Design, Implementation & Roll-outof e-Procurement

May 2013

Kang-il Seo | Deputy Director, International Cooperation DivisionPublic Procurement Service (PPS), the Republic of Korea

Contents

Ⅰ. e-Procurement in Korea

How did we get here?

- Choosing the model & consideration factors

- What’s in the law?

- the Roll-out

Impact of e-Procurement

Ⅱ.

Ⅲ.

e-Procurement in Korea

Korea Online e-Procurement System (KONEPS)KONEPS is the single portal for public procurement info in Korea

End-to-end Functional CoverageKONEPS processes the entire procurement procedures through sub-systems: e-bidding, e-contracting, e-ordering from online shopping mall and e-payment

“KONEPS”

KoreaON-lineE-ProcurementSystem

“KONEPS”

KoreaON-lineE-ProcurementSystem

e-Payment

e-Bidding e-Contracting

Online

Shopping

Mall

e-Ordering

e-Notice

e-Biddinge-Contracting

Online

Shopping

Mall

e-Ordering

2

In 2012, 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 in 292T e-bidding • Total transaction value : $42 billion

• 657T contracts are electronic(99% of all contracts)• 100% of all payments are electronic

• 500T Purchase Orders issued online(99% of all POs)• Total e-Mall transaction value : $12.5 billion

UserRegistratio

n

e-Bidding

e-Contracting

& e-PaymentOnline

Sopping mall

e-Procurement in Korea

Before

Certification-Related agencies

Industry Associations

Ministry of Strategyand Finance

Credit Rating Companies

Surety Companies

ConstructionAuthorities

National Tax Office

Bid

Supplier

Public Buyer

One Stop Service through Data IntegrationKONEPS exchanges data with 140 external info systems for supplier information, bid evaluation, bonds and payment, minimizing paper document submissions

e-Procurement in Korea

Certification-Related agencies

Ministry of Strategyand Finance

ConstructionAuthorities

National Tax Office

Industry Associations

Credit Rating Company

Surety Companies

Korea Financial Telecommunications& Clearings Institute

Contract Delivery

After

One Stop Service through Data IntegrationKONEPS exchanges data with 140 external info systems for supplier information, bid evaluation, bonds and payment, minimizing paper document submissions

e-Bid

KONEPS

Supplier

Public Buyer

e-Procurement in Korea

e-Procurement System

Choosing e-GP Model

Procurement process involves the exchange of information, agreement (negotiation and contracting), and settlement (delivery and payment). e-Procurement system is an intermediary that enables online processing of these activities

Information Exchange

Agreement SettlementBuyerBuyer

Intermediary

Electronic platform

SupplierSupplier

State Investment vs. Public Private Partnership

Choosing e-GP Model

PPPPPP State InvestmentState Investment

Complete outsourcing (development & operation)

Hidden costs - Risk of lock-in effect (limits competition)

Need dispute settlement mechanism (service fees, etc.)

Complete outsourcing (development & operation)

Hidden costs - Risk of lock-in effect (limits competition)

Need dispute settlement mechanism (service fees, etc.)

Government’s operation (facility management

outsourcing)

Needs operating agency with expertise in public procurement

Certain level of internalization of technological resources

Easier to share govt. administrative database

Government’s operation (facility management

outsourcing)

Needs operating agency with expertise in public procurement

Certain level of internalization of technological resources

Easier to share govt. administrative database

Harmonization with e-Govt. Plan

Choosing e-GP Model

Government e-Procurement system was implemented as one of 11 e-Govt. projects

Setting the Goals

Choosing e-GP Model

Single Window for Public Procurement

All public tender notices and related information at a single website

Bidders can participate in all public biddings after one-time registration

Digitalization of Entire Procurement Cycle

Entire procurement processes from supplier registration, bidding through to payment are conducted via the internet

Integration with Other Information Systems

Maximize the impact of digitalization by using database available at other public authorities

Choosing e-GP Model

Integratede-GP

System

Integratede-GP

System

Gateway to Government Procurement

E-Procurement PortalComprehensive Information ContentsIntegrated Information SearchCustomer Service

Standardized Procurement Process

ASP for public institutionsServices for suppliersSystem development for the System Operation Authority

Efficient Procurement Process

One-time registration for participating in all public bids Reducing the paper document submissions by bidders

Integrated Information & Shared Use

Comprehensive information on public bids and bid awarding Access to data from public authorities and industry associationsShared use of information

Standardization of Data

Standardizing Product Catalog based on UNSPSCCreation of e-CatalogStandardizing 149 e-Document forms

Reliable e-Document Exchange

Conformity to ebXML international standardsEnd-To-End security measures with PKI encryptionSecurity assurance

Governing Laws (1)

Legal Framework

No separate primary legislation for e-Procurement until Feb. 2013e-GP was rolled out without mandatory-use provisions (except tender notice)

Governing Laws (2)

e-GP could be implemented under existing laws on e-Commerce

Legal Framework

Rolling Out

Training and User Support

• Nation-wide training sessions• Marketing visits to public entities• Web Call-Center - 60 staff offering 4,585 consultations daily

via phone and video-conferencing

In the early onset of e-Bidding, PPS held 130 training sessions in 2001 and operated training courses at 23 locations

Incentives• Discount for service fees when procurement

request is made via KONEPS• e-GP usage was included in the government-

wide performance evaluation criteria (‘05-’09)

2002 2010

20%

e-Contracting Ratio

40%

98%

2006

Increased Transparency

Real-time information disclosure

Objectivity in bid evaluation

- Bid evaluation based on objective, validated data

Informed decision-making- Traceable prices and specifications

- Bidding results and contract details disclosed to the public on-line- Peer monitoring on fair results

- Reduced risks of biased decisions from information asymmetry

12

Impact of e-Procurement

Impact of e-ProcurementImpact of e-Procurement

Transaction Cost Savings KONEPS is saving transaction costs of 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

Before over 30 hrsless than 2 hrsAfter

- Reduction of 7.8 million pages of paper documents per year

$ 6.6 bn

Public Sector Private Sector

Transaction Cost Savings

$ 1.4 bn

13

THANK YOU