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e-Government Procurement in Korea

April 2013

Myeongki Baek | Director General, e-Procurement Service BureauPublic Procurement Service (PPS), the Republic of Korea

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Ⅰ Public Procurement in Korea

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Public Procurement Service (PPS) under Ministry of Strategy and Fi-

nance

Provides procurement services for all public entities

Operates government-wide single e-Procurement portal (KONEPS)

Central government entities are required to use PPS services for procurement above the threshold value

Local govt. entities and public enterprises may procure either au-tonomously or use PPS servicesAll public entities should purchase from PPS’s MAS contracts* whenever applicable

The Korean Model

* MAS contract : unit-price framework contracts for commercial products established by PPS.All public entities may place orders against MAS contracts.

Korea’s Public Procurement Model

Central Public Procurement

Agency

Centralized & Decentralized Procurement

Goods & Services above $100,000

Construction Works above $3,000,000

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The Korean Model

In 2012, centralized procurement through PPS was 36% (USD 36 billion) of Ko-rea’s total public procurement (101 billion) Of PPS’s procurement, 53% was upon mandatory procurement request and 47%

was upon non-mandatory procurement request

Centralized & Decentralized Procurement in Korea

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II Korea Online e-Procurement System (KONEPS)

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e-Payment

e-Procurement in Korea

“KONEPS”

KoreaON-lineE-ProcurementSystem

e-Bidding e-Contracting

OnlineShopping

Malle-Ordering

KONEPS (Korea On-line E-Procurement System)

Single public e-Procurement Portal

KONEPS processes the entire procurement cycle Interconnected with 140 database systems for minimal paperwork

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Certification-Related Agencies

Ministry of Security and

Public Administration

KONEPS at a Glance

Surety Insurance

Ministry of Strategy

and FinanceConstruction

CALS

Use Linkage

PPSOperation

PublicOrganizations

(Buyers)

PrivateBusinesses

(Suppliers)

Linkage

Korea Financial Telecommunications&Clearings Institute

Constructaion-Related

Associations

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Before

Certification-Related agencies

Industry Associations

Ministry of Strategyand Finance

e-Transformation – Before & After

Credit Rating Companies

Surety Com-panies

ConstructionAuthorities

National Tax Office

KONEPS exchanges data with 140 external info systems for supplier information, bid evaluation, bonds and payment, minimizing paper document submissions

One Stop Service through Data Integration

Bid

Supplier

Public Buyer

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After

Certification-Related agencies

Ministry of Strategyand Finance

ConstructionAuthorities

NationalTax Office

Industry Associations

Credit Rating Company

SuretyCompanies

Korea Financial Telecommunications& Clearings Institute

Contract Delivery

e-Bid

KONEPS

Supplier

Public Buyer

e-Transformation – Before & After

One Stop Service through Data Integration

KONEPS exchanges data with 140 external info systems for supplier information, bid evaluation, bonds and payment, minimizing paper document submissions

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Saving budget through MAS Contracts

Framework contracts (unit-price based) for frequently purchased commercial products

Contracted by PPS, available for all public entities for e-ordering

Favorable price terms due to opportunities for to sell to all public entities(economy of scale)

Multiple Award Schedule (MAS) Contracts

Framework Contracts

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Online Shopping Mall

KONEPS Online Shopping Mall

Excellent Government

Supply Products

Green Product

s

Technology Certified Products

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Online Shopping Mall

Products on Comprehensive Online Shopping Mall

340,000 Products

Registered

5,213 Suppliers

Registered

860,000Orders

12.5 billionUSD

Online Shopping Mall in 2012

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III Impact of KONEPS

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Facts and Figures

In 2012, Over 66% of Korea’s total public procurement ($101 billion)was conducted through KONEPS

45,000 government agencies 244,000 registered businesses

93% of all bids are conducted online 24M bidders participated

657T contracts are electronic

100% of all payments are electronic

860T Purchase Orders issued online(99% of all POs) Total e-Mall transaction value : $12.5 billion

UserRegistration

e-Bidding

e-Contracting& e-Payment

OnlineSopping mall

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Increased Transparency

Real-time information disclosure Bidding results and contract details disclosed to the public on-line Peer monitoring on fair results

Objectivity in bid evaluation Bid evaluation based on objective, validated data

Informed decision-making Traceable prices and specifications Reduced risks of biased decisions during the process

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Transaction Cost Savings

Transaction Cost Savings

$ 6.6 billion

Public Sector Private Sector

- Reduced visits- Reduced labor costs

- Reduced lead-time- Streamlined Process

$ 1.4 billion

KONEPS is saving transaction costsof USD 8 billion annually

Private Sector : USD 6.6 billion Public Sector : USD 1.4 billion

Increased efficiency Receiving bids, validating related

docs.

and selecting the winning bid

Reduction of 7.8 million pages of paper documents per year

Before over 30 hrs

After less than 2 hrs

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International Recognition

International Recognition

UN Public UN Public Service Award (2003), Global IT Excellence Award (2006), e-Asia Award (2007)

Implementations in Partner Countries

KONEPS

Mongolian e-GP System

(2012)

Mongolia

Vietnam e-GP Pilot System

(2010)

VietnamCosta Rican e-GP

System(MER-LINK, 2010)

Costa Rica

Tunisian e-GP System (began in 2013)

Tunisia

e-GP Feasibility Study (2012)

Algeria

e-GP Feasibility Study (2009)

Uzbekistan

e-GP Feasibility Study (2012)

Jordan

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IV Implementation Experiences

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Main Pillars of e-GP Implementation

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Leadership

• Operated the Presidential Committee for e-Govt.(2001)

* legal framework, integration with external systems, partnership with private sector

• PPS as a leading agency played a key role on leading and managing the transition to e-GP

• Enacted e-government legislation : Digital Signature Act (1999), Framework Act on e-Commerce (1999), etc

• Amended Procurement law and regulations to elimi-nate

barrier to the implementation of e-procurement

* e-Procurement Act (2013)

Intra-governmental cooperation

Development of legal framework

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Change Management

Lack of awareness and capacity building

Inertia of traditional man-ual procurement process

Fear of loss of discre-tionary power and reduced role of PPS

Intensifying the delivery of training of procurement of-ficers and suppliers (5,100 trainees in FY 2011)

Promoting the benefits of the e-GP and the necessity of procurement reform

Continuous user support through call-center

(4,585 consultations daily)

Obstacles solutions

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Business Process Reengineering (BPR)

80% of the total 565 processes in three categories (goods, services, construction works) were revised

152 processes were removed, and over 300 processes were streamlined through integration and digitalization

Provisions for the registration of information and mandatory re-porting for e-Procurement services

Revisions for the streamlining of procurement procedures

Integration of Entire Procurement Process

Revision of Legal and Institutional Basis

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Technology

Standard

• Adopted UNSPSC as a standard for commodity classification (2.2M items)

• Based on the global standards of e-document (XML, SOAP, EBMS, etc)

Security

• Authentication & Data integrity : PKI based digi-tal signature & encryption

• System security : firewall, intrusion detection system, etc

ServiceStability

• Dual structure for servers and networks • Back-up system for disaster recovery• Funding 10% of development cost /year for on-

going operation

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Lesson Learned

• Simplification and clarification of procurement regulations

for process transition through BPR

• A single e-procurement system for all public organizations

• Take the step-by-step approach from integrated bid notice,

e-bidding and e-Shopping Mall

• Government leadership and establishment of a lead agency

• Long-term planning & risk management for the on-going

operation including funding resources, capacity building for

operational staff & clear system management protocol.

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THANK YOU