April 2007

Leveraging IT Tools and Best Practices of e-Government Procurement

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Procurement is generally regarded as a sensitive function in the Public sector and is rarely transparent . It is for this reason; government procurement is one of the sectors that remains insulated against any process improvements. The inadequacies in the traditional systems of procurement and its associated delays, increased costs were adversely affecting the delivery of development projects, goods and services to the citizens. In the year 2000, a Cabinet Committee of the Ministers of government of Andhra Pradesh (GoAP), India, recommended to embark on e-Procurement for government agencies in the state as a strategy to reform the public procurement.

Andhra Pradesh government is the pioneering state in India to implement electronic procurement by leveraging the Information Technology tools and the best practices of e-Government procurement. e-Procurement is included as an important and integral part of e-Governance initiatives embarked upon by the state. The prime objectives of e-Procurement are demand aggregation, transparency, accountability, fi scal savings, standardization of procurement processes across government entities to bring in administrative efficiency.

The state government has set up a statewide e-Procurement portal (www.eprocurement.gov.in) that can be utilized by all GoAP departments, Co-operative sectors, public sectors units and urban local bodies along with their vendors. The project is implemented for the State Government by a private vendor on Application Service Provider model. In this model, the service provider had invested in the hardware, software and customization of the project and it recovers the investment through service charges paid by the participating bidders for transactions carried out on the portal.

The e-Procurement system offers a superior level of security with Secure Socket Layer (SSL) encryption, strong authentication with digital certifi cates and speed to conduct real time bidding from remote locations over the Internet. The initiative is implemented in phases, the pilot phase was launched in January 2003 in 5 selected departments for procurement costing above INR 1 Crore (USD 231,639) to test proof the concept. After successful testing of the pilot, the state government has rolled out the initiative to all the procurements in the state in July 2004 for values exceeding INR 10 lakhs (USD 23,163). Currently e-Procurement is implemented successfully in all major procurement agencies i.e.,16 government departments, 19 Public Sector Undertakings (PSU), 82 Urban Local Bodies, 5 universities spread across length and breadth of the state, the portal has processed 29384 transactions worth INR 45,036 Crores (USD 10,436 million). The year wise break up of transactions are as follows.

  • FY 2003-04: 564 Numbers worth INR 1982 Cr (USD 459.22 million)
  • FY 2004-05: 2215 Numbers worth INR 15600 Cr (USD 3614 million)
  • FY 2005-06: 9981 Numbers worth INR 15808 Cr (USD 3662 million)
  • FY 2006-07: 16624 Numbers worth INR 11646 Cr (USD 2698 million)

e-Procurement has secured demonstrable and significant benefits by way of cost and time  savings to the government, brought transparency and empowered the small & medium suppliers. The path breaking initiative has proved that transparency, fairness and equal  opportunity to private entrepreneurs who bid for govt contracts, sell products or expertise to  government agencies will not only result in healthy competition, significant contribution to  the economy but also makes significant social impact as the citizens are now assured that  their money is properly spent . As a matter of fact the successful implementation of this  initiative by the state of Andhra Pradesh has motivated the Government of India and several  other state governments have to  India embark on e-Procurement initiatives. While setting up  a procurements portal is not such a unique technological task but it is the scale of this  project, enormous change management efforts that are required to rope in the stakeholders and the social impact it creates, which makes the project a role model

Benefits

  • INR 2700 Crores (USD 625 million) Cost savings due to competitive (discounted) quotations by suppliers:
  • Significant cost savings in print media advertisement cost due to abridged tender notices
  • Elimination of supplier Cartels, Syndicates due to remote bidding.
  • Significant reduction in tender process time (from 3 to 4 months to 35 days) due to automatic work flows
  • Transparency in procurement process
  • Generated transaction Database to act as Decision support system
  • Strong MIS reports
  • Empowerment of small & medium bidders as the entire content and bid submission is online
  • Institutional compliance of statute/ process changes through application at one go
  • Improved Institutional memory due to storage of electronic records
  • Improved efficiency in tender processing as the departments are now able to take enhanced procurement work load with the existing staff

Awards tO the project

  • Topped the overall assessment of 39 eGov projects conducted by the Ministry of Information Technology,
  • Government of India (GoI) with a score of 83.7 on a scale of 0-100.
  • GoAP- eProcurement case study is published in the World Bank website.
  • The PC Quest Award for Best IT implementation in India for the year 2005
  • Golden Icon Award from GoI in the Year 2003 for Exemplary eGovernance Initiative
  • Short listed for the Prime Minister’s Award for excellence

Key Lessons of GoAP e-Procurement Project

  • The support of political leadership and the formation of a high-powered steering committee  (project implementation committee) with a mandate to take decisions on all issues were  important factors for successful implementation of the e-Procurement project.
  • Insistence on a single mode of bid submission through the e-Procurement platform was a decisive factor in the adoption of the system by suppliers.
  • A participative design process that involved workshops attended by department users,  suppliers/contractors was used to draw user requirements. Subsequent training of users was a  major factor in developing the application to the satisfaction of users.
  • The pool of Chief Information Officers from various government departments trained at IIM-A  (Indian Institute of Management- Ahmedabad), acted as change agents in implementing  e-Procurement. The pace of implementation accelerated with Chief Information Officers from different domains taking over as project champions.
  • Implementation needed enormous efforts in change management. The users were slow to  adapt to the changes in initial period but the project ramped up once the users became  comfortable with the new system.
  • The selected Application Service Provider (ASP) business model under Public Private  Partnership was helpful in scaling up the transactions during roll out, as the private partner has resources to meet the challenge.
  • A rational and affordable Pricing model based on value and number of bids per tender is also  very important for sustaining the e-Procurement initiative. Cost to government with ‘No  Cost’ to supplier in the Pilot phase, and Cost to supplier with ‘No Cost’ to government departments in the roll out phase, facilitated easy acceptance from suppliers in the early  stages and speedy roll outs to government departments in the later stages.
  • Committed project teams from both the service provider and the Government, 24X7 help  desk, strong security features, deployment architecture and MIS have contributed to the  overall success of the e-Procurement platform in AP.

K. Bikshapathi, Project Manager, e-Procurement, Government of Andhra Pradesh, India
RamaRaju, Chief Engineer, Irrigation Department, Govt of Andhra Pradesh, India
and Prof. Subhash Bhatnagar, IIM, Ahmedabad, India.

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