Module #1 E-Procurement Preparation
Module #1 E-Procurement Preparation
Module #1 E-Procurement Preparation
E-Procurement Preparation
This document was prepared for the e-Procurement Online
Learning Project of the World Bank Group by European
Dynamics, www.eurodyn.com.
EU procurement procedures
The EU has issued directives regarding the procurement methods, to be followed by
all member states for public procurements that exceed the set thresholds. The
procurement procedures are categorized according to various parameters (i.e. type of
contracts, types of goods/works/services). The different procurement procedures set
their own limitations and thus not all methods are suitable for the procurement of all
types of goods, works or services. These limitations must be taken into consideration
when selecting the suitable procedure.
The directives foresee specific instruments for covering the repetitive purchasing of
CAs (in this training course referred to as “repetitive contracts”), whereby CAs
establish agreements with specific EOs for covering their purchasing needs for a
period of up to four years. In addition, other instruments are available for individual
contracts concluded through one procurement process (in this training course
referred to as “one-off contracts” or “individual contracts”). In particular:
for individual contracts, the following procurement procedures are defined:
- Open procedure
- Restricted procedure
- Negotiated (with and without advertisement) procedure
- Competitive Dialogue
for repetitive contracts, the following procurement procedures are defined:
- Framework Agreements (FAs)
- Dynamic Purchasing System (DPS)
E-procurement can be categorized into e-tendering and e-purchasing; e-tendering
refers to public tenders related to the acquisition of goods, works, and services that
are of high value/low volume, whilst e-Purchasing refers to the procurement of low-
value/high-volume goods and services. Tendering processes (e.g. open procedure) are
better suited to the former category, while FAs and DPS constitute the most effective
way to acquire the latter category.
In case of below threshold procurements than defined by the EU, any procurement
method can be used, even procurement methods not included in the EU directives, as
long as they follow the principles of the directives. In the following sections, the most
basic procurement procedure for individual contracts, as well as, the two instruments
for repetitive contracts are described.
Open procedure
An open procedure is the practice whereby any CA may create a tender and advertised
it through a contract notice, and respectively any EO can submit a response to this
tender through the submission of a Bid. This type of procedure is the only one that
does not include a prior selection and/or dispatching of an invitation to specific EOs
by a CA. All interested EOs are eligible to submit a Bid as long as they comply with the
requirements.
Restricted procedure
Restricted is the procedure that is publicly advertised through a contract notice,
whereby any EO may express interest to participate but only those who are selected
by the CA will be invited to submit a bid. The CA must specify in the contract notice
the criteria that will be applied to select EOs; subsequently, the qualifying EOs are
invited to submit a bid.
Negotiated procedure
The negotiated procedure is the procurement procedure whereby the CA intends to
negotiate the terms of the contract with the candidate EOs. This procedure can be
applied either with or without a prior advertisement:
in a negotiated procedure with a prior advertisement, the CA advertises the tender
through a contract notice; any EO may express interest to participate in a process
similar to the restricted procedure; following full evaluation, counterparts engage
in negotiations,
in a negotiated procedure without a prior advertisement, the CA directly invites at
least three EOs to submit a bid and subsequently negotiates with them to conclude
the procurement process.
This procurement procedure can be used in restricted cases as explicitly foreseen by
the Directives.
Competitive dialogue
A competitive dialogue is the procurement procedure often used for complex
contracts such as large infrastructure projects whereby the CA cannot fully define the
technical specifications upfront. In a competitive dialogue procedure, the CA conducts
a dialogue with the candidate EOs, aiming at defining in full all tender requirements
before inviting EOs to submit their final bids.
e-GP Benefits
Effectiveness of Development
Governance
Government of Markets
Business
Accountability Value for Money
Development
Rule of Law
The aforementioned benefits, as seen in, are mutually compatible. However, in order
for them to be achieved, they need to be part of the overall design of the e-GP
implementation. Therefore, the following considerations should be taken into account
in order to support the objectives of all three categories:
resource availability;
management of standards;
design of the e-GP implementation;
adoption and use of the e-Procurement system; and
training and support.
Governance
Electronic procedures ensure that users perform public procurement in line with the
legislation, and enable any interested party to monitor public procurement
proceedings and results, hence promoting better governance. Procurement
information is available online (generally in real-time), and can be accessed by any
interested party (auditing bodies, oversight agencies, government officials)
directly/indirectly involved in the procurement processes. Governance involves the
following:
Transparency: E-GP ensures compliance to laws, facilitates data collection and
analysis as well as improving accounting and monitoring, promoting transparency
and thus leading to better governance. For public procurement transactions,
transparency is achieved through the complete disclosure of all stages of
procurement, as well as through the auditing capacities offered by the e-
Procurement system. Actors are encouraged to be accountable for their actions as
public procurement procedures are constantly monitored. Moreover, initiatives
such as the Open Contracting Data Standard (OCDS), focusing on the openness of
procurement data, promote transparency and result in better governance.
Accountability: Bidding community and the general public have access to e-GP
reports as well as to current and past information, and future procurement plans,
thus establishing high levels of trust in the electronic processes. All activities
performed are logged and can be traced improving the overall accountability of
the e-Procurement system users. Moreover, comparisons can be made through
the creation of reliable indicators of performance. Such indicators can define a
default set of mathematical formulas for the synthesis of procurement data for
the identification of bad governance practices and potentially fraudulent user
actions.
Corruption control: Corruption in procurement relates to the awarding of a
contract to an EO to the detriment of the public interest; commonly accompanied
by personal benefit to one or more CA officials involved in the procurement
process. E-GP contributes to the reduction of corruption by:
- making procurement information publicly accessible for review
- eliminating unstructured face-to-face contact between CAs and Eos, avoiding
potential opportunities for undue influence
- auditing all actions in the e-GP system
Rule of law: In the procurement context, the rule of law relates to the
enforcement of any procurement legislation and supporting regulations to
improve compliance by CAs. This ensures that procurements are conducted in a
manner that promotes fairness, equal treatment, consistency and common
understanding for all stakeholders.
Effectiveness
E-GP offers the standardization of public procurement processes aiming at achieving
effectiveness. Processing times and administrative costs are reduced due to the
automation of the manual procedures, in addition, the prices of the procured
goods/works/services are reduced by virtue of the increased competition.
Effectiveness involves the following:
Efficiency: Administrative costs associated with electronic processes are reduced
in comparison to paper-based systems and individual procurement procedures are
executed in a more timely fashion. In addition to the above, e-Procurement
systems facilitate the collection and application of real-time purchasing data, and
thus reports with rich and up-to-date information can be produced, allowing CAs
to revise their policies. As such, e-GP contributes to the stimulation of the local
economy since the rate at which public procurement budgets are spent
significantly increases.
Value for money: Value for Money (VfM) can be defined as the effective, efficient,
and economic use of resources, which requires the evaluation of relevant costs
and benefits, along with an assessment of risks, and non-price attributes and/or
life cycle costs, as appropriate. By virtue of the increased competition, e-GP
produces significant savings in the costs of goods and services being procured
and/or improvement in their quality.
Civil society awareness: Oversight of public procurement by civil society promotes
accountability and transparency, targeting to the efficient allocation and spending
of public funds in a responsible manner and according to their intended cause.
Through e-GP relevant information is made easily accessible to the general public
as well as to relevant monitoring bodies. However, personal information and
information related to national security should be protected. The development of
data classification and publication policies are efficient means to define the level
of procurement information appropriate for public disclosure.
Development of markets
The implementation of e-GP increases competition and improves productivity while
reducing fraud and corruption. Local and regional economies are improved,
economies of scale are made and SMEs’ participation is increased. Public expenditure
is therefore more balanced, fair and aligned with development goals. In this context,
developing countries can use such capabilities in order to improve their standing at
regional and international levels.t of markets.
Competitiveness: Through e-Procurement systems, responses to tenders can be
submitted remotely from any location, as long as reliable Internet connectivity is
available. Moreover, any interested EO is allowed to register to the e-Procurement
system, be notified immediately about newly published tenders, download the
available tender documentation and subsequently place its bid. Therefore,
competitiveness is improved since any EO (including SMEs) has the opportunity to
sell to government.
Business Development: Governments have become great economic players, as
purchasers, and thus they have the ability to strengthen and promote the use of
state-of-the-art technologies and standards for conducting business using
electronic means. Such technologies and standards, adopted during the e-GP
implementation, have a high potential of being adopted by the market on a larger
scale. The use of technologies and standards promote equal opportunities to the
different EOs allowing not only large bidders but also SMEs to participate in public
procurements. Moreover, e-GP grants opportunities to access a bigger,
international market.
Regional Development: E-GP grant access to local, regional and international
business opportunities, thus providing a business development for both
governments and EOs. Distance is not an obstacle, resulting in greater levels of
participation, thus allowing EOs from any region to participate in the bidding
opportunities of other regions, by completing online transactions. In this context,
foreign EOs are able to participate in public procurement activities, thus
encouraging local businesses to maintain, if not improve, their competitive
standing.
Establishment of the e-GP framework
Steps to followed for establishing e-GP
The establishment of e-GP involves the support of procurement practices by
electronic means. Nevertheless, it should not be seen as an isolated technological
project, but as a means to modernize the public procurement framework and render
it more efficient.
A well-defined e-GP framework targets to:
the optimization of procurement methods and business practices;
the incorporation of appropriate adjustments to policies and legal framework;
the activation of CAs and EOs through training, and generation of awareness;
the development of technological infrastructures and establishment of standards.
In this context, a series of activities must be undertaken;
the responsibilities of executives and operational personnel need to be updated;
new skills need to be cultivated;
regulations and legislation need to be modernized;
operational policies need to be adjusted;
strong leadership and consistent commitment at multiple government levels need
to be ensured;
an effective change management program must be planned;
assessment and monitoring tools should be in place for identifying shortfalls.
Strategic objectives
The following five strategic objectives, complementary to each other, support the
successful delivery of e-GP:
Governance
Institutional Capacity
Functionality & Infrastructure
Interoperability
Adoption
When starting an e-GP implementation, in many cases, governments find themselves
in the low status for each of the strategic objectives. However, as long as the
implementation of e-GP evolves, this status is expected to improve in all five
dimensions.
Governance
Prior to the commencement of an e-GP implementation project, the rules/regulations
on public procurement may be outdated, especially regarding international best-
practice standards on public procurement (e.g. EU Directives, UNCITRAL model law,
etc.), and may not even foresee the use of electronic means in public procurement.
One of the core objectives of an e-GP project relates to the modernization of the public
procurement law, which should explicitly foresee the use of ICT in public procurement.
In addition, the introduction of ICT in the procurement legislative framework should
also foresee the introduction of procedures conducted exclusively through electronic
means such as reverse auctions. Besides the legislation itself, policies, explanatory
notes, and guidance / best practice notes should be made available in order to avoid
ambiguities on the interpretation of the law across the public and private sectors. The
standardization of Tender documentation, Contract templates, etc. also forms a
crucial mechanism for streamlining public procurement. Rules, processes and
organizational aspects should be progressively adjusted and regularly reviewed in
order to reach their optimum performance.
Institutional capacity
A very important aspect of e-GP is the establishment of coordinated leadership which
possesses the necessary public procurement competencies. Prior to the
commencement of an e-GP implementation project, knowledge on public
procurement (or even e-Procurement) is most probably dispersed while there is
commonly lack of expertise at senior / decision making levels. An e-GP
implementation project should aim at establishing the required leadership at senior
decision making levels, comprising expert staff that is fully educated on model
international public procurement laws/rules, adoption/marketing strategies for CA
and EO engagement, state-of-the-art systems, etc. This expertise should be leveraged
to establish institutional leadership, with dedicated bodies that coordinate, assist and
(even at times) enforce progress in the e-GP framework. A Public Procurement
Regulatory Authority (PPRA) is indispensable, so that progress occurs in a coordinated
fashion across the public sector. These institutions provide expert guidance to both
the public and private sectors so that irregularities are identified and compliance is
enforced.
Interoperability
A fully-fledged e-Procurement system can substantially benefit from its
interconnection with external systems, such as the government’s financial system
(FMIS), banking systems, suppliers’ electronic catalogue systems, etc. However, such
an interconnection is very difficult to achieve at the initial stage of e-Procurement
systems implementation, considering that commonly, these systems are dispersed
and do not follow “interoperability” standards.
As e-GP progresses, knowledge is accumulated, integration points that can offer
substantial benefits are identified, and infrastructure is improved based on industry
standards; therefore capacities are offered to extend the functional scope of e-
Procurement systems through communications with external governmental and/or
private systems to achieve further automation. E-Procurement systems become
standardized and interoperable, providing integration points using standardized
communication protocols.
Adoption
Prior to the commencement of an e-GP implementation project, conducting public
procurement business through electronic means is not rare for some CAs and their
EOs; therefore, some level of adoption pre-exists. Still, this usually covers a very small
spectrum of the complete e-GP user base, which must be engaged through an
appropriate adoption strategy. Such strategy cannot be applied when procurement
information is scattered in various e-Procurement systems, and is non-standardized
and often incomplete. In such case, low levels of trust can be witnessed in CA and EO
communities, resulting in low participation.
An e-GP project should aim at progressively enhancing the awareness for the full
adoption of the e-Procurement system through promotional/marketing and
educational/training actions across the public and private sectors. Partnership evolves
between the public sector and the private sector while in parallel, citizens actively
participate and monitor public procurement performance.
Recommended organizational structure
The need for organizational restructuring
For the efficient and effective operation of e-GP dedicated bodies should be
established which undertake the daily operations and processes. In case such bodies
already exist, they should be restructured and reengineered as necessary in order for
them to be in line with their new mandates and authorities. E-GP engages many
stakeholders both within and outside government, as described in the following
sections.
Permanent structures
The main strategic body in the Public Procurement Regulatory Authority (PPRA). PPRA
is the authority responsible for the establishment of national policy for e-GP as well as
overseeing its implementation. In most cases, the PPRA is a unit located within the
Department of Finance, although this is not necessarily the case in all countries.
Amongst others, the main roles of PPRA are focused on:
National policy related to improving performance of public procurement.
Operational issues in the daily operation of the e-Procurement system and public
procurement in general.
PPRA’s responsibilities are allocated to separate divisions in the structure, therefore,
it should be staffed with key personnel in full time positions and should have the
authority and budget to supplement the staff with external expertise, as required. In
order for the PPRA to succeed in its tasks, the following conditions should be met:
the unit must have sufficient authority across the entire public sector;
it must be an independent source of advice or assistance for those CAs wishing to
make use of the available experience and expertise of PPRA, and
it must be adequately equipped to provide a broad range of skills from
management advice to specific business support services in the area of
procurement.
Other permanent bodies that should be established within government are the
following:
Auditing bodies: These bodies are responsible for conducting independent audits
of the processes, technology, performance and finances.
Appeals body: This body is responsible for processing potential appeals. It must
be independent from PPRA, in order to ensure transparency, fairness and
impartiality.
Contracting Authorities (CAs): They are responsible for ensuring that legal and
administrative requirements are implemented and adhered to.
Interim structures
In case existing structures do not exist to manage public procurement and until the
permanent structure is established, interim structures may need to be created. The
experience gained during this initial period, can be subsequently incorporated into the
establishment of the permanent structure.
Collaborative structures
International Trade Agreements Board (ITAB): Governments participate in
international and regional trade agreements, and thus several government
departments (not necessarily related to public procurement) are involved to
monitor compliance. ITAB is responsible for facilitating regular discussion between
such government departments and PPRA, to ensure that the procurement strategy
implemented for the country supports the agreements that have been signed.
International Standards and Compliance Board (ISCB): ISCB is a purpose-build
body, responsible for monitoring the activities and progress by international
standards setting bodies (e.g. United Nations Commission etc.) and technology
standards bodies (e.g. International Organization for Standardization etc.). This
body should ensure that policies, regulations and/or systems remain updated
according to such standards, as appropriate.
Permanent Commission for Public Procurement (PCPP): PCPP body facilitates the
efficient interaction between individuals in the various ministries and PPRA in
order to efficiently determine the appropriate national strategy. Its main role is to
ensure that national policy remains relevant and effective.
National Procurement Managers’ Forum (NPMF): NPMF promotes the efficient
and effective collaboration of the procurement managers, across government, and
enables them to share experiences, get/provide advice, discuss common
procurement issues and transfer knowledge among sectors. This structure is
important in increasing the skills levels of procurement staff as rapidly as possible.