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Federal, state and local governments systematically waste tax money when shopping. Possible volume discounts will not be used. Experts estimate the savings potential at 50 to 75 billion euros per year.
The Federal Republic of Germany is a major buyer. According to estimates by the Organization for Economic Cooperation and Development (OECD), federal, state and local governments buy at least 500 billion euros a year. Simple business rules such as bundling quantities to achieve discounts are usually not followed.
Various online portals on which contracts worth 221,000 euros or more have to be advertised across Europe show that there is no central coordination. Most authorities order goods and services on their own and in small quantities: from cars to heating oil to printer paper.
No quantity bundling, no discounts
Robert Müller-Török, professor of digital administrative management at the University of Public Administration and Finance in Ludwigsburg, describes the lack of economic orientation of public purchasing as a “cardinal problem”.
Goods that offer a lot of scope for discounts are divided into such small quantities that the price is no better than for a private consumer – sometimes even worse because tendering processes involve a lot of bureaucracy and effort for the supplier.
The scientist estimates the annual savings potential to be at least 50 billion euros. Duran Sarikaya, managing director of Kloepfel Consulting, Europe’s largest private agency for purchasing and supply chain management in Düsseldorf, goes even further: According to his calculations, the federal, state and local governments overspend by up to 75 billion euros a year on goods, services and construction projects.
fear of Review procedures
In contrast to many other countries in the European Union, public contracts in Germany must be divided into individual contracts, so-called lots. This is intended to ensure that medium-sized companies also have a chance as suppliers. Good approach, bad implementation, criticizes Gordon von Miller from the University of Public Administration and Finance in Ludwigsburg. In his opinion, the authorities want to avoid review proceedings at all costs. For fear of making mistakes, they would cut the lots too small. This uneconomical approach prevents quantity discounts.
The purchasing group for municipal hospitals, EKK plus, shows that there is another way. Around 280 community hospitals and medical facilities have joined forces to save money by ordering large quantities.
It is working. The municipal hospital in Fulda, for example, has ordered three new computer tomographs through the purchasing group. Discount: 750,000 euros. In addition, according to Markus Fischer, head of the purchasing department at the Fulda Clinic, the merger also saves time and human resources because not every single hospital has to deal with product knowledge and market analyses. In this way, each hospital uses the respective expertise of the other companies.
The only approach: federal department store
With the federal department store there is a first approach to bundling quantities when purchasing by the public sector. This online platform was founded in 2003. According to the Federal Ministry of the Interior, total sales in 2023 were only around eight billion euros – that is 1.6 percent of the total German budget. One problem: Only federal authorities are allowed to shop in the federal department store.
Austria does it better. States and municipalities can also order there in the central government online shop. The platform has existed since 2001 and has long since developed into an “administrative Amazon,” says Andreas Prosser from the Vienna University of Economics and Business. According to his information, the average savings potential is 18 percent.