1. E-Procurement: Opportunities & Challenges by Sanjay Pradhan, Vice President World Bank Institute
e-GP

2. Key Elements of Discussion:
Situate e-procurement reforms within a broader framework of governance: focus on supply and demand for reform
E-Procurement can provide significant benefits, but requires important conditions for success
Important to understand and manage political economy of reform
Importance of e-procurement for Governance.
Recognize conditions in which public procurement may become vulnerable: to leakages (high public expenditure, high levels of bureucracy, high levels of discretion, dispersed regulatory framework).
Context: An effective context for e-procurement depneds on a number of factors including (the supply and demand for reform, leadership and political will, feasibility of reforms, context and the cultural, legal and administrative environments at the local and national level. Also the context at the regional and global standars such as emerging standards in EU countries should be considered.
Reform strategies for e-procurment: ie. Watch in the Phillipines; one stop shops in Brazil are examples of a reform strategy aimed at using technology to provide access to public procurement information.
Implementation and change management: Simplification of laws and regulations, standardizing product documetns and issues of public tender. How might e-systems for procurement be anchored to existing regulations? Recognize that successful implementation requires changes in incentives and attitudes in addition to systems with a focus remaining on users.
Oversight. Succesful oversight mechanism that ensure that e-procurement systesm are meaninguflly linked to procurement regulations and that both are aimed at improving transparency and governance
Stakeholders involvement: Government, private sector, civil society
nding and in particular, prior review ratios over time.

3. 1. Situate reforms in a broader framework of governance and anticorruption: focus on supply and demand for reform

4. Good Governance has many dimensions …
Citizens/Firms
Political Governance
Political competition, broad-based political parties
Transparency & regulation of party financing
Formal Oversight Institutions
Independent judiciary
Legislative oversight
Independent oversight (SAI)
Global initiatives: UN, OECD Convention, anti-money laundering
Public Sector Management
Public finance management & procurement
Civil service meritocracy & adequate pay
Service delivery and regulatory agencies in sectors
Civil Society & Media
Free press, FOI
Civil society watchdogs
Citizens/Firms
Citizens/Firms
Private Sector Interface
Streamlined regulation
Extractive Industry Transparency Initiative
Collective business associations
Outcomes: Services, Regulations, Corruption
Decentralization and Local Participation
Decentralization with downward accountability
Community Driven Development (CDD)
Oversight by parent-teacher associations & user groups
Citizens/Firms

5. Strengthening Governance Systems: Balancing Supply & Demand
Demand-side
Strengthen accountability arrangements – elections, political parties, effective parliaments, independent judiciary, free press, vibrant civil society, accountable local governments – that enable citizens and firms to hold state institutions to account
Supply-side
Strengthen the state’s bureaucratic capability – leadership, skills, human resource, financial management, information systems – to deliver public goods and services

6. Strengthening Demand for Public Financial Accountability
Transparent, competitive e-procurement
(Latin America)
Civil Society Oversight on procurement
(Slovakia)
Strengthening Supreme Audit Institutions
(Hungary)
Strengthening Public Accounts Committees of Parliament
(Kenya, Ghana, Zambia -- AFR)
Procurement oversight by CSOs (Philippines)
Accountability, Transparency & Integrity Project
(Tanzania)
Strengthening Public Accounts Committees of Parliament
(India)
Participatory Budgeting, Puerto Alegra
(Brazil)
Public Expenditure Tracking & Information Campaigns
(Ghana, Madagascar, Mozambique, Peru, Senegal, Tanzania, Zambia)

7. 2. E-procurement can deliver substantial benefits but requires important conditions for success

8. E-Procurement & Citizen Oversight
E-Procurement: LAC
Engaging CSOs: Philippines
All supplier companies register, indicating areas of business (e.g., IT, construction, furniture)
Public agencies submit tenders through internet
Automatic to all companies in selected area
Online information on name, position of official in-charge
Online information on results: who participated, proposals made, scores received, who won bid, historical record of agency’s purchases & contracts
Legal foundation a mess with over 100 laws and regulations
New omnibus law needed for clarity and predictability in the process
New law in 2003 with determined efforts of reform minded public officials allied with strong and unified advocacy efforts of CSOs to offset entrenched vested interests
For credible enforcement: requirement that all bids and awards committees must have at least one observer from a certified CSO
Extensive training of CSOs now under way

9. Impact of e-Procurement
Increased efficiency due to competition, transparency and lower transaction costs
Reduced opportunity for fraud & corruption due to automated procedures
Public procurement monitoring
The table above shows the high-level trends against total IBRD/IDA lending and in particular, prior review ratios over time.

10. Example Korea Enhanced Transparency of Public Procurement
Real-time basis
Bidding info
No room for arbitrary decisions
Competitive biddings of micro-purchases
Number of bidders
has tripled
Diminished the
possibility of corruption
Stimulated e-Commerce in the Private Sector
Enhanced Transparency of Public Procurement
Announcing all bidding information on a real-time basis
No room for arbitrary decisions
Converting private contracts to competitive biddings of micro-purchases
The number of bidders has tripled as a result of decreased transaction costs and increased opportunities of e-Procurement 
Diminished the possibility of corruption due to online contact instead of direct interpersonal contact
Stimulated e-Commerce in the Private Sector
Promoted an e-Commerce mindset
Accumulated business experiences of e-Procurement has enhanced the credibility of e-Commerce
Helped build the infrastructure
Created the computer environment such as the PC, and Internet connection
Promoted the use of digital signatures as the best way to ensure security
Promoted an e-Commerce mindset
Enhanced the credibility of e-Commerce
Helped build the infrastructure
Created the computer
Business environment
Use digital signiture
to ensure security

11. Savings (Examples)
Total volume of US$ 44 bn in 2006 with transaction cost savings of US$ 4.5 bn ( )
650,000 electronic auctions between 3/2002 and 10/2006 with savings of US$ 178 mn (
From 2000 to 2006, 51% savings in transaction costs and 25.5% in price reductions (
US$ 3.6 bn of transactions in 2005 with savings of US$ mn due to tender discounts in the same year (
KOREA
ROMANIA
BRAZIL
Korea : Total volume of US$ 44 bn in 2006 with transaction cost savings of US$ 4.5 bn ( )
Romania: : 650,000 electronic auctions between 3/2002 and 10/2006 with savings of US$ 178 mn (
Brazil: : From 2000 to 2006, 51% savings in transaction costs and 25.5% in price reductions (
India (AP): : US$ 3.6 bn of transactions in 2005 with savings of US$ mn due to tender discounts in the same year (
INDIA
eprocurement.gov.in

12. Potential Annual Savings of Introducing E-Tendering in EU
Savings on purchasing price
Savings on admin. costs (buyers)
Total value of public procurement in the EU15: 1,500 Billion EUR
Value of e-public procurement at a 25% level uptake in the public sector in EU15: 375 Billion EUR
Range of savings realized today: Between 10% - 53%
Conservative est. for savings on purchasing price: 5%
Est. total savings calculation: 375 Billion EUR / 5%
Total annual no. of public procurement transactions in the EU (above & below threshold): 665,000
Est. no. of e-public procurement transactions at a 25% level uptake: 166,000
Savings per invitation to tender: 31% realized (40 – 130 EUR per transaction)
Est. for savings on administrative costs per transaction: 40 EUR
Est. total savings on administrative costs: 166,000 X 40 EUR
Estimated total savings:
19 Billion EUR per year (for EU15)
6.6 Million EUR per year (for EU15)

13. Conditions for Successful Implementation
Strong government leadership (e.g. Korea, Mexico at presidential level)
Appropriate implementation framework (e.g. procurement policy, legislation, capacity building, standards)
Infrastructure development (connectivity)
Complaints mechanism & resolution
Oversight over collusion & bid rigging
Managing political economy of reform
The table above shows the high-level trends against total IBRD/IDA lending and in particular, prior review ratios over time.

14. Bid Rigging Schemes & Red Flags
“Complementary” bidding
Round robin
Divide the pie
Coercion
Low balling/
“Change orders”
Bidders have same address or bid price
Wide gap between winner & all others
Winning bidder subcontracts to losers
Qualified bidders do not bid
Lowest bidder later submits substantial change orders

15. 3. Vested Interest
Focus on managing the political economy of reforms

16. Entrenched Corruption Networks:
Montesinos in Peru
Judiciary
Civil Society
Legislative Branch
International
Alberto Fujimori
State (Bureaucracy)
Political Parties 1
Vladimiro Montesinos
Media
Military
Municipal Government
Private Sector
Source: “Robust Web of Corruption: Peru’s Intelligence Chief Vladimiro Montesinos,” Kennedy School of Government Case Program, Case C , based on research by Professor Luis Moreno Ocampo; Peru: Resource Dependency Network, 2000

17. Philippines: Procurement Reform
Forging Coalitions for Reform
Philippines: Procurement Reform
Transparency and Accountability Network (20+ member groups)
Walang Ku-Corrupt Movement
(Youth)
Procurement Watch:
Drew other civil society groups
into the advocacy efforts and
coordinated the activities
PAGBA & AGAP
(w/in Gov’t)
CBCP
(Church)
Local chambers of Commerce
(Private sector)
Philippine Contractors Association
(private sector – main stakeholder)

18. Summary
Situate e-procurement reforms within a broader framework of governance: focus on supply and demand for reform
E-Procurement can provide significant benefits, but requires important conditions for success
Important to understand and manage political economy of reform
Importance of e-procurement for Governance.
Recognize conditions in which public procurement may become vulnerable: to leakages (high public expenditure, high levels of bureucracy, high levels of discretion, dispersed regulatory framework).
Context: An effective context for e-procurement depneds on a number of factors including (the supply and demand for reform, leadership and political will, feasibility of reforms, context and the cultural, legal and administrative environments at the local and national level. Also the context at the regional and global standars such as emerging standards in EU countries should be considered.
Reform strategies for e-procurment: ie. Watch in the Phillipines; one stop shops in Brazil are examples of a reform strategy aimed at using technology to provide access to public procurement information.
Implementation and change management: Simplification of laws and regulations, standardizing product documetns and issues of public tender. How might e-systems for procurement be anchored to existing regulations? Recognize that successful implementation requires changes in incentives and attitudes in addition to systems with a focus remaining on users.
Oversight. Succesful oversight mechanism that ensure that e-procurement systesm are meaninguflly linked to procurement regulations and that both are aimed at improving transparency and governance
Stakeholders involvement: Government, private sector, civil society
nding and in particular, prior review ratios over time.

19. The End

20. Lessons learned: e-Government vs better government
Ways to fail
Ways to go
Consider and promote e-government as a government-centered effort
Replace every paper-based process by an electronic process
Offer ‘ministry-specific’ e-solutions
Focus primarily on first rate technological systems
Focus the e-government process on users (citizens & businesses)
Use e-government as a tool to foster changes in attitudes and thinking, and as an instrument for reforms
Rally government-wide efforts, and an ‘all-of-government’ approach (front office)
Understand and tackle underlying political obstacles to reform

21. Examples of Broader E-Government Reforms
Citizen Service Centers & One-Stop Shops (Bahia, Brazil; e-Seva in AP, India; online Motor Vehicles Departments)
E-procurement (Brazil, Chile, India, Korea, Mexico, Philippines, Romania, others)
Land titling (Karnataka, India: 18m titles issued)
New Business Registration (Jamaica, Jordan, China)
Online counseling for teacher transfer (Karnataka, India)
Online customs (70 countries)
Online municipal services (Seoul, Korea)
Property registration (AP, Kanartaka, Maharastra, India)
Railway reservations (India: 5 billion passengers/year)
Tax payment (Mexico, Singapore, India, Chile)
Trade facilitation (Tunisia)
Treasury & integrated financial management systems (50 countries)

22. What is the mystery behind e-GP?
What is the impact of e-GP?
The table above shows the high-level trends against total IBRD/IDA lending and in particular, prior review ratios over time.
What is the best approach to
successful e-GP implementation?

23. The Use of ICT in Procurement
… to publish and distribute public procurement information (online portal)
… to support public procurement transactions (e-Tendering, Purchasing from e-Catalogues, e-Reverse Auctions)
… to monitor and manage public procurement (PMIS linked to FMIS and other systems)
The table above shows the high-level trends against total IBRD/IDA lending and in particular, prior review ratios over time.