29% of businesses rigorously follow up on established environmental goals, with time and resources as the main barriers. 

• Just 14% believe their procurement practices have led to substantial reductions in climate and environmental impact. 

• While more companies are facilitating new products and services, only 27% actively explored this, in the past two years. The main reason for seeking innovation is to improve the quality of products and services, followed by the need for time-saving solutions.

Achieving these climate and environmental goals requires adequate time, resources, and expertise. The Mercell Supplier Relationship Management module puts the public buyer in the driver's seat, providing the needed tools to set concrete sustainability goals, measure suppliers’ ability to deliver and, not least, establish KPIs that give the buyer confidence when reporting and documenting their sustainability efforts. Whether the main goal is to comply with the Transparency Act, the EU taxonomy or CSDDD, Mercell delivers. 

 

5. Digitalisation

The aim of a fully digital process is to manage the source-to-payment cycle, ensuring buyers receive the correct products and prices as per agreements. Among the DFØ highly mature company respondents, 52 percent experienced significant simplification over the past two years due to digitization. They benefited from more efficient purchases, streamlined processes, fewer errors, and better regulatory compliance. According to PWC, the procurement space is projected to go 70% digital by 2027, with efficiency gains, transparency, and performance as the main drivers. 

While ICT and cloud services demand both technical and procurement expertise, only 5 percent of companies have a dedicated plan for procuring these services.

At Mercell, our ambition is to take the procurement function out of Excel and Word and into the cloud. Mercell Tendering automates and digitises your procurement processes, from needs assessment, to internal dialogue and tendering, to contract follow-up, ensuring that all information is transferred seamlessly from one step to the next, reducing manual work and increasing process efficiency.

 

The 2024 DFØ survey highlights the dynamic progress within Norway's public procurement sector. It reveals significant progress in streamlining processes, advancing environmental sustainability, and embracing digitalisation. 

Conclusion

As Norway continues to prioritise regulatory compliance and data-driven decision-making, the introduction of platforms like Mercell Tendering aligns seamlessly with these forward-looking initiatives. The insights from this survey are crucial for fostering an advanced and responsive procurement system in the Norwegian market.

If you are interested to see how Mercell can assist you and your organisation in all aspects of your sourcing and tendering process, book a demo here.