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eProcurement in Europe Realities and Perspectives

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Title: 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.

15
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

18
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)
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