Status of the Electronic Procurement in Korea and Future Tasks January 2003

What is the GePS? 2. Overview of the procurement in Korea 3. How to promote the GePS - Success factors 4. Major contents of the GePS 5. Detailed job improvement through the GePS 6. Expected effects of the GePS 7. Future tasks Table of Contents

- 2 -  A system that digitally processes complicated procedures and paperwork  Digitalizing all the procedure from purchase request to payment  Removing or drastically reducing documents 27,000 public organizations and 70,000 companies use the system  27,000 public organizations and 70,000 companies use the system  A system that digitally processes complicated procedures and paperwork  Digitalizing all the procedure from purchase request to payment  Removing or drastically reducing documents 27,000 public organizations and 70,000 companies use the system  27,000 public organizations and 70,000 companies use the system Government e-Procurement System 1. What is the GePS?

- 3 -  Centralized procurement system  Where goods, services and construction works exceeds a certain amount has to be entrusted to the Public Procurement Service or PPS  To enhance transparency and save national budget  The amount of the public procurement : $56 billion  PPS handles about 30% of the total public procurement ※ The total public procurement takes about 47% of the entire government expenditure 2. Overview of the Procurement in Korea

- 4 - Step-by-step approach Government-wide systematic promotion President’s strong will 3. How to promote the GePS - Success factors Internet infrastructure

President’s strong will of ‘Powerful IT Country’  “ I am going to make Korea the best IT nation in the world to build solid foundation of IT country. ” (1998 Inauguration)  Adopting a national-wide strategy : Cyber Korea 21 (1999~2002)  To build the knowledge-based nation through on-line  To improve national competitiveness and quality of life  To develop as one of the top 10 advanced IT countries  “ I am going to make Korea the best IT nation in the world to build solid foundation of IT country. ” (1998 Inauguration)  Adopting a national-wide strategy : Cyber Korea 21 (1999~2002)  To build the knowledge-based nation through on-line  To improve national competitiveness and quality of life  To develop as one of the top 10 advanced IT countries 3. How to promote the GePS - Success factor(1)

Set up a government-wide promotion system  Organizing ‘ e-Government Special Committee ’ ( Nov )  Under the direct control of the President  Consist of officials and private sector specialists Vice minister level officials : planning and budget Private sector specialists : applying new IT technology  Selecting 11 tasks for e-Government  Comprising civil service administration, procurement, taxation, education, social insurance, etc  The GePS is one of the most important tasks  Organizing ‘ e-Government Special Committee ’ ( Nov )  Under the direct control of the President  Consist of officials and private sector specialists Vice minister level officials : planning and budget Private sector specialists : applying new IT technology  Selecting 11 tasks for e-Government  Comprising civil service administration, procurement, taxation, education, social insurance, etc  The GePS is one of the most important tasks 3. How to promote the GePS - Success factor(2)

Step-by-step approach  BPR/ISP ※ by Ministry of Planning and Budget(MPB)  With a neutral and balanced view  MPB has budgetary authority ※ BPR/ISP : Business Process Reengineering/Information Strategic Planning  System building by PPS  With rich e-procurement experiences PPS has developed EDI/EC * system since 1997  With accumulated work experiences and knowledge as the central procurement agency for the past 50 years ※ EDI/EC : Electronic Data Interchange/E-Commerce  BPR/ISP ※ by Ministry of Planning and Budget(MPB)  With a neutral and balanced view  MPB has budgetary authority ※ BPR/ISP : Business Process Reengineering/Information Strategic Planning  System building by PPS  With rich e-procurement experiences PPS has developed EDI/EC * system since 1997  With accumulated work experiences and knowledge as the central procurement agency for the past 50 years ※ EDI/EC : Electronic Data Interchange/E-Commerce 3. How to promote the GePS - Success factor(3)

Well-developed Internet infrastructure  No. 1 in Internet Connectivity  Internet users : 25 million  Broadband internet subscribers : 10 million 70% of total households  Top Internet using rate in the world  Stock trading, internet shopping, etc  No. 1 in Internet Connectivity  Internet users : 25 million  Broadband internet subscribers : 10 million 70% of total households  Top Internet using rate in the world  Stock trading, internet shopping, etc 3. How to promote the GePS - Success factor(4)

Major Contents of the GePS end-user operation agency operation agency Suppliers Use Certification- Related agencies Certification- Related agencies Ministry of Government Administration And Home Affairs Ministry of Government Administration And Home Affairs Construction-related Associations Korea Financial Telecommunications & Clearings Institute Korea Financial Telecommunications & Clearings Institute Surety insurance Ministry of Finance And Economy Ministry of Finance And Economy Construction CALS Linkage Linkage Portal IntegratedNoticeCommercialProductscatalog Contractedproductscatalog Goodsclassificationsystem Documents distribution and outside linkage User registration suppliers’performance e-Guarantee e-payment e-Procurement system e-Procurement ASP Supplier supporting service Unit contract system 4.1 System architecture(1) - linked to 30 outside systems

System architecture (2) Applying e-signature Applying e-signature  In association with 6 authorized certification agencies  Securing the stability of on-line transaction  In association with 6 authorized certification agencies  Securing the stability of on-line transaction Abolishing the submission of documents Abolishing the submission of documents  By sharing various information including suppliers data  Enhancing convenience of suppliers  By sharing various information including suppliers data  Enhancing convenience of suppliers 4. Major Contents of the GePS

System architecture (3) Electronic handling the various contract-related bonds Electronic handling the various contract-related bonds  By being connected with 11 guarantee agencies  On-line submission of bonds for prepayment, tenders, performance, etc.  By being connected with 11 guarantee agencies  On-line submission of bonds for prepayment, tenders, performance, etc. Realizing real-time electronic payment Realizing real-time electronic payment  In association with 13 major commercial banks  Shortening payment time  In association with 13 major commercial banks  Shortening payment time 4. Major Contents of the GePS

The GePS technology base  Adopting encryption technology based on public key infrastructure and digital certification  Based on the world-wide standards of e-document (XML, SOAP, EBMS, etc)  A point-in-time confirmation service and an individual ID confirmation service  Adopting encryption technology based on public key infrastructure and digital certification  Based on the world-wide standards of e-document (XML, SOAP, EBMS, etc)  A point-in-time confirmation service and an individual ID confirmation service Combination of information protection technology Combination of information protection technology and a new e-commerce model and a new e-commerce model 4. Major Contents of the GePS

Major functions of the GePS  All the bid-info is required to be placed on the GePS  81% of bids were conducted electronically (As of Dec. 2002)  All the bid-info is required to be placed on the GePS  81% of bids were conducted electronically (As of Dec. 2002) Providing integrated domestic bidding information Providing integrated domestic bidding information Covering the whole procurement processes on the internet  From specification review to payment Accessing to standardized commodities and supplier ’ s info  Information on 420,000 goods, and 70,000 suppliers  Purchasing of commodities pre-contracted by PPS  Information on 420,000 goods, and 70,000 suppliers  Purchasing of commodities pre-contracted by PPS 4. Major Contents of the GePS

Major functions of the GePS ( 4. Major Contents of the GePS

Use registration Integrated Notice Use registration Integrated Notice Information sharing Information sharing Before After 5. Detailed job improvement through the GePS 5.1 Integrating the supply of bid Information PPS Public Organization Public Organization Supplier company Supplier company Construction - Related Associations Construction - Related Associations Registration Bid Info. Registration Suppliers information PPS Public Organization Public Organization Public Organization Public Organization Construction - Related Associations Construction - Related Associations Supplier company Supplier company The GePS

Simplification of documents and prompt e-Payment Financial officer Inspection officer Payment officer Supplier company 6.Payment request 4. Delivery confirmation 1.Delivery 3.Delivery confirmation 2.Request of inspection 5.Payment request 7. National treasury check/payment 7. National treasury check/payment 2Delivery confirmation and payment request 3.Payment handling 1.Request of delivery and payment Payment officer Inspection officer Supplier Company Before After 5. Detailed job improvement through the GePS

Expanding the range of commodity selection 1.Request for quotation Public Organization Supplier company Public Organization 3.Order Placement 3.Order placement 2 ’.On line quotation submission e-Catalog 2.Search 1.Product registration Before After 2. Quotation Submission (off-line) 5. Detailed job improvement through the GePS

Standardization of the classification of commodities Before Different item classification/ attributes/management system PPS classification PPS classification Public corporation classification Defense Classification Application of different system PPS Local governments Other government agencies Based On UNSPSC Application of standard classification/attribute system Public Organization After 5. Detailed job improvement through the GePS

Competitiveness Efficiency Transparency 6. Expected effects of the GePS Policy making

By blocking up face-to-face transactions  By blocking up face-to-face transactions  Making public in real time of the status where the procedure goes  Disappearance of prearranged bidding  By enhancement of suppliers ’ competition ※ The number of bidders increased by three times after the e-bid started  Centralized system to avoid duplicate system development By blocking up face-to-face transactions  By blocking up face-to-face transactions  Making public in real time of the status where the procedure goes  Disappearance of prearranged bidding  By enhancement of suppliers ’ competition ※ The number of bidders increased by three times after the e-bid started  Centralized system to avoid duplicate system development Enhancement of transparency Saving of government budget 6.2 Saving of government budget 6. Expected effects of the GePS

 Stimulating the e-commerce in the private sector  Inducing the competitive environment in price and quality  Unification of commodity classification system will also help  Stimulating the e-commerce in the private sector  Inducing the competitive environment in price and quality  Unification of commodity classification system will also help  Obtaining the statistical data of public procurement 6.3 Strengthening corporate competitiveness 6.3 Strengthening corporate competitiveness 6.4 Improving government procurement policies 6.4 Improving government procurement policies 6. Expected effects of the GePS

The Government e-Procurement System (GEPS) The Government e-Procurement System (GEPS) Enhancement of PPS expertise in procurement Focusing on stable system operation Focusing on stable system operation Maximizing customer satisfaction 7. Future tasks(1)

 System securities strengthened against hacking possibilities  User training to spur on the public e-procurement  Continuous system upgrading to renew the functions  System securities strengthened against hacking possibilities  User training to spur on the public e-procurement  Continuous system upgrading to renew the functions  Improving the reliability of the GePS contents  Broadening the product choices  Developing more flexible contract methods Focusing on stable system operation 7.2 Maximizing customer satisfaction 7.2 Maximizing customer satisfaction 7. Future tasks(2)

 Strengthening procurement-related consulting services  Developing new contents for price, products, etc  Working out new managerial expertise in various areas  IT, research service contract, etc  IT, research service contract, etc  Settlement of contract disputes in e-procurement  Strengthening procurement-related consulting services  Developing new contents for price, products, etc  Working out new managerial expertise in various areas  IT, research service contract, etc  IT, research service contract, etc  Settlement of contract disputes in e-procurement 7.3 Enhancement of PPS expertise in procurement 7.3 Enhancement of PPS expertise in procurement 7. Future tasks(3)

Great impact on anti-corruption and enhancement of transparency Sharing know-how of the GePS with other countries Sharing know-how of the GePS with other countries Training program, system building, problem solving Training program, system building, problem solving Maximizing the benefits of the GePS e-bid, e-shopping, e-payment, sharing information e-bid, e-shopping, e-payment, sharing information