E-Government Procurement – tool to reduce corruption in public procurement

FIDUCIARY FORUM 2008 - PROCUREMENT SESSIONWorld Bank25-28 March 2008

S. JanakiramWorld Bank

The views and opinions expressed in this presentation are the author’s own and should not be attributed to the World Bank, its management, its Board of Directors or the countries they represent.

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Corruption in Government

Government is corrupted whenever it is diverted from its avowed purpose and directed toward some other goal, especially goals that conflict with its purpose.

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COSTS OF CORRUPTION

-where corruption is systemic, it probably adds at least 20 to 25 percent to the costs of government procurement.

-corruption scandal in Milan several years ago - led to many criminal indictments and closer scrutiny of public contracting practices,

-unit costs of major works projects fell by more than 50 percent,

With annual purchasing budgets running in the billions or hundreds of millions of dollars, this begins to involve "real money."

Source: Tanzi, Vito and Davoodi, Hamid. IMF working paper, "Corruption, Public Investment and Growth,"

-where corruption is systemic, it probably adds at least 20 to 25 percent to the costs of government procurement.

-corruption scandal in Milan several years ago - led to many criminal indictments and closer scrutiny of public contracting practices,

-unit costs of major works projects fell by more than 50 percent,

With annual purchasing budgets running in the billions or hundreds of millions of dollars, this begins to involve "real money."

Source: Tanzi, Vito and Davoodi, Hamid. IMF working paper, "Corruption, Public Investment and Growth,"

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One solution …

Introduce E-Government Procurement

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What is E-Government Procurement?

E-Government Procurement is the use of Information Technology – especially the Internet – by Governments in conducting their procurement relationships with suppliers for the procurement of goods, works and consulting services required for the public sector

Is the application of a high quality management framework to public sector procurement, facilitated through online information and processes

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Why Develop E-Government Procurement?

•Current procedures of procurement in most of our client countries :– do not provide potential suppliers with full information concerning total public-

sector demand;–do not provide government purchasing units with information on all potential

suppliers for all types of goods, works and services needed by the Government institutions, and

–do not provide adequate means for the general public to provide feedback and oversee procurement processes;

•Low to High incidence of Corruption in Public Procurement

•Greater transparency in procurement is a current priority of many of the Bank’s client countries and commitment to reform exist at the highest levels of Government leadership is beginning

•High transaction costs in procurement processes

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Why Develop E-Government Procurement?...contd..

•Many countries are initiating major reforms in public procurement mostly led by the Ministry of Finance and Economy;

•Level of investments in both information technology hardware and institutional development areas is on the increase and provides opportunities for investment opportunities – ICT costs are declining and becoming user friendly-

•E-commerce legislation, such as provision for buying and selling on-line Electronic signatures, digital certificates etc, exists and/or is under development

•Varying degrees of trained manpower in ICT skills in all our client countries

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E-Procurement Lifecycle

Source: Office of Government Commerce. Spring 2005. procurement in Action – A guide to e-Procurement for the public sector. United Kingdom. http://www.ogc.gov.uk, page 19-

Source: Office of Government Commerce. Spring 2005. procurement in Action – A guide to e-Procurement for the public sector. United Kingdom. http://www.ogc.gov.uk, page 19-

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Road Map of E-Government Procurement

Source:ADB, IADB, WB. 2004.Electronic Government Roadmap. Washington DC. http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=645469

Source:ADB, IADB, WB. 2004.Electronic Government Roadmap. Washington DC. http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=645469

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NEEDS AND DEMAND

ASSESSMENT

PREPARATIONPHASE – PROCESS

DESIGNAND BID DOCUMENTS

SELECTION OF CONSULTANTS

CONTRACT IMPLEMENTATION

FINAL ACCOUNTING

AND AUDIT

1 2 3 4 5

PROCUREMENT PROCESSPROCUREMENT PROCESS

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E-GP is part of E-Government

12Source : UN, Benchmarking e-Government, 2002

Thailand, Senegal

China, India Malaysia, Peru U.S., Singapore,

Korea

None

- 부처 및 기관간 경계없는 온라인

서비스 제공Level1Level1

Development

InitiationLevel

2Level

2

InteroperationLevel 3Level 3

Integration

E-CommerceLevel 5Level 5

Level 4Level 4

Providing Limited

Information

Peridoc Updates

E-Mail

E-Forms

On-Line Processing

Civil Service

E-payment of Taxes and Fees

Converged and Integrated Services

(Single Access Services)

Development StageDevelopment Stage

Stages of E-Government

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Initiation High Expect.

Moderate ReorganizingStable

Services

1993 2000 2003 20102005

Expecta

tion

Level of Services not matched with Public’s demand

Level of Services not matched with Public’s demand

Govt Portals

Govt Portals

Reengineering of Internal Processes

Reengineering of Internal Processes

Creating Values of Gov’t Services

Creating Values of Gov’t Services

On-Line by Services

On-Line by Services

Simple Info. ProviderSimple Info. Provider

International Trend of E-Gov’t International Trend of E-Gov’t

World Trend of e-Government

Source: Gartner

HOW E-GP HELPS REDUCE CORRUPTION?

ALLOWS TRACKING DOWN EACH SINGLE INFORMATION AND TRANSACTIONS DETAIL OF THE PROCUREMENT PROCESS

INCREASES TRANSPARENCY AND HOLDS GOVERNMENT MORE ACCOUNTABLE IN SPENDING TAXPAYER’S MONEY

PRICES CAN BE REDUCED BY 10 TO 20 PERCENT – DUE TO INCREASED COMPETITION

TRANSACTION COSTS CAN BE REDUCED BY 20 TO 80 PERCENT

ALLOWS TRACKING DOWN EACH SINGLE INFORMATION AND TRANSACTIONS DETAIL OF THE PROCUREMENT PROCESS

INCREASES TRANSPARENCY AND HOLDS GOVERNMENT MORE ACCOUNTABLE IN SPENDING TAXPAYER’S MONEY

PRICES CAN BE REDUCED BY 10 TO 20 PERCENT – DUE TO INCREASED COMPETITION

TRANSACTION COSTS CAN BE REDUCED BY 20 TO 80 PERCENT

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How E-GP helps reduce Corruption…contd..

PROVIDE A LEVEL PLAYING FIELD

STANDARDIZE DOCUMENTS, FORMS

MINIMIZE PERSONAL CONTACT

ENFORCE RULES

DISSEMINATE INFORMATION WIDELY

PROVIDE ACCESS TO MANY POTENTIAL SUPPLIERS OF GOODS, WORKS AND SERVICES

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Pre-Conditions for launching E-Government Procurement

–Committed leadership and E-GP champions at the policy and operational levels

–Enabling legislation in place to permit E-Government Procurement

–Clear understanding and adoption of internationally accepted procurement policies, procedures, guidelines and processes

–Development of adequate number of suppliers of goods, contractors for works and consultants for rendering services in the private sector to ensure competition

–Reliable internet connectivity at affordable rates

–Developing confidence and trust within the user community to carry out business with the Government using E-GP systems

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Enabling environment for E-GP is evolving….

•Internationally accepted procurement policies, procedures, guidelines and processes are yet to take root in most of our client countries

– Low to medium levels of understanding among procurement professionals– Adoption rates of internationally accepted policies are still low

•E-Government Procurement Strategy and Action Plan– Is under development in most countries

•Legislation– For enabling E-Government is evolving and is in an early stage in most countries

Information technology infrastructure– Low penetration rates of internet connectivity – Low levels of usage of internet by the private sector

•Private sector– Rate of private sector development is slow – Inadequate number of bidders from the private sector competing for Government contracts

•Change management and adoption of new ways of doing business– Paper driven processes in all stages of procurement– For enabling E-Government is evolving and is in an early stage in most countries

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Main challenges in E-Government Procurement

I

C

T

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Main challenges in E-Government Procurement

I: Institutions–Collaboration – Coordination - policy and operational levels

•Information –Sharing and confidentiality

•Intellectual Property Rights- Ownership and protection of

- content – data, information - software – applications in different sectors

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Main challenges in E-Government Procurement

C: Culture• Moving from manual to electronic ways of doing business by citizens• Human-computer interaction• Of sharing information

–Corruption reducing mechanisms

–Citizen’s Expectations• Has E-Government improved the delivery of Government services and efficiency

– Necessity to have quick wins –Communications

• In easy to understand Content by the common citizen• In local language• Using a variety of media – such as radio, TV, dramas, folklore,newspapers,

internet, etc…–Centralization and Decentralization

• Of Key functions and decentralizing sectoral services – management and delivery –Cross -sectoral

– E-GP cuts across many sectors sectors: from Agriculture to Banking – to Commerce – to Debt management – to Economy to Finance – to Governance to Health to Industry to Jobs to Security to Trade, etc…

– What aspects to integrate and what cannot and should not be integrated

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Main challenges in E-Government Procurement

T: Technology is not the real challenge–Inspire Trust in Government Procurement Policies, Processes, Procedures

–Training•At all levels for Providers and Users

–Well established Technologies exist – and are declining in costs with improved capabilities, capacity and efficiency

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Europe and Central Asia - Current status of E-GP

Countries Web-site Content

1.Armenia www.procurement.am Mostly general information -

2. Azerbaijan www.tender.gov.az Mostly general information

3.Bulgaria www1.government.bgwww.dv.government.bg

Mostly general information

4.Georgia www.spa.ge Mostly general information

5. Poland www.uzp.gov.plwww.portal.uzp.gov.plwww.aukcje.uzp.pl

Has capability to do limited E-GP functions

6.Romania www.licitatie.ro Has capability to do limited E-GP functions

7. Turkey www.kik.gov.tr Has capability to do limited E-GP functions

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Use of E-GP by procurement activity in ECA countries

Activity Type of Procurement system (manual or E-GP system) in ECA countries

1. Notice inviting EOI/RFP/Tenders

Manual and web-based system in use in almost all ECA countries

2. Registration of suppliers, contractors and consultants

Mostly manual

3. Provision of Bidding documents

Mostly manual

4. Registration of bidding documents

Mostly manual

5. Notification to approved suppliers, contractors and consultants

Mostly manual

6. Clarifications to bidding documents

In person or through E-mail

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Use of E-GP by procurement activity in ECA countries

Activity Type of Procurement system (manual or E-GP system) in ECA countries

7.Submission of bids In person or by post/courier and very limited use of encrypted submission

8. Bid evaluation Mostly manual

9. Privacy and integrity of bids

Sealed envelopes and very limited use of encryption

10.Opening of Bids All manual

11. Bid security/Bank guarantee

Manual

12. Contract signing Manual

13.Modifications to contract

Mostly manual

14.Payment for goods, works and services

Mostly manual

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EUROPE

KEY DEVELOPMENTS IN E-PROCUREMENT

Source: Office of Government Commerce. Spring 2005. procurement in Action – A guide to e-Procurement for the public sector. United Kingdom. http://www.ogc.gov.uk, page 12

Source: Office of Government Commerce. Spring 2005. procurement in Action – A guide to e-Procurement for the public sector. United Kingdom. http://www.ogc.gov.uk, page 12

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ACHIEVING A FAIR AND COMPETITIVE PRICE Example from an actual e-Auction

Source: Office of Government Commerce. Spring 2005. procurement in Action – A guide to e-Procurement for the public sector. United Kingdom. http://www.ogc.gov.uk, page 23

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Areas of Bank assistance – through IDF grants and Public Sector Reform Projects

•Development of E-Government Procurement Strategy and Action Plans

•Capacity Building in all aspects of E-GP

•Sharing of knowledge and expertise of E-Government Procurement processes in different countries

•Upgrading of the present systems in E-Government Procurement systems and building on systems developed by other donors

•Collaboration with EU and other donors in developing common standards, procedures, framework, measurement indicators, training modules, IT infrastructure, etc

•Strengthening administrative capacity and support for legislation for E-GP in compliance with EU requirements

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What we hope to see in the years ahead?...

Reduction in Corruption in Public Procurement – through the creation of :

•Enabling environment for private sector and citizen organizations to provide services in a fair and competitive manner

E-GP tendering• Customized search facilities• Bidding documents on internet• Electronic bid submission

E-Purchasing• On-line purchasing and E-Transactions• Customized services

E-Contract Management• Contract execution management• Contract capacity consolidation

Linking E-GP systems with Financial Management Systems – to achieve an E-enabled “Procure to Pay” cycle

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Many thanks for your attention

Comments, suggestions welcome..Please send to:SJanakiram@worldbank.org