CENTRALIZING THE ORGANIZATION OF CONTRACTING

AUTHORITIES IN GERMAN MUNICIPALITIES: A MULTICASE ANALYSIS FOR THE DETERMINATION OF PUBLIC

PROCUREMENT MATURITY
Matthias Einmahl, Professor in Public Administration, University of
Public Administration for the state of North-Rhine Westphalia, Germany;
Markus Amann, Vice Director of the Research Center for Law and
Management of Public Procurement (FoRMB), Germany;
Michael Essig, Chair of Materials Management and Distribution,
Director of the Research Center for Law and Management of Public
Procurement (FoRMB), Germany.
ABSTRACT
Municipalities have an imperative place in the federal structure of
the German state mirrored in the fulfillment of public tasks, their
structural sovereignty and a significant local public purchasing volume.
The way of organizing local procurement has varied through time and
differs considerably from municipality to municipality. Beginning with a
dominating concentration on construction procurement the attention has
moved to non-construction procurement due to the rising importance of
information technology and outsourcing of services. Additionally,
centralization initiatives occurred in the municipal public procurement
affecting organizational and structural tasks which are core of the
underlying paper. Based on the approach of maturity selected mediumsized German municipalities ranging from 110,000 to 186.000 residents
are analyzed in terms of the centralization degree of their public
purchasing function. Insights reveal heterogeneity in organizing the
procurement function in German municipalities.
INTRODUCTION
Municipalities play an important role in Germanys federal structure
since they fulfill basic public functions. Being self-administrated,
municipalities possess a sovereign nature and offer services to their
citizens based on the subsidiarity principle. Regarding the number of
municipalities in Germany, the census bureau identified 3,104
autonomous and 10,044 dependent municipalities in Germany in the year
2002 (Destatis, 2005). As a matter of fact, German municipalities own a
significant share estimated up to 55% of the total public purchasing
volume in Germany (Schwarting et al., 2009, p. 3). For the year 2013 the
European Commission reported a public purchasing volume of 1,786
billion Euros in total (EU) and for Germany 401 billion Euros (EC,
2015). German municipalities enjoy a great degree of freedom in how to
organize their procurement activities. Art. 28 (2) of the German
constitution gives municipalities the right to regulate all local affairs on

their own. A cornerstone of this right is organizational autonomy

(German constitutional court in BVerfGE 91, 236; Burghart, 2015). For a
long time, public procurement outside of construction received little
legislative or practical attention. The attention focused on construction
procurement where the need for a certain degree of professionalism was
all too evident to be ignored. It has been a long tradition in German
municipalities to employ architects and construction engineers to manage
construction and maintenance of public infrastructure efficiently. The
first set of procurement rules, the so-called VOB, which was enacted
in 1926, dealt exclusively with construction procurement. Procurement
outside of construction received its set of rules, the VOL, only 10 years
later. Procurement outside of construction was often staffed with
employees who had failed elsewhere and had to be put somewhere where
they could supposedly do little harm. The disregard for non-construction
procurement was reinforced by the fact that in earlier times the volume
of construction procurement far outweighed the volume of nonconstruction procurement. Two developments changed that: First, the rise
of information technology and an increased demand of hardware,
software and services which go with it. Second, the tendency to
outsource many services previously carried out by municipalities
themselves (e.g. waste management, office and building cleaning).
The rise of the New Public Management concept in the 80s set off a
discussion about introducing private sector management methods to
public administration. These ideas were picked up by an influential think
tank for municipal matters in Germany (KGSt, 1993). It designed its own
concept called Neues Steuerungsmodell (new steering model) which
was published in 1993. This model calls, amongst other things, for the
decentralization of responsibilities. Influenced by this discussion, a push
toward decentralization of procurement in municipalities could be
observed throughout the late 80s and 90s. But the KGSt itself was well
aware that simple decentralization was no magic wand and that a
differentiated approach was needed. In 1997, it published a report which
dealt specifically with the organization of procurement in municipalities
(KGSt, 1997). This report advocates a budget responsibility for the user
unit, a centralization of procurement for goods and services needed
across the whole organization (e.g. office paper) and an implementation
of the lead buyer concept.
However, from the mid-90s two developments acted in the opposite
direction, as drivers for centralization. First, an increased readiness to
identify corruption as a serious problem in Germany (long been denied)
and especially the realization that procurement is the most corruption

prone activity in German administration. Several high level corruption

scandals in municipal procurement in the 90s and beginning of the 00s
(cities of Frankfurt, Cologne, Wuppertal) made this abundantly clear
(Bannenberg and Schaupensteiner 2007, pp. 104 ff.). The division of
function within the procurement process whereby the selection of the
contract partner is handled by a specialized central unit and not by the
user unit was identified as an important corruption prevention tool. This
led to a (re)centralization of procurement in a substantial number of
municipalities, especially in those where corruption in procurement had
been uncovered. The city of Cologne provides a good example: It created
a central procurement department as a direct consequence of a big
scandal which became known in 2000.
The second driving force for centralization in procurement was the
European Union (EU). Traditional legal thinking in Germany saw public
procurement as a largely internal administrative matter. Public
procurement rules were seen as part of public budget law. Their purpose
was to serve budgetary rigor. The law provided no judicial remedies for
bidders who did not get the contract. This internal legal approach on
public procurement was challenged by the EU. One of the primary
function of the EU is the creation of a European single market in which
goods and services can flow freely. The EU consequently identified
public procurement as a market in which companies across Europe
should try to sell their goods and services to administrative entities. In
1989 it enacted its first European directives obliging its member states
(amongst them Germany) to change their national legislation
accordingly. There has been a subsequent succession of 8 European
directives since then (Khler 2010, Neun and Otting 2015) which created
a complex set of rules and especially a sophisticated remedy system
above a certain contract volume threshold. This created the need for
professionalization through specialization and thus centralization. From a
business-management perspective, a higher degree of specialization and
centralization is able to reduce public procurement process costs for
government authorities who faced 8.8 billion Euros in Germany in 2007
(Rambll, 2008).
As the situation stands today, the majority of German municipalities have
centralized the formal selection of the contract partner to prevent
corruption and to enable their staff in charge to cope with the
complexities of current public procurement law. Some municipalities
have gone further and used centralization to enable strategic management
of their procurement. However, the push for centralization is often met
with a lot of resistance within the municipalities. User units usually want

to decide for themselves what goods and services they will get to fulfill
their administrative duties. They are reluctant to subdue individual
choices and preferences to broader strategic procurement goals. German
municipal law gives the mayor the power to decide on organizational
matters (Plckhahn, 2014). Very much depends on whether (s)he is
willing to pick up concepts of centralization and strategic management or
not. Sometimes a difficult financial situation will trigger a readiness to
change and improve. It can be observed that resourceful municipalities
tend to have less incentive to engage in organizational reforms.
The goal of the paper is to determine the current status of organizing the
procurement function in German municipalities using the concept of
procurement maturity. Furthermore, the variety of competences and roles
along the public procurement process are identified and allocated by
means of semi-structured interviews with senior purchasing managers of
selected municipalities. The paper is structured as follows: after the
description of maturity as the fundamental concept for the determination
of the evolution stage of purchasing a maturity model for municipal
public procurement is derived. The model is applied analyzing five
German medium sized municipalities in terms of organizing the
purchasing function and the underlying competences of the involved
municipal members. Finally, theoretical and managerial implications are
drawn from the findings.
CONCEPTS OF MATURITY FOR PUBLIC PROCUREMENT
In a business-management context the concept of maturity expresses
a certain process or performance level in terms of organizational
output/outcome (Rglinger et al., 2012, pp. 328f.). Economy, efficiency
and effectiveness are understood as control goals of business
administration determining the performance of (public sector)
organizations in general and especially the performance of public
procurement authorities (in terms of the 3-e concept see Sheldon, 1996,
p. 5, or Reichard, 2003, p. 794). In the field of public procurement
further relevant performance objectives are e.g. rule of law, welfare
principles and environmental compatibility (Eichhorn, 2003, p. 415). In
this regard, Schapper et al., (2006) developed a framework for the
management of public procurement, which is illustrated in figure 1. This
framework explicitly takes premises into account regarding policy
objectives, efficiency and conformance with public procurement
regulations. One major goal of Schappers management framework
includes policy objectives that also imply other policy objectives such as

the promotion of sustainability in terms of environmental, social and

economic procurement practices.

Figure 1: The Procurement Management Framework (Schapper / Veiga

Malta / Gilbert, 2006).
An issue relevant for evolving the concept of public procurement
maturity represents the general evolutionary path of private sector
procurement organizations. In detail, the incremental evolution of the
procurement function can be classified into four categories, the first three
of them are also highly relevant from a public procurement perspective:
traditional procurement organization, procurement organization
following procurement strategies, procurement organization integrated
into the corporate strategy, procurement organization integrated into the
supply network and the supply chain (following Kutschker et al., 1997,
p. 107, Leenders et al., 2002, p. 6, or Boutellier and Corsten, 1998). The
different categories are described along the four indicators organization,
personal requirements, concept of controlling, and supplier relationship.
Within the phase of the traditional procurement, the procurement
department is integrated into a line organization and the purchasing agent
is seen as the responsible person for order processing. Babbage (1832)

described the purchasing agent as materials man (Babbage 1832, p.

207) as he mainly reacts to requests from other functional departments.
In this type of procurement organization, suppliers are considered as
vicarious agents as suppliers are chosen by price and availability of the
goods and services needed. Procurement organizations following
procurement strategies exist in matrix organizations and are not affected
by strategies of the corporation. Here purchasing agents are called
materials experts as they consider quality and costs with regard to
supplier selection and supplier management. Decisions concerning cost
savings and efficiency improvement are explicitly made by the
management (Prozenko, 2008, p. 338). Supplier relationships are
primarily characterized by the market the supplier belongs to. The next
evolutionary step represents procurement organizations integrated into
the corporate strategy. This type of purchasing phase generally exists in
decentralized as well as centralized organizations. The purchasing agent
is matured in terms of personal requirement such as technical know-how.
Controlling concepts such as total cost of ownership and time to market
are used to enforce the competitive position of the organization. The
selection of suppliers plays a prominent role and the selection process is
carefully done as dyadic win-win-relationship with suppliers. The last
evolution phase is represented by procurement organizations integrated
into the supply network and the supply chain. The organization type of
this phase is characterized by hybrid institutional arrangements. For that
reason and because of the complete integration of the purchasing strategy
into strategy of other functional departments, the purchasing agent needs
to have interdisciplinary know-how and be able to take over the
moderating function between the different departments and the suppliers.
The controlling concept is grounded on time to money and cash cycle
time. In a private sector context the relationship with suppliers in this
phase is based on partnership within the supply chain network.
Additionally, Monczkas MSU model represents an evolution framework
from the private sector (Monczka et al., 2005). This model is a step-by
step approach which sketches the route to excellent procurement in
helping organizations to improve their purchasing process. The
framework comprises strategic and enabling processes. The supporting
processes need to be organized in order to enable purchasing to perform
excellent (Faber et al. 2007, p. 4). All strategic steps are related to a
decision: within each step there can be several circles and therefore
several decisions.
As the public procurement sector has undergone a similar development,
an accustomed MSU model called MSU+ is applied for measuring public
procurement maturity in the Netherlands (NEVI, 2009). Public

procurement maturity is measured through MSU+ using self or expert

assessments
with
regard
to
eight
strategic
processes
(insourcing/outsourcing,
commodity/article
group
strategies
development, supply base optimization and management, supplier
partnerships, supplier integration in product creation process, supplier
integration in order realization process, supplier development and quality
management, strategic cost management). Rendon (2008) proposes a
contract management maturity model comprising five levels of maturity
which range from ad hoc processes (level 1), to basic processes
(level 2), to structured processes (level 3), to integrated processes
(level 4), to optimized processes (level 5). By means of the five
maturity levels organizations should be able to evaluate their capabilities
and effectiveness in regard to a critical procurement process and dissect
the process into the six key process areas procurement planning,
solicitation planning, solicitation, source selection, contract
administration, contract closeout. The contract management maturity
model is intended to provide an organizational road-map for
continuously improving procurement processes.
A further example for an existing procurement maturity framework for
the public sector published as an IRSPP framework is proposed by
Harland et al. 2007. This framework divides public procurement into
seven stages (Harland et al. 2007, pp. 351ff.). The first stage namely
serving the organization focuses on the basic availability of required
objects. Therefore the main issue is to get the product in the right
quantity at the right time at the right place. The public procurement
section is reactive and serves the organization in a logistical nature. The
main objective of stage two is the compliance with legislation which
expresses a conformance of procurement actions with prevailing
regulations. The third stage appropriate use of public funds is to
prevent fraud and corruption. In addition to serving the organization the
public procurement department needs to make sure that the funds are
used for what they are intended for. Besides of the result (availability),
the process plays an important role. Additionally, a focus lies on meeting
the budget and getting the most for a fixed amount of money. The
commercial aspects become a major factor, even though the attitude is
still reactive. In the fourth stage accountability the public
procurement department needs to make sure that processes are well
designed and well executed in order to be able to purchasing the required
items, avoiding fraud and getting a good price. Consequently,
transparency of the processes plays a role in addition to the aspects of the
previous stage. In the fifth stage value for money is important in public
procurement. Not only costs, but also the value of items and services

procured contribute to the organization. The focus starts to change from

reactive to proactive, but is still internally oriented. In the sixth and
seventh stage public procurement aims to support and deliver policy
goals. The public procurement function makes a direct contribution to the
strategic goals of the organization. The achievement of strategic goals
also has an external role to a certain degree. It is seen as an instrument
for economic, technological (promoting innovations) or social reform
and achievement of policy goals such as job creation and employment,
strengthening the industry, SME / regional involvement, promoting
diversity with regard to the supplier base, stimulating innovation,
sustainability and social responsibility, or developing aid.
DEVELOPING A MATURITY MODEL FOR MUNICIPAL
PUBLIC PROCUREMENT
Public administration in Germany on a local level has undergone
several waves of modernization which was able to strengthen the
administrative function of local governments in Germany (Wollmann,
2000, p. 932). As a consequence, our approach for the determination of
the status of centralization in German municipalities concentrates on the
upper levels of the above described seven stages model of Harland et al.
(2007) referring to a very similar approach of Beck and Schuster (2013).
This is also in line with McCue and Pitzer (2000) or Gianakis and Wang
(2000) identifying trends in (de)centralization of governmental
procurement in US American cities. Similarly, Glock and Broens (2013)
analyze the size and structure in the purchasing function for German
municipalities using centralization, specialization, formalization and
hierarchical position as structural variables of their investigation.
Similarly, De Boer and Telgen (1998) argue that the structural
professionalization of municipalities purchasing function is a key to the
achievement of purchasing goals. Purchasing goals vary depending on
the stage of maturity of the purchasing function (Van Weele, 2014).
Figure 2 illustrates the postulated approach for determination of the
maturity of municipal public procurement. At the lowest level purchasing
only executes demands and orders. The procurement department is
mainly involved in operational activities representing the role of an
internal service partner. A practical evidence for the lowest stage of
maturity can be the fact that procurement is just involved in the award
procedure. The second level determines purchasings coordination and
supply market development function. Internal customers benefit from
procurement departments knowledge about the supply market and

suppliers which characterizes the role of the purchasing department

being an analyst. Obvious indicators for the second maturity level are a
coordination responsibility and a market research responsibility in terms
of procurement. Level three understands the purchasing department as
some kind of tactical partner who is involved in planning and budgeting
processes and who acts at eye level with internal customers.
Consequently, procurement is involved in the setting of goals, the
definition of the need and - as far as possible - the setting of standards.
The highest maturity level attests the purchasing department the role of a
strategic manager. The purchasing department drives internal innovation
processes and directly contributes to the strategic goals of the
organization. Moreover, the activity field of the purchasing department
requires operational and strategic skills and the use of corresponding
instruments. A typical indicator of the fourth maturity level is an
organizational design which is specific to the context of the procurement
department. In the case of optimizing procurement process costs it can be
a single central procurement unit which is in overall charge of
purchasing, defines the needs in cooperation together with user units, and
identifies similar needs within the organization in order to create new
bundling opportunities. Further evidence of the highest maturity level is
the establishment of controlling routines and the drafting of internal rules
which represent internal rules enacted by the mayor or the municipal
council.

Figure 2: Maturity levels of municipal public procurement

METHODOLOGY AND RESULTS
The purpose of this paper is to identify the current status of
centralization of the procurement function in German municipalities.

More precisely we aim to determine the allocation of competences and

roles in the local public procurement process. In order to develop a depth
understanding and in contrast to the existing quantitative exercises of
Glock and Broens (2013) or De Boer and Telgen (1998) a qualitative
approach was chosen capturing the complexity and impact mechanisms
of municipalities. Municipalities represent the cases of our research; their
selection corresponds to theoretical replication (Yin 2013). Five
interviews with medium-sized German municipalities were carried out,
each with a number of residents between 110,000 and 186,000. Three of
the selected municipalities are located in North-Rhine-Westphalia, the
two remaining belong to Rhineland-Palatinate and Bavaria. According to
the German census bureau, the selected municipalities range in the third
highest class in terms of size (100,001-200,000 citizens) encompassing
46 municipalities in total (Destatis, 2005). Consequently, our sample is
able to cover more than ten per cent of the basic population of mediumsized municipalities in Germany. In order to guarantee anonymity each
of the interviewed municipality is assigned a number representing the
thousandth part of its inhabitants.
The municipalities of the sample were selected by the researchers, using
e-mail and phone calls for establishing the first contacts. Personal indepths interviews followed with senior purchasing managers. The
interviews were semi-structured around organizational tasks and the
public procurement process of the corresponding contracting authority.
Consequently, a responsive interviewing approach was used, questions
and prompts were developed during the interview (Rubin and Rubin,
2005). Each interview lasted between one and two hours, was audio
recorded and transcribed for the analysis. The interviews were alternately
conducted between the authors and took place at the location of the
contracting authority.
FIRST MATURITY LEVEL
The first maturity level is characterized by a watchdog role assigned to
the central units whose main task is to ensure a legally correct award
procedure as prescribed by public procurement law.
The award procedure as defined by public procurement law starts with
the conception of the performance description which is followed by the
decision whether to split the required product in lots and if so the design
of the lots, the decision whether to select the contractor in an open award
procedure, a restricted award procedure or a negotiated award procedure
and the selection of potential bidders if there is no open award procedure.

10

These decisions require proper decision making involving discretion and

trade-offs.
The procedure then moves on to a stage which is largely procedural: This
stage includes the publication of the invitation to bid, the dispatch of the
bidding documentation to interested parties, the communication with
bidders to clarify questions, the receipt of the bids, the opening of the
bids, some formal checks and the registration of the bids. Of these
procedural steps only the communication with the bidders may require
some form of decision-making.
The last stage of the award procedure is again marked by proper decision
making. This stage comprises the evaluation of the suitability of the
bidders in an open award procedure, the evaluation of the bids and in
case of an irremediable obstacle to an award the termination of the award
procedure.
All five cities dispose of central units which are involved in the award
procedure. But the level of involvement varies considerably from city to
city and in some cases within one city from product to product. All cities
have some products for which there exists a centralized procurement
responsibility involving elements of market analysis and bundling of
known needs. This goes beyond the first maturity level and will therefore
be discussed in the next section. For the other products the middle stage,
which is largely procedural, is centralized in all cities. The reason for this
is mainly historical: This stage has traditionally been identified as the
part of the award procedure being most susceptible to manipulation. The
division of functions via assigning this task to a central unit is meant to
reduce the manipulation risk. City 121, which all in all has the most
decentralized procurement, contents itself with the centralization of this
stage. The purely formal role of the central units in these cases is
exemplified by the task repartition concerning the communication with
the bidders: The central units in city 121 receive the questions and
convey the answers. The answers themselves however are formulated by
the user unit. The central units role therefore does not exceed that of a
mere messenger.
The four other cities bestow also some decision-making elements on
their central units. City 160 takes this furthest and thus forms the
opposite example to city 121. City 160 has one central unit with an
overall responsibility for the entire process. This includes the conception
of the performance description and the evaluation of the bids, the two
elements which require the highest degree of technical expertise. In these
cases the central procurement unit of city 160 will cooperate more or less

11

closely with the user unit and in many cases just confirm a decision or
concept proposed by the user unit. But the final say rests with the central
procurement unit.
In the cities 110, 161 and 186 the responsibility for the performance
description and the evaluation of the bids lies with the user units. Their
central units have responsibility for decision-making elements which
typically require less technical expertise and are more orientated towards
applying public procurement law. In the cities 161 and 186, the decision
whether to split the required product in lots and if so the design of the
lots is in the hand of a central procurement unit while in city 110 it is the
user units which have the final say. The choice of the award procedure is
in the hand of a central procurement unit in all three cities while the user
units select the bidders if there is no open award procedure. In an open
award procedure the user units decide on the suitability of the bidders.
Finally, the decision to terminate an award procedure in case of an
irremediable obstacle to an award lies in the hands of the central
procurement units in city 186 and in the hand of the user units in the
cities 110 and 161.
SECOND MATURITY LEVEL
On the second maturity level, the role of the central procurements unit
role goes beyond ensuring the legality of the procurement process. Its
main task is to analyze the market and bundle similar needs for frame
agreements where possible.
All cities reach this maturity level for some products, first and foremost
construction procurement. It has always been acknowledged that
procurement in that area requires a certain degree of professionalism (see
section 2). Traditionally, construction procurement is split between road
and canal construction on the one hand and building construction on the
other hand. This split can be found in all five cities.
City 160 uses frame agreements for construction maintenance services
extensively. The other cities operate with frame agreement in that area
too, although probably to a lesser extent. Exact information could not be
obtained as, with the exception of city 160, none of the analyzed cities
has an exact overview over all procured products.
Outside of construction procurement all cities procure some products in a
central way where a decentralized approach would self-evidently be
inefficient. This concerns products whose procurement require technical
expertise. Information technology is the prime example here, its

12

procurement is centralized in all five cities. This further concerns

products where a decentralized procurement would generate
disproportionately high process costs and make the city lose the
opportunity of quantity discounts. An example for this would be office
supplies which is procured by central units in all analyzed cities.
THIRD MATURITY LEVEL
Central procurement units on the third maturity level assume the role of a
tactical partner. They take a proactive part in defining needs, setting
standards and defining goals.
None of the analyzed cities proactively defines overall procurement
goals beyond the goal of getting best value for money while observing
the law. All that can be found are environmental sustainability goals for a
few specific products. As an example, cities 160 und 121 prescribe the
procurement of recycling paper. Furthermore the internal guidelines of
city 121 demand that procured cars must use electric drive.
City 160 has established a lead buyer structure which is under the full
control of the central procurement unit. These lead buyers take up the
procurement need of the user units and where necessary use their
market knowledge to modify the need and set standards. It is difficult to
assess to what extent this is also true for the centralized procurement of
certain goods in the other cities as described in the above section. The
reason for this is that only city 160 has an exact overview over its own
procurement activities. It can be assumed however that some level of
influence on need definition will also exist in these cases.
FOURTH MATURITY LEVEL
The fourth maturity level requires a single central procurement unit with
a strategic role. This unit has the competence and resources to analyze all
procurement activities, identify similar needs and decide on bundling,
establish a controlling system and draft internal regulations on
procurement.
City 160 has a single unit in overall charge of all centralized procurement
tasks. The four other cities have between four and approximately ten
units, the exact number sometimes not being clearly identifiable. The
first type of units are those in charge of the tender procedure or parts
thereof as described in the section on the first maturity level. City 110
has only one unit of that type. Cites 161 and 186 dispose of two units,

13

one unit for construction procurement and one unit for procurement
outside of construction. This approach reflects the classical distinction
between these two areas of procurement. City 121 has four units, two in
construction and two outside of construction. The second type of units is
in charge of procuring certain products for the whole administration as
described in the sections on the second and third maturity level.
City 160 is again the only of the analyzed cities which has an overview
about all procurement activities which is used to systematically identify
new similar needs and bundling opportunities. It is the only city with a
fully-fledged controlling system. Its central procurement unit is also in
charge of drafting the internal regulations on procurement. This task is
also assigned to central procurement units in the cities 110, 161 and 186.

14

Indicators for
maturity level
Maturity level 1
Involvement in
tender procedure
Maturity level 2
Centralized
procurement of
goods (includes
market analysis)

City12
1

City110

City16
1

City18
6

City160

(X)

Maturity level 3
Setting of goals
Definition of the
need / setting of
standards (in
cooperation with
user units)

Maturity level 4
Central unit in
overall charge of
procurement

Identification of
similar needs to
create new
bundling
opportunities

Established
controlling system

Drafting of
internal rules

Legend: X= applied, (X) = partly applied, = not applied

Table 1: Classification of investigated cities in terms of maturity

In sum, only city 160 has organized its procurement activities on the
fourth maturity level. Its central unit is called service unit procurement
highlighting the overall strategic responsibility for all procurement
activities within the organization. In that role it acts as driver for

15

innovation. A telling example for this is the case of electricity supply for
the administration. For many years city 160 bought its electricity from its
own subsidiary energy company. The lead buyer for energy then noticed
that the city produced electricity itself through a waste incineration plant
which was subsequently sold on the electricity market. City 160 decided
to use its own electricity instead of selling it and having then to buy it
from its own subsidiary. The savings generated from this change of
strategy were considerable, mainly from saving the VAT for the used
electricity. Table 1 summarizes the maturity indicators assigned to the
cities; their pigmentation indicates the corresponding maturity level.
DISCUSSION
Our results show that at least within our sample a highly mature
procurement level in municipalities can be interpreted as an exception,
but not as the rule. From the selected five municipalities only one city
possesses a procurement department that can be allocated on the highest
maturity level. In terms of a centralized purchasing unit, this finding is
also in line with the research of Glock and Broens (2013) who found that
German municipalities tend to allocate responsibilities for purchasing
products and services closer to the user unit. In contrast to the
quantitative study of Glock and Broens (2013) we conducted an in-depth
analysis that enables us to specify different types of centralization
According to this, it is evident that the level of centralization differs
within the procurement of a municipality regarding different product
categories. Information technology or office supplies are typical
examples being often centrally procured by a single unit which has the
exclusive responsibility for this category.
Interestingly, the size of a city does not influence the number of units
with procurement responsibility. This result is also supported through the
findings of Glock and Broens (2013) as they were not able to identify a
significant correlation between the number of inhabitants of a
municipality and the degree of centralizing procurement. The third
largest city of our investigation in terms of inhabitants is the city with the
highest maturity level regarding its procurement. Furthermore, in the
case of city 160 we are able to align the existence of a controlling system
with a high degree of maturity. Gianakis and Wang (2000) also correlate
the use of performance measurement systems with the degree of
decentralization. They propose that the financial condition of a
municipality effects its centralization of procurement what we can
confirm in the case of city 160. Because of financial constraints city 160

16

puts a great emphasis on the professionalization of its procurement

activities.
The setting of strategic goals represents an important task of public
procurement which seems to be highly underestimated in the field of
municipal procurement. Within our sample of five medium-sized
German cities if at all strategic goals influence public procurement
activities insignificantly.
Although only one city has a procurement level 4, all but one city assign
the task to draft internal procurement regulation to their central
procurement units. The reason for this is probably the fact that this is a
law orientated task and that fits well with the traditional law focused
view on public procurement in Germany.
Further additional features of public procurement do not bear a direct
link to its maturity level but shed a light on the importance attached to
procurement and the awareness of the potential a mature procurement
has to offer. These features can be regarded as circumstantial evidence
for a mature procurement.
The first feature is whether the scope of responsibility of the central
procurement units is limited to the municipal administration or whether it
extends to municipal subsidiary companies. German municipalities are
traditionally in charge of providing utility services (e.g. public transport,
water and energy supply) to their population. The management of these
utilities is nearly always outsourced to companies of which the
municipality usually holds all the shares. In sum, these companies have a
procurement volume which can easily amount to or even exceed the
procurement volume of the administration itself. Extending the
responsibility of the central units to subsidiary companies shows an
understanding for the need of professionalization and a corresponding
political will.
None of the analyzed cities extends the reach of its central procurement
units to its subsidiaries. It is however interesting to note that city 160
undertook such an effort but ultimately failed. In 2007 it extended the
responsibility of its then newly established central unit to the municipal
hospital. But this extension had to be taken back a year later due to the
hospitals resistance. There is however informal cooperation on a
voluntary basis in most of the analyzed cities. Cities 110 and 161 speak
of an occasional advisory role of their central units. One of the central
units of city 121 is used by some of its municipal companies to open the
bids, a highly formalized procedure. In city 160, the central unit is often
assigned with the task to carry out the tender procedure for complex

17

construction project because its degree of expertise in that area is much

higher than those of the municipal companies.
The second feature is the degree of cooperation with other municipalities
or within an institutionalized procurement partnership. This hints at a
higher degree of maturity although responsibility is moved away from
the central unit. But it shows that central units had enough influence to
impose this on user units often reluctant to give it out of hand. Apart
from city 110 all analyzed cities engage in some form of cooperation.
City 121 cooperates closely with three neighboring communities on
several products. This close cooperation stems from a project in 2005 to
create a common procurement unit for the four communities, a plan
which ultimately failed. Cities 186 and 161 also have regular cooperation
with neighboring communities on certain products. City 160 is a
founding member of a procurement cooperative under the tutelage of the
German association of larger municipalities. City 121 is also a member.
All in all, it is interesting to notice that city 121, which has the lowest
procurement maturity level, has above average cooperation activities.
The third feature is the use of e-procurement solutions. Investing in eprocurement hints at the importance attached to procurement. Apart from
city 121 all cities use e-procurement solutions for the publication the
invitation to bid, the dispatch of the bidding documentation to interested
parties, the communication with bidders to clarify questions and the
receipt of the bids. City 160 goes beyond that, having acquired and using
a fully-fledged procurement management software that covers the entire
procurement process.
The last feature to be discussed here is payment grading of purchasing
employees. It should come as no surprise that the managerial staff in
charge of procurement in city 160 is better paid than in the other
analyzed cities.
CONCLUSION, LIMITATIONS AND SUGGESTIONS FOR
FUTURE RESEARCH
The focus of this paper has been on the status of centralization and in
which way selected German municipalities organize procurement. Based
on existing approaches of maturity we were able to develop an adequate
procurement maturity model for municipalities comprising four levels,
the internal service partner, the analyst, the tactical partner and the
strategic partner. By means of the model of maturity our research
disclosed heterogeneity in terms of centralizing municipal public

18

procurement in Germany. Three of the selected municipalities reached

the second maturity level with a centralized responsibility in supply
market analysis. Only one of the five municipalities was assigned a high
maturity of procurement having one unit which is in overall charge of
procurement. The procurement of the remaining city was evaluated on
the lowest maturity level acting as an internal service partner for different
user units within the city.
Further, our results indicate that maturity is not a matter of size; the city
with the highest maturity in procurement is just the third largest of the
selected municipalities. At least within our sample, a high level of
maturity was an exception; the majority of cities possessed a mid-scale
maturity level.
Our study has a few limitations which can serve as future directions of
research. First, we only investigate medium-sized municipalities with a
number of inhabitants between 100,001-200,000. Other classes in terms
of size remain were consciously excluded from our study. It would be
interesting to analyze larger cities in terms of the status of centralization
of procurement. Second, we limited the sample up to five municipalities.
An enlargement of the sample can give further evidence of the
representativeness of the results.
REFERENCES
Arnold, U. (1997). Beschaffungsmanagement, 2nd ed.,
Stuttgart 1997.
Babbage, C. (1832). On the economy of machinery and
manufactures, London 1832.
Bannenberg, B. / Schaupensteiner, W. (2007). Korruption
in Deutschland : Portrait einer Wachstumsbranche,
3rd ed., Munich 2007.
Beck, S. / Schuster, F. (2013). Kommunale Beschaffung
im Umbruch: Groe deutsche Kommunen auf dem Weg
zu einem nachhaltigen Einkauf?, Berlin 2013.
Boutellier, R. / Corsten, D. (2002). Basiswissen
Beschaffung, 2nd ed., Munich and Vienna 2002.
Burghart, Axel, Art. 28 rim number 345, in: Leibholz/Rinck
Grundgesetz, 69th edition 2015, pp.

19

De Boer, L. / Telgen, J. (1998). Purchasing practice in

Dutch
Municipalities,
International
Journal
of
Purchasing and Material Management, 34 (2): 31-36.
Destatis (2005). WISTA Wirtschaft und Statistik,
August, Wiesbaden 2005.
EC (2015). Public Procurement Indicators 2013, DG
Markt C4 - Economic Analysis and e-Procurement,
Brusssels 2015.
Eichhorn, P. / Friedrich, P. / Jann, W. (2003).
Verwaltungslexikon, 3rd ed. Baden-Baden 2003.
Faber, B. / Lamers, N. / Pieters, R. (2007). Models for
decision making in purchasing: Kraljic versus
Monczka, HAN University for Professional Education,
Arnhem 2007.
Gianakis, G.A. / Wang, X.H. (2000). Decentralization of
the purchasing function in municipal government: a
national survey, Journal of Public Budgeting,
Accounting & Financial Management, 12 (3): 421:440.
Glock, C.H. / Broens, M.G. (2013). Size and structure in
the purchasing function: evidence from German
municipalities, Journal of Public Procurement, 13 (1):
1-38.
Harland, C. / Telgen, J. / Knight, L. / Callender, G. / Thai, K.
(2007). Challenges facing public procurement, in:
Knight, L./Harland, C./Telgen, J./Thai, K./Callender, G.
(Eds. 2007) Public Procurement: International Cases
and Commentary, Routledge 2007, pp. 351-356.
Kutschker, M. / Burle, I. / Schmid, I. (1997). International
evolution, international episodes, international epochs,
implications
for
managing
internationalization,
Management International Review 37 (Special Issue 2):
101-124.
Khler, D. (2010), Eine kurze Geschichte
Vergaberechts, Kompass/KBS, (7/8), p. 16.

des

KGSt (1993). Neues Steuerungsmodell, Cologne, 1993.

KGSt (1997). Organization des Einkaufs, 1997.

20

Leenders, M.R. / Johnson, P.F. / Flynn, A.E. / Fearon, H.E

(2002). Purchasing and supply management, 12th
ed. Boston et al. 2002.
McCue, C. P. / Pitzer, J. T. (2000). Centralised vs
decentralize
purchasing:
current
trends
in
governmental procurement practices, Journal of
Public Budgeting, Accounting & Financial Management,
12 (3): 400-420.
Monczka, R. / Trent, R. / Handfield, R. (2005). Purchasing
and supply chain management, 3rd ed. Cincinnati
2005.
Neun, A. / Otting, O. (2015). Die Entwicklung des
europischen Vergaberechts in den Jahren 2014/2015,
EuZW 2015, p. 453.
NEVI (2009). Audit-tool MSU+, https://www.nevi.nl/msu.
Plckhahn, D. (2004). 62 Nr. 3.2, in: Held, F. / Winkel, J.
(eds). Gemeindeordnung NRW, 3rd ed. Dsseldorf
2004, pp.
Reichhard,
C.
(2004).
Anstze
zu
Performance
Measurement
in
deutschen
Kommunen:
Eine
Bewertung ihres Entwicklungsstandes und ihrer
Wirksamkeit, in: Kuhlmann, S. / Bogumil, J. / Wollmann,
H. (Eds.). Leistungsmessung und -vergleich in Politik
und Verwaltung: Konzepte und Praxis, Wiesbaden
2004, pp. 341-356.
Rubin, H. J. / Rubin, I. S. (2005). Qualitative Interviewing:
the art of hearing data, 2nd ed., London 2005.
Prozenko, O. (2008), Steigerung der Wettbewerbsfhigkeit
Einflussfaktoren und Besonderheiten, in: Gischer, H. /
Reichling, P. / Spengler, T. / Wenig, A. (Eds.).
Transformation in der konomie: Festschrift fr
Gerhard Schwdiauer zum 65. Geburtstag, Wiesbaden
2008, p. 330-345.
Rambll (2008). Kostenmessung der Prozesse ffentlicher
Liefer-, Dienstleistungs- und Bauauftrge aus Sicht der
Wirtschaft und der ffentlichen Auftraggeber, Studie

21

im Auftrag des Bundesministeriums fr Wirtschaft und

Technologie, Berlin 2008.
Rendon, R. G. (2008). Procurement process maturity: key
to performance measurement, Journal of Public
Procurement, 8 (2): 200-214.
Rglinger, M. / Pppelbu, J./Becker, J. (2012). Maturity
models in business process management, Business
Process Management Journal, 18 (2): 328-346.
Schapper, P. / Veiga Malta, J./Gilbert, D. (2006). An
analytical Framework for the Manage-ment and Reform
of Public Procurement, Journal of Public Procurement,
6(1&2): 1-26.
Schwarting, D. / Bergmoser, U. / Eltges, K. / Wille, J.H.
(2009). Effizienzrevolution im ffentlichen Einkauf
Schritte
zu
einem
modernen
Beschaffungsmanagement, Berlin 2009.
Sheldon, D.R. (1996). Achieving accountability in
business and government: Managing for efficiency,
effectiveness, and economy, Westport 1996.
Van Weele, A. (2014). Purchasing and supply chain
management: analysis, strategy, planning and
practice, 6th ed., London 2014.
Wollmann, H. (2000). Local government modernization in
Germany: between incrementalism and reform waves.
Public Administration, 78 (4): 915936.
Yin, R.K. (2013). Case study research: design and
methods, 5th ed., London et al. 2013.

22