Important Advice for Your Procurement of Group Reporting Systems
2024-12-04
Tiego has shared its experiences of responding to tenders in open procedures for municipalities and regions in webinars organized by the Association of Municipal Economists (KEF). We have noticed several development trends in municipal accounting that accelerate the need for group reporting systems. One example is that the Council for Municipal Accounting has tightened the language regarding increased requirements to consolidate even when ownership stakes are relatively low. The requirements for municipal accounting audits have also been tightened, as reviews must be conducted on audited financial statements, which increases time pressure. Last but not least, increasing values are being generated within the group, making efficient and timely reporting beneficial to politics and decision-makers.
Part 1: General Recommendations
Tiego’s procurement consultant Magnus Josephson presented his experiences from thousands of procurements, specifically adapted to the procurement of group reporting systems, in the following nine points. Magnus Josephson has experience from both the supplier and municipal/regional perspectives. Below is an excerpt from each part of the webinar.
Definition of “System”
“Purchasing a ‘system’ implicitly means a combination of products and services that will be used over a long period, at least 8-10 years. You need to have a long-term perspective.”Distinguish between ‘Purchase’ and ‘Investment’
“It is common when investing in a system to focus more on the result of the procurement (project goals) rather than on the result of the investment (effect goals/ measurable outcomes throughout the contract period).”Define Measurable ‘Goals’ for the Investment
“What measurable goals can be achieved with a group reporting system that provides maximum benefit (for input such as implementation and reporting processes, as well as output for financial reporting and decision-making)?”Evaluate the Tenderer’s Ability to Achieve the Goals
“The supplier that can provide the best evidence, i.e., examples and proof that they will achieve the goals, should receive the highest score for that part. Scores can be given, for example, as 0, 5, or 10.”Weight the Price a Maximum of 20%, with the Remaining 80% for the Conditions to Achieve the Goals
“The purpose of the evaluation is to assess the tenderer’s conditions for achieving the goals of the agreement, e.g., developing the use of the system so that the organization derives the greatest benefit from the embedded values. Overall, it’s enough to evaluate four aspects: Organization: 20%, Work Process: 20% (both implementation – input – and development – output), Experience in achieving similar goals: 40%, Price: 20%.”Why Should Negotiated Procedures Be Considered Instead of Open Procedures?
“A negotiated procedure can be used when it is difficult to foresee what the optimal solution will be without negotiating with the supplier. It creates flexibility and shows the potential for creating a good collaboration environment during the agreement period.”The Right Team
“Procurement is a team effort. The main responsibility should lie with the business manager who has knowledge of how the system should be used and has ultimate responsibility for the results and the money to be invested. The users who have the greatest interest in obtaining a good work tool should be involved from the start of the purchasing process. To compare the technical aspects of the bids, these officials should also have experts in the field on their team.”The Agreement Should Start with the Purpose of the Collaboration – Details Will Be Worked Out During the Contract Period
“The collaboration should start from the standpoint that the supplier will solve the task, but the task should be defined together with the buyer, and pricing should be done in collaboration with the buyer. This doesn’t mean that everything should be included, as new needs will arise. New development will be needed, and new money will be required in the project.”Ongoing Monitoring of Key Quality Metrics
“Metrics should reflect that both the supplier and buyer have done things on time, with the correct figures, at the agreed price, and fulfilled the contract. In addition, evaluation of general customer satisfaction should be carried out continuously on a scale of 1-10.”
Part 2: Tiego’s Experiences from Current Tender Documents
Evaluation Model
“Tiego has seen well-thought-out and ambitious evaluation models, and there need to be qualifying requirements for suppliers. It is more beneficial for suppliers if the buyer asks open questions with descriptive requirements rather than using detailed must-have requirements.”
“Given that it is a major task to go through and evaluate a system and assess competencies in three hours, we have proposed two options:
Option 1: Invite suppliers for a brief demonstration as part of preparing the procurement documents.
Option 2: Ask the supplier to provide simplified examples of simple and complex questions in advance, either in writing or as recorded videos. This way, the system demonstration can focus more on follow-up questions rather than seeing the system for the first time.”
Implementation Project
“Tiego appreciates the requirement to submit an implementation plan as part of the tender. Tiego’s implementation plans always include milestones where the status is evaluated during the implementation in three categories:
1. Registers and reports,
2. Input data,
3. Consolidation.”
“Regarding training, Tiego believes that participants’ system competencies should be built over time, and it is recommended to document what Tiego calls a ‘test level’ at each milestone. A ‘test level’ is a checkpoint against the balances for the current year.”
“One final recommendation for the implementation project is to involve someone outside the project group by milestone 3 or 4, someone who is interested in the project’s impact. This could be a politician or a civil servant who is the recipient of the consolidated figures.”
Annex: Buyer’s Current Situation and Conditions
“Describe the current situation as accurately as possible, including the number of people involved and the time for the closing process. Common reasons for deciding to invest in a group reporting system include time-consuming processes, reliance on specific individuals, high complexity with many companies, joint-owned companies, divisions, difficulties in reconciling internal transactions, the need for monthly financial reports from parts of the municipal group, and the need for monitoring departments, products, and projects.”
Functional Requirements
“In an open procedure, many qualifying MUST requirements increase the risk of disqualification and lead to fewer suppliers responding to the tender, creating a risk of starting over and re-procuring. In a negotiated procedure, you can instead request descriptive answers, attracting more interest and the opportunity to negotiate and adapt.”
Nine Key Requirements from Tiego in Open Procedures, with Suggestions for Minor Adjustments to Request Descriptive Answers:
Group Consolidation Methods
“Describe how the solution can handle multiple groups using different consolidation methods simultaneously. For example, the Stadshus group should be consolidated using K3 (acquisition and equity methods), and the municipal group should use the demerger method. Describe the flow of data in the system in a suitable way so that the group evaluating the solution can prepare for the demonstration.”
Group Structure
“Describe how the solution can handle the group structures in the Stadshus group and the municipal group. Also, describe if it is possible to consolidate both sub-groups and individually (i.e., all companies and eliminations in a row).”
Account Structure
“Describe how your solution handles companies and sub-groups with different chart of accounts. Evaluate the charts of accounts in the tender documents and comment on how the implementation project will be carried out.”
Intercompany Transactions
“Describe how the solution can handle the reconciliation of intercompany transactions (receivables/liabilities and revenues/expenses) using counterparty codes. Provide examples of procedures from other clients who have succeeded in streamlining and achieving high quality in their intercompany reconciliation routines.”
Eliminations
“Describe the system’s solution for working efficiently with eliminations for wholly-owned and partially owned companies. Describe the process for acquisitions, mergers, and divestitures. Describe how eliminations are handled for untaxed reserves. Describe any smart solutions to streamline eliminations.”
Flow Analysis
“Describe how the system handles gathering information on the flow between the opening and closing balances for tangible assets, financial assets and liabilities, equity, and reserves.”
Notes
“Describe the system’s solution for reporting note information for the annual report when supplementary information needs to be reported.”
Cash Flow
“Describe the system’s functionality for generating cash flow based on information in the system.”
Impact and Reports
“Describe how the system ensures that accountants, CEOs, civil servants, and politicians can benefit from the system’s consolidated financial statements, including comparisons with the previous year, budget, and forecasts. Provide examples of how management reports can be presented as an appendix to the tender.”
Response Appendix / Offer
“Tiego’s experience is that there is a risk that a predetermined way of calculating prices leads to a suboptimal pricing model for the municipality if the same price per user is given, regardless of role (company accountant with access to one or more companies, group accountant, system administrator). A negotiated procedure provides both the supplier and the buyer with a better starting point to create cost efficiency and added value.”
