Flaws in public procurement reviewed

Students Linn Johansson and Louise Ramqvist have, as their degree project, examined public procurement projects. They have reviewed nearly 500 infrastructure projects, and the results show that the budget is exceeded by an average of 20 percent per project.
– There is a need for better accounting and documentation of the projects, says Linn Johansson.

Linn Johansson and Louise Ramqvist have recently graduated from Luleå University of Technology’s Master Programme in Business and Economics. The purpose of their degree project was to explain the contractual precision of complex construction contracts.

I order to do that, the two students reviewed registry data from a project database with 486 infrastructure projects. Linn Johansson and Louise Ramqvist have also made interviews and surveys with clients and contractors.

The results indicate that the documentation, follow-up and reporting often are inadequate.

– The budget has been exceeded by an average of 20 percent in the infrastructure projects we have reviewed. One reason is that it is not as easy to follow the billing as in private companies. It should be easier to look at the documentation in a project and go back to see what the increased costs are due to, says Louise Ramqvist.

Need for better documentation

One conclusion she and Linn Johansson have reached, is a need for better documentation, follow-up and accounting. If a better contractual precision is created in procurement, it would contribute to meaningful processes and more accurate resource allocation.

Their supervisor Ossi Pesämaa, Associate Professor in Accounting and Control, commends the degree project.

– The students have undertaken a demanding degree project at Luleå University of Technology. In their work, they have found shortcomings regarding public procurement processes. Linn and Louise have gathered empirical data from the construction industry, where procurement is perhaps most developed with an extensive standard for entering an agreement. Even so, shortcomings in the agreements are the core of the problems.

Ossi Pesämaa calls for more research in the field.

– Personally, I think it's a pity that the research subject Accounting is not allocated more money to study this type of matters deeper. I think we would have a lot to contribute to the knowledge of building projects.

Ossi Pesämaa

Ossi Pesämaa, Associate Professor

Phone: +46 (0)920 493498
Organization: Accounting and Control, Business Administration and Industrial Engineering, Department of Business Administration, Technology and Social Sciences

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