eProcurement in Europe Realities and Perspectives

1
eProcurement in Europe Realities and
Perspectives

• Tomas Sabol
• Technical University of Kosice, Faculty of
  Economics
• SLOVAKIA
• Tomas.Sabol_at_tuke.sk

2
Overview of the presentation

• Definition of eProcurement
• Overall aims, benefits
• eProcurement tools/methods
• De-/Centralised approach, Fees, Governing
  approach
• Barriers to eProcurement
• eProcurement in Europe, Good practices
• EU Directives, IDABC Programme

3
Definitions

• Procurement The purchasing cycle form
  identification of requirement through to payment
• e-Procurement The use of web-based technologies
  and electronic communications networks for
  transactional purchasing
• The business to business purchase and sale of
  supplies and services over the Internet.
• (Also called e-Purchasing, e-Sourcing, )

4
Definition

• e-Government The use of ICT in public
  administrations combined with organisational
  change and new skills in order to improve public
  services and democratic processes and strengthen
  support to public policies

5
Why is Procurement important (in Europe)?

• Total public procurement in EU i.e. purchases
  of goods, services and public works by
  governments and public utilities - is estimated
  at about 16 of EUs GDP or 1,500 billion in
  2002. Its importance varies significantly between
  Member States ranging between 11 and 20 of GDP.
  
• The opening up of public procurement within the
  Internal Market has increased cross-border
  competition and improved prices paid by public
  authorities.
• Source http//europa.eu.int/comm/internal_market/
  publicprocurement/introduction_en.htm

6
Overall e-Gov / e-Procurement Aims

• Open and transparent public sector
• Fairness
• e-Procurement as a part of anti-corruption
  measures
• (But Existing corruption can be a barrier for
  introducing eProc!)
• Productive public sector value for taxpayers
  money
• Elimination of maverick / unplanned, ad hoc
  buying,
• Aggregation of demand
• Improved PA departments ability to manage their
  supply chain more efficiently
• Automation of certain types of transactions
  (invoices, orders, payments etc.) ?
  Standardization

7
Overall e-Gov / e-Proc Aims (2)

• But also
• To increase accessibility of public services
• To increase quality of public services
• Improved commercial relationships of PA with
  suppliers,
• Reduced costs for suppliers dealing with
  government
• Provide personalised services, new types of
  services

8
Is experience of private sector relevant?

• Success of a commercial company depends
  significantly on its supply base, effectiveness
  and efficiency of purchasing, sourcing and
  related processes
• e-Procurement technologies - opportunity for
  reducing cost and process optimization
• ? The first step and the easiest way for gaining
  the competitive advantage, better prices and
  quality of their products and services

9
Motives for intro of e-Procurement

• Results of a management survey (ordered with
  decreasing priority)
• Public sector savings
• Modernization of public sector
• Improving efficiency competition in public
  procurement, increasing competitiveness of
  private sector
• Better control of public sector spending
• Transparency and accountability of PA(priority of
  the EC)
• Promotion of the information society development
• ? Corresponding to national priorities
• Efficient Public sector Necessary condition of
  competitive country economy

10
Categories of benefits

• Financial - efficiency, reduced costs of
  government operations (e.g. eliminate paperwork,
  printing mailing costs, routine procedures
• Fostering democratic principles e.g.
  transparency, accountability, anti-corruption
  measures,
• Improved service to businesses, SMEs
• Reduced redundancy - consolidating and
  integrating government systems
• Modernisation

11
Concrete benefits of e-Procurement

• Price
• Quality
• Optimisation of procurement processes, reducing
  the processes time
• Reducing administration and personnel cost
• Improved efficiency
• Wider dissemination of information (on tenders, )

12
Concrete benefits of e-Proc (2)

• Elimination of mistakes
• Expansion of the market (single electronic market
  for eProcurement)
• Decision support for the best offer selection
• Higher transparency
• Improved commercial relationships with suppliers
• a variety of ways in which technology for
  e-procurement can be used

13
Measuring benefits of eProcurement

• Define metrics according to the type of benefit
• Well measurable attributes (price) vs. not well
  measurable (better service conditions reduced
  maverick buying improved transparency, wider
  impact on economic environment)
• Methods like e.g. ROI, Balanced Score Card,
  Performance prism, Total Cost of Ownership (TCO),
  etc usable also in Public eProc
• Impact on public as well as private sector
• Adequate baseline information to assess the
  impact of e-procurement initiative needs to be
  collected
• Sometimes benefits are over-stated and
  measurement of the benefits is confused with
  making a case to meet political or commercial
  needs ?

14
e-Procurement tools and methods

• Static purchasing system - eCatalogue
• Semi-static eTendering
• Dynamic eAuctions
• eCatalogues
• For goods and services with relatively fixed
  prices in PS difficult (legislation), but
• Framework agreement Used to establish the terms
  (price, quantity) that are awarded over a limited
  period of time ? To streamline selection and
  award of repetitive contracts. Awarded following
  a competitive call.

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e-Tendering

• Advertisement of requirement for goods/services
• Preparation of tender documents
• Registration of suppliers to receive tender
  documents
• Pre-qualification of suppliers for the tender
• Delivery of tender documents between the PA and
  bidders
• Opening of responses to the tender
• Evaluation of responses to the tender,
• Award of the contract
• - By electronic means

16
Reverse e-Auction

• Reverse auction (PA unit vs. potential suppliers)
  - dynamic downward pricing (can be real-time on
  the Internet)
• Suppliers compete for a contract by outbidding
  each other in terms of quality, price and/or
  other (quantifiable) criteria used only when
  the contract specifications can be established
  with precision
• For a contract of a reasonably high value, to
  ensure that the savings gt the costs of running
  the e-auction
• On national level used e.g. in Denmark, Italy,
  France, UK

17
Requirements on eProc tools

• Functional (supporting individual phases of eProc
  process) Non-functional requirements
• General availability of tools used for electronic
  communications
• Usability Graphical User Interface (GUI),
  Search functions, Online help,
• Reliability - Mean time between failures, Rate of
  fault occurrence etc.
• Interoperability (Technical, Organisational,
  Semantic)
• Example The European Interoperability Framework
  (EIF) for Pan-European eGov Services, IDABC,
  v1.0, http//europa.eu.int/idabc/en/document/3761

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Requirements (2)

• Integrity of data and confidentiality of data
  exchanged
• Security - e.g. the exact time and date of the
  receipt of tenders can be determined precisely
  the access to data is limited to persons
  authorised to acquaint themselves therewith the
  access to data is possible only through
  simultaneous action by authorised persons, and
  only after the prescribed date

19
e-Procurement Scenarios/Models

• Frequency of purchase
• vs.
• Volatility of product specification
• Office furniture (rarely ordered
  standardisable) ? Bidding system
• Computers, printers (less rarely ordered great
  variation in product definition) ? Reverse
  eAuction
• Office stationery (regularly ordered limited
  variation) ? eCatalogue

20
e-Procurement Scenarios/Models
21
Centralised vs. Decentralised approach

• Centralised
• There is one or more central procurement
  institutions in the country (at national,
  regional and/or local governmental levels),
• These institutions are actively involved and
  responsible for the selection of suppliers
• Decentralised
• A central procurement institution (if exists in
  the country) is responsible for the overall
  policy formulation and coordination of public
  procurement,
• but the management of tenders and selection of
  suppliers are done at the institutional (the
  central procurement body is not involved in this
  process)
• Countries with a eProc strategy - the strategy
  most often aimed at the central governmental level

22
Governing approach to eProc Portal

• Portal is state-owned or operated by a company
  with 100 state share
• Spain - http//catalogopatrimonio.meh.es -
  operated by the Sub-Directorate General of
  Procurement (centralised approach)
• Italy, http//www.acquistinretepa.it - operated a
  company owned by the Ministry of Finance
• Portal operated by a commercial institution or
  co-owned by the state, respectively
• The Danish Public Procurement Portal,
  https//domain.gatetrade.net/forside/prod/
  doip/doip.asp - an electronic marketplace, both
  private and public purchasers and their suppliers
  have access to it functionality, interface,
  security and transaction costs are regulated by
  the public sector

23
Governing approach to eProc Portal (2)

• Decentralised procurement system without a
  specialised portal - e.g. Sweden
• Several privately owned and operated portals, a
  central electronic public procurement portal not
  implemented (left up to private companies)
• However, Public Procurement information portal
  (http//www.avropa.nu) is maintained by the
  Swedish Agency for Public Management - provides
  information on tenders and tender procedure for
  suppliers and PA authorities

24
Fees Policies

• eProc Portal operated
• Without a fee for suppliers (all costs paid by a
  procurement authority - from the state budget or
  from savings)
• With a fee
• Categories of fees
• Registration fees suppliers have to pay fee
  to public procurement portal (e.g. Danish public
  procurement portal DOIP, http//www.doip.dk -
  1,500)
• Licence fees suppliers have to pay fee (usually
  for one year)
• Transactional fees suppliers paying fee as a
  percentage from every closed transaction (DOIP -
  2 fee from turnover)

25
Factors with influence on efficiency

• Centralisation vs. decentralisation of
  procurement (e.g. excessive or abusive
  centralisation of purchases)
• Use of proper tools methods (e.g. inappropriate
  use of electronic auctions)
• Closed purchasing systems (e.g. framework
  agreements) vs. open systems
• ? May cancel out the benefits from increased
  efficiency

26
Other important factors

• The development of
• Guidelines
• Standards, frameworks
• Codes of conduct
• Legislation
• Good practice, knowledge sharing

27
Estimated annual saving in EU15

• 1. Savings on purchasing price
• Value of public procurement in EU15 1,500
  billion EUR
• eProc take up rate 25, i.e. 375 billion EUR
• Estimated savings on purchasing price 5
• 18.75 billion EUR/year

28
Estimated annual saving in EU15

• 2. Savings on operational costs
• Total annual number of public proc. transactions
  in EU 665,000
• If eProc at 25 uptake 166,000 trans.
• Savings per invitation to tender for buyers
  (estimates) 8-35 (?).
• Conservative estimate per transaction 50 EUR
• Total savings on operational costs 166,000 x 50
  8.3 million EUR/year
• 18.75 billion EUR/year 8.3 million EUR/year

29
Potential barriers to eProcurement

• Economic
• High investments and operational costs
  (subscription and transaction fees)
• Small suppliers likely to be disadvantaged
• Technical
• Lack of technical standardization, lack of
  compatibility between e-procurement systems
  (within and across countries)

30
Potential barriers (2)

• Human resources
• Lack of strategic insight
• Lack of operational skills
• Organizational
• Resistance within public institutions against
  change
• Concerns related to the use of decentralized as
  well as centralized approach, barriers to SMEs

31
Good practice - Romania

• To lower the costs of inputs, lowering corruption
  (Corruption Perceived Index, Country rank 87)
  reducing bureaucracy, ensuring transparency
• National Web eProc portal https//e-market.e-licit
  atie.ro/ on reverse auction basis - a time-bound
  automated bidding system, the choice of winner is
  based on the lowest price bid to supply the
  required goods
• Launch March 2002 - started with 159 contracting
  authorities and 7 product categories

32
Romania (2)

• After 3 years 1,000 contracting authorities,
  3,300 suppliers and over 80 product categories
  consisting of thousand of individual products
• During 3 years
• 380,000 transactions
• Savings (in terms of price reduction) 150
  million EUR, i.e. 24.5

33
Czech Republic

• 3 portals operated by private companies (based on
  a licence from the state)
• Government electronic Marketplace,
  http//gem.b2bcentrum.cz/
• 9 main categories of goods/services
• 1,124 registered contracted authorities
• 2,949 registered suppliers
• 20,989 transactions
• CenTrade http//www.centrade.cz/
• 2,300 registered suppliers
• AllyGeM http//www.allytrade.cz
• 1,650 registered suppliers
• Transaction fee 1 (invoiced monthly)

34
Norway

• Marketplace eHandel.no http//www.ehandel.no/index
  _en.php
• Adopted at central, regional local level
• Main goals
• To lower the threshold for taking e-procurement
  in use (for public sector entities and their
  suppliers)
• Cost reduction (prices from suppliers as well as
  more effective procurement process)
• Policy for a more modern and effective PS
• Operated by a private e-procurement service
  provider (an example of a Public-private
  partnership)

35
Regione Piemonte, Italy

• A platform for regional PA
• eProc by means of bidding, electronic marketplace
  and agreements (contracts between parties)
• Goals
• Optimise expenditure - reducing costs using
  simpler, more rapid transparent procedures
• Improve communication between PA and businesses
  (SMEs)
• Creating a fair market for SMEs
• Expanding supplier markets making it more
  efficient
• http//acquisti.sistemapiemonte.it/,
  https//eproc.sistemapiemonte.it/home.jsp

36
Regione Piemonte, Italy (2)

• Complementary services (to eProc) provided
• Consultation services
• Information service (reference regulations,
  community services, good practices, forums,
  events, newsletters, etc.)
• Assistance and help desk services
• Training services (e-learning)

37
More on e-Procurement in Europe

• Denmark, Public Procurement Portal,
  http//www.doip.dk/default.asp
• Finland, Hansel Ltd., http//www.hansel.fi
• Ireland, National Public Procurement Policy Unit
  (NPPPU), www.etenders.gov.ie
• Office of Government Commerce (OGC), UK,
  http//www.ogc.gov.uk/index.asp?id35
• Aims
• Ireland aims to save 400 million over 5 years
  (2 of procurement expenditure in the public
  sector)
• UK aims to save 350 million over 3 years for
  central civil government purchases

38
EU Directives 2004/17/EC, 2004/18/EC

• DIRECTIVE 2004/18/EC On the coordination of
  procedures for the award of public works
  contracts, public supply contracts and public
  service contracts
• DIRECTIVE 2004/17/EC Coordinating the procurement
  procedures of entities operating in the water,
  energy, transport and postal services sectors
• Community coordination of contracts above a
  certain value
• Principle of equal treatment, non-discrimination,
  mutual recognition, proportionality, transparency

39
EU Directives (2)

• New electronic purchasing techniques - to
  increase competition and streamline public
  purchasing (savings in time and money)
• Appropriate rules should be introduced to enable
  contracting entities to take full advantage of
  the possibilities afforded by these systems
• It is necessary to define a completely electronic
  dynamic purchasing system for commonly used
  purchases and to lay down specific rules for
  setting up and operating such a system
• Electronic auctions should be given a Community
  definition and be governed by specific rules

40
IDABC Programme - eProcurement

• http//europa.eu.int/idabc/en/document/2084/5643
• IDABC Interoperable Delivery of European
  eGovernment Services to public Administrations,
  Business and Citizens
• Public procurement a part of the eEurope
  initiative
• The use of electronic ways of working can greatly
  improve and simplify the way government
  procurement operates. This will make it easier
  for enterprises to identify contract
  opportunities and to supply their goods and
  services across Europes Internal Market, thus
  contributing to the strengthening of Europes
  competitiveness and economic growth

41
IDABC Objectives

• Achieving a high degree of interoperability in
  electronic public procurement and supporting
  efforts for developing concrete measures to
  overcome potential obstacles to the smooth
  functioning of electronic procurement across
  Europe
• Facilitating electronic public procurement by
  providing functional requirements, common tools
  or generic services for the contracting
  authorities to enable easy access to public
  procurement opportunities in the Member States
• Promoting the use of eProcurement in Europe by
  creating awareness of transborder eProcurement
  benefits and opportunities.

42
Legislation and Policies

• Process of Public e-Procurement - governed by
  the legislation
• Law on Public procurement
• Law on Electronic signature
• Law on Archiving
• Law on support of e-Business
• Law on personal data protection
• Free access to Information,
• Policies Information Society development,

43
eProcurement Perspectives?

• EU 25 countries
• Differences in legislation
• Different PA models (local, regional, national
  level)
• Different languages,
• ? No One fits all solution
• Implementation of the EU Directives on
  eProcurement will take time
• Technology is not the problem

44
General critical success factors

• Vision and strategy
• Top level IT champion, political support
• Build on existing good practices
• Reengineering, change of organisational processes
  needed
• HRD development of e-skills (public servants,
  ...)
• Sound business model (private-public partnership,
  )
• User-driven approach
• Access for all (PA, SMEs, )
• Trust and security

45
Thank you for attention! Tomas.Sabol_at_tuke.sk
46
e-Gov market in EU

• Year 2002 30 billion spent on the ICT part of
  PA (administrative services only, excluding
  health, education, defence etc.)
• Of this an estimated 5 billion spent on eGov
  (growth 15 p.a.) without investment in
  re-organisation and training
• Government revenues in EU15 45 of GDP
• Employment in public services EU15 29, SK
  25.7
• Labour productivity growth in public services
  EU15 0.9, SK 8.3 (annual growth, average
  for 1996-2002)
• Economic benefits of eGov in Canadian province in
  terms of annual global savings 0.7 GDP
• Source The role of eGov for future for Europes
  Future, COM(2003) Biatec 9/2004

47
How much to invest into ICT?Firm-level
productivity depending on investment into
IT investment has to go hand-in hand with
management skills
? Principle 20/80 20 in ICT 80 in management
HR
Source Survey by LSE and McKinsley on 100
manufacturing companies in France, Germany, UK,
and USA (Dorgan and Dowdy, 2004)
48
Public-Private Partnership (PPP)

• PPP refers to forms of cooperation between public
  authorities and the world of business which aim
  to ensure the funding, construction, renovation,
  management or maintenance of an infrastructure or
  the provision of a service
• In PA a trend towards outsourcing services
  (driving licenses, management of land records,
  etc.)
• PA a lack of technical skills and expertise for
  implementation of new technologies
• PA focuses on Defining public objectives,
  monitoring, regulating and, where necessary,
  financing those services

49
Public-Private Partnership (2)

• PPP sharing of risks and benefits between PA
  private undertaking
• A regulatory framework is needed (transparency
  and fair competition for the benefit of the
  taxpayer)
• Do not sell just the old business under a new hat
  -)

50
How to implement an eGov project?

• Define a vision
• Secure a strong political leadership and support
• Identify user requirements (user-driven approach)
• Identify a pilot application, define the
  objectives, identify relevant good practices,
  identify resources (SF, )
• Implement the project (if possible adapt an
  existing solution)
• Measure progress/impact (cost-benefit analysis,
  return on investment, customer satisfaction,
  benchmarking etc.)

51
eGov Roadmap

• Why are we pursuing e-Gov?
• eGov is about transformation technology is a
  tool
• Do we have a clear vision and priorities
• What kind of e-government are we ready for?
• Infrastructure, ICT usage, budgetary resources
  etc
• Is there enough political will to lead the
  e-government effort?
• Expect opposition, motivate leaders,
• Are we selecting e-government projects in the
  best way?
• Do a diagnosis, shop around, match the project to
  the vision, see e-Gov from user's perspective

52
eGov Roadmap (2)

• 6. How should we plan and manage e-government
  projects?
• Establishing e-government teams, its authority, a
  work plan (content, competency, connectivity,
  continuing involvement of key stakeholders,
  capacity building)
• How will we overcome resistance from within the
  government?
• Understand their fear, Seek "buy-in, Explain,
  Train, Evaluate, Force, Reward, Praise
• How will we measure and communicate progress?
  How will we know if we are failing?
• Set overall performance criteria, Set benchmarks,
  Plan and publicize "quick wins" for e-Gov

53
eGov Roadmap (3)

• Relationship with the private sector?
• Private sector as a partner, Everyone needs
  "return on investment, Create realistic business
  models, Find each partner's strengths, Develop
  formal policies on outsourcing
• How can e-government improve citizen
  participation in public affairs?
• Learn as you go, Citizens are the e-Gov experts,
  e-Gov is evaluated through public participation
  

54
A eGov/eDem solution WEBOCRAT system

• Functionality of web-based WEBOCRAT
• User-friendly publishing on Web simple Content
  Management System
• Publication of tenders support for public
  procurement
• Non-/Moderated discussions e.g. on published
  docs
• Opinion polling on published docs, discussions,
  
• On-line submissions (requests, complaints) - with
  possibility to track their processing status
• Personalisation user profiles,
• Notification alerting on new events relevant to
  the user profile
• Concept-based retrieval automatic retrieval of
  all resources (docs, discussions, pollings, web
  links) relevant to the given concept
• Security role-based access control etc.
• All modules integrated by means of a
  Knowledge Model

55
User interface
Log in
Fulltext search
Different types of relevant resources
User profile
Categories
Resources relevant to the selected category
56
Advantages of the WEBOCRAT

• Easy adaptation to local needs, customizable
  interface
• Intelligent concept-based retrieval - automatic
  retrieval of content relevant to the given
  concept
• Integrated modules all resources (docs,
  discussions, pollings, web links, tenders, )
  linked together
• Open system - easy integration with a legacy
  information system
• Configurable, modular system
• Security and Role management
• Personalised services user profiling
• Multilingual support a new language can be
  added easily
• Thin client solution only standard web browser
  required
• Platform independent tested on Windows, Linux
• Open source solution
• WAI
• Knowledge management
• Tested in natural settings pilots in UK, SK
  (user survey)