January 2007

e-Procurement implementation in Selangor local governments

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Malaysia is witnessing a shift from an industrial-based  economy to an information-based economy in which information is intrinsic to organisational functioning. Driven by the need to acquire, manipulate and distribute information, the last decade have seen a massive growth in Information and Communication Technology (ICT) investments by both public and private institutions. Often described as a characteristic of the information revolution, this increasing rate of investment in technology has also been fueled by both the decreasing costs and increasing capabilities of technological hardware and software.  Given all of these events, there is little doubt that the Malaysian society has become increasingly dependent on ICT.

Furthermore, in recent years, the vital development of the Internet offers increasing opportunity for e-Commerce (electronic commerce).  E-commerce has attracted much attention from businesses, not only to get connection with others and make a profit from their product/service, but also to reduce the costs of internal and external operational procedures including purchasing or procurement.  Procurement is a very critical task because it is a matter not only for making a profit, but also for staying in business in a highly competitive environment.  In the government sector, procurement is sometimes the source of corruption, scandal and abuse of public resources.  Besides inadequately qualified personnel, “transparency” of the procurement environment becomes another source of problems in the procurement procedure.

e-Procurement is still considered to be a new and volatile area in the local governments in Malaysia. The 21 local governments in Malaysia’s Selangor are not yet ready for  e-Procurement services as per the study. Realistically, the challenges and difficulties in effecting change at the local government level, lack of funding, complex and expensive initiatives, and rigid government bureaucracy are the issues confronting them

The Malaysian scene for e-Procurement is very slow to pick up even though it is one of the flagships of the Multimedia Super Corridor (MSC).  Since Selangor is the leading state in Malaysia and in view of its economic development, it should play a major role in making Malaysia’s Vision 2020 a reality.  Also, due to Selangor’s economic success, as well as its strategic location in the center of West Malaysia, Selangor has become the regional hub for all things cyber. Of the 14 states in Malaysia, Selangor is the only state that has achieved the status of a developed state as of 29th August 2005 through their Vision 2005.

Significance of research

In order to realise an electronically driven government an in-depth understanding of the specific issues related to ICT implementation leading to e-Procurement implementation is essential for the establishment of appropriate principals and effective approaches with regard to the management of information and communication systems in an organisation.  In fact, in the implementation of e-Government initiative subsequently leading to e-Procurement initiative, many issues and challenges to both initiatives are inter-related such as those pertaining to information security, establishment of a comprehensive, widespread and affordable telecommunications infrastructure as well as adequate education and training which encompass not only government employees but the masses as well.  Each individual issue is important in its own context as well as producing multiple impacts, which affect the organisation and implementation of ICTs within it.  Subsequently, effective management of ICT and later, e-Procurement across the board can only take place when a more comprehensive understanding of the myriad of issues is achieved.

In the area of information and communication technology, a good portion of the research conducted prior to this study tended to focus primarily on private sector systems and was based on what Ward (1995) termed “supply-side” issues, or those issues related to how ICT based systems can be made to work effectively, economically, and in the end deliver the expected benefits.  In this case the issues were those, which surround the cost to benefit ratios of specific ICTs, and were usually earmarked for singular applications or projects.  While these issues are certainly very important, they are not the be-all and end-all of ICT implementation leading towards                       e-Procurement systems.  This study will identify and address the issues that the local government or local councils’ ICT officers or managers face when attempting to implement and later adopt e-Procurement in their organisations.

The focus of this study is on the ICT planning and e-Procurement implementation processes as a whole and not on one specific part, since it is only through a complete review of the spectrum of issues that greater success can be achieved in this relatively new and volatile environment, especially for the Selangor local government.

Procurement is a very critical task because it is a matter not only for making a profit, but also for staying in business in a highly competitive environment.  In the government sector, procurement is sometimes the source of corruption, scandal and abuse of public resources

Research objectives

The objectives of this research were to identify and examine the issues or problems, which are specific to the Selangor local government with regard to e-Procurement implementation in their municipality as well as to distinguish a comprehensive view of the overriding barriers and/or facilitators associated with the information and communication technology (ICT) planning, ICT implementation and e-Procurement development, deployment and implementation processes in the Selangor local government.  For this study, the concept of local government will actually consist of the twelve municipalities or local agencies and nine land/district offices (LDO) within the state of Selangor.

Literature review

In the last 20 years, Malaysia has experienced a remarkable growth in the economy.  The GNP per capita has risen from US$1,710 in 1981 to US$4,284 in 1997. One consequence of this rapid growth of the Malaysian economy is that, the rise in the level of affluence of the local population has created increasing demands for public goods and services.  People not only want to consume what is being provided to them but they also care for the quality of the public goods and services. At the local level, the local government, as one of the levels of government, plays a crucial role in providing public goods and services that are specific to the localities. However, the performance of local governments has been subjected to various criticisms based on the increasing number of complaints and dissatisfaction from the public regarding provision of public goods and the poor services rendered to the locals, suggesting the inefficiency of our local governments. This calls for the local government to be more responsive in meeting local needs and being able to deliver their functions effectively. As the public at large is concerned about quality services and the greater role expected from local governments, the need to evaluate the performance of local governments is essential. The implementation of e-Procurement by the local government is an important issue to be addressed. This paper investigates the issues by analysing whether the Selangor local governments are ready to provide online procurement services.

The local governments in Malaysia are classified into three groups: city council for city centers, municipality for large towns and land/district offices for small sub-urban areas.  As of 1999, there are a total of 99 local governments in Peninsular Malaysia comprising of four city councils, 19 municipal councils and 76 land/district offices. They are formed and regulated by the respective state legislation and subordinate to the respective state governments. The local government act of 1976 provides local authorities in Malaysia with a very comprehensive set of functions and responsibilities. The major function of the local governments is to provide public goods and services that are specific to the localities. Local public services that are undertaken by them on behalf of the respective state governments include both mandatory and discretionary functions. The mandatory functions include all critical functions such as refuse collection, maintenance of minor drainage, sewerage treatment, road maintenance, street lighting and activities pertaining to public health. Discretionary functions include all development function such as providing amenities, recreational parks, housing and commercial activities, markets, sports facilities and community centers. The sources of revenue for local governments mainly come from state specific grants that include road maintenance grant, economic development grant, and property tax.

The Malaysian scene for e-Procurement is very slow to pick up even though it is one of the flagships of the Multimedia Super Corridor (MSC).  Since Selangor is the leading state in Malaysia and in view of its economic development, it should play a major role in making Malaysia’s Vision 2020 a reality

This study is the first attempt to undertake the systematic study of e-Procurement implementation in a selected local government of Malaysia. The rest of the paper provides a brief review of the literature on e-Procurement implementation and the study of local government readiness for e-Procurement followed by the methodology and finally the findings and conclusion.

Methodology

All the 21 or 100% of the local governments in Selangor were studied comprising of the city councils, municipalities and the land/district offices; thus, no sampling technique is employed. The study utilised both the primary and secondary data, that is, the research used a combination of qualitative and quantitative methods. As very little is known about the implementation of  e-Procurement in the local governments of Selangor, the initial data gathering needed to be more qualitative in order to gain a breadth of view on the subject.  Stangor (2004), Neuman (2003) and Roberts (2004) pointed out the value of using qualitative techniques where research issues are not clear-cut and where respondents replies are likely to be complex, discursive, and grounded in the culture of the organisation. Furthermore, since the population of the Selangor local governments is not large, this study employs the local governments as the unit of analysis.

Data Collection: Data collection was divided into two phases. Phase 1 – Face-to-face interviews were conducted using structured survey questions. The local governments were chosen on the basis of easy access and their geographical closeness to Shah Alam and Klang.  The seven local governments were  Petaling Land/District Office, Petaling Jaya Municipal Council (MPPJ), Subang Jaya Municipal Council (MPSJ), Shah Alam City Council (MBSA), Ampang Jaya Municipal Council (MPAJ), Klang Municipal Council (MPK) and the Kuala Selangor Land/District Office. These seven municipalities comprised 33.3% of the overall population. Only the department head of the respective ICT Department of each municipality was interviewed.

Phase 2 – A questionnaire was then developed based on the responses received. These questions were structured on a Likert scale of 1 (Extremely Ineffective) to 7 (Extremely Effective). At the request of the respondents during the interview sessions, the questionnaire was translated to Bahasa Melayu as the respondents are more comfortable with this language. The questionnaires were sent to all 21 (100%) local governments of Selangor by snail mail followed by e-mail upon request. From the 21 questionnaires sent out to the 21 local governments, only seven or 33.3% were returned after repeated phone calls and e-mail. From these seven responses, only one was from the land/district office while the remaining six are from the local councils or municipalities.

Data Analysis:Following the procedures described in the data gathering processes, the interview sessions were audio-taped and notes taken by the researcher. The interviews were later transcribed and content analysis was performed on the notes to identify the main themes relative to the research questions. Consequently, a questionnaire was drawn up to quantify the responses with questions structured on a (Likert) scale of 1 (Extremely Ineffective) to 7 (Extremely Effective). The software used to analyse the descriptive statistics was the Statistical Package for Social Science or SPSS Version 12.0.1 for Windows.

Research findings

In a nutshell, the findings of this study on e-Procurement implementation issues in the Selangor local government resonate with the literature on like issues. The findings from this study indicate a paradox in the midst of policies imposed by the State and Federal Governments plus those hyped up by the mass media. The responses made by the various local governments stem more from the perspective of the respective individuals surveyed which are actually reality-checks than from upper management. The findings based on the research questions are addressed thus.

The findings from this study indicate a paradox in the midst of policies imposed by the State and Federal Governments plus those hyped up by the mass media. The responses made by the various local governments stem more from the perspective of the respective individuals surveyed which are actually reality-checks than from upper management.

The first research question was about the most problematic issues facing the Selangor local government executives with regard to ICT planning process. According to the respondents, the most problematic issues facing the Selangor local government executives with regard to ICT planning process is the Human Resource issue and the drawing up of contracts issue.  From the interview transcriptions, almost all of the ICT officers are employed on a contractual basis. This is in itself a de-motivating factor as most of them have been working for their respective local authority for more than three years.  Furthermore, the organisational structure of their local authority shows that they are the department heads for the ICT department or unit. Even though most of them are diploma holders, still the fact remains that as department heads they should be employed as a permanent staff as their subordinates are already employed permanently. This abnormality is in stark contrast particularly in the nine land/district officers of the Selangor state. Grievances on this matter have been brought up to the top management at every opportunity but bureaucracy hinders the process of recruitment, compensation and benefits at the local government organisations. Therefore, in order to have an effective ICT planning process, the local governments must deal with these issues immediately.

Regarding the most problematic issue of ICT implementation facing the Selangor local government executives is again the human resource issue, drawing up of contracts and adequate staffing.  Yet again, the Klang land/district office which represents the rest of the eight land/district offices in Selangor pointed out that Human Resource management is ineffective because of the ripple effect on the contract employment of these ICT executives. Inadequate staffing for ICT-skilled employees is another issue that the state government of Selangor should look into as only one ICT officer heads the ICT department at their municipality, thus these ICT officers are considered a “Jack or Jill of all trades”.  In particular, the ICT officers at the land/district officers are in charge of everything ICT such as being network administrators, systems analyst, programmer, webmaster, ICT trainer, etc.  Therefore, in order to have a successful implementation of ICT at the local government organizations, these issues must also be tackled as soon as possible.

The barriers of e-Procurement implementation at the Selangor local governments, as ranked by the respondents includes difficulty in adjusting to change, lack of funding, complex and expensive initiatives, and rigid government bureaucracy. However, in reply to the question whether the local governments of Selangor (Municipalities and, Land and District Offices) are ready for e-Procurement adoption, the respondents said that the local governments are not ready for e-Procurement adoption.

In fact, all of the issues such as political, social, economic, technological and public service must be taken care of immediately as they are the barriers of e-Procurement adoption particularly the human resource and the drawing up of contracts issues, which are placed under the “Social” variable, plus the bureaucratic red-tape on recruitment which is a “Public Service” variable. Once these issues are resolved, the adoption of e-Procurement at the local government level of Selangor would be a smooth process.

Limitations and assumptions of research

The choice of Selangor from the rest of the 13 states in Malaysia is due to her strategic location of being sandwiched between Putrajaya and Cyberjaya. Other criteria for choosing Selangor are extensive infrastructure, high population, successful economy, etc. The minimum response rate of 33.3% or 7 out of 21 is the borderline acceptance for reliability in research. It has been anticipated that using the local government as the unit of analysis would cause some problems in getting back a complete response but the need to use them as the scope is important in today’s Information Era. It took almost a year to get back a semblance of a sufficient number of completed questionnaires to successfully run the analysis.

The results indicate that the city and municipal councils would have better preparations to introduce e-Procurement compared to the other local councils particularly the land/district offices. This might be due to the size of the local government

Conclusion and recommendation

In this paper, the e-Procurement implementation issues of local governments in the state of Selangor were analysed relative to ICT planning and ICT implementation. There are several conclusions that can be derived from this study. Firstly, the findings suggest that most of the local governments in Selangor are not ready for e-Procurement implementation or to provide procurement/tendering services online. The underlying objective of this research is to enable online Federal Government procurement. When fully implemented it will transform the current procurement procedures by making it a faster and cheaper process, which will then be handed down to state governments and the local governments throughout Malaysia.  Electronic procurement enables the Government to become a smart buyer procuring quality goods and services at reasonable prices. Suppliers in turn will reap benefits through more expeditious and error-free payments. From literature, the initial phase of the project is limited to the procurement of Central Contract goods and services involving the automation of the procurement process and establishing connectivity between buyers and suppliers. The project will then be extended to other procurement processes, namely direct purchases, quotations and tenders. Two agencies have been identified to implement this project. They are the Administration Division and the Government Procurement Division of the Ministry of Finance and the Management Services Division of MAMPU. Pilot implementation will begin in early 1998 before full rollout to all Government agencies in subsequent phases.

Secondly, the variables that influence the local government’s implementation issue the most are the type of local government, level of technology usage, political issues and social issues.  Lastly, the results indicate that the city and municipal councils would have better preparations to introduce e-Procurement compared to the other local councils particularly the land/district offices. This might be due to the size of the local government, the scale of operations, and autonomy of the city and municipal councils.

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