E-Tendering Innovations For Buyers - MERX · •The growth of the internet facilitated meeting transparency requirements ... 53% Various drugs/medicines 43% Equipment for electrification

October 2007

SCM 2007 SymposiumCPP

E-Tendering Innovations

For Buyers

2 E-Tendering Innovations for Buyers

Agenda

-Tendering Developments

-International Tendering Experiences

-Tendering Tools and Techniques

-Conclusion


Tendering Developments


e-tendering can be described as the electronic publishing, communicating, accessing

and receiving of all tender related information and documentation via the internet,

thereby replacing the traditional paper based tender processes.

•The goal of tendering is to acquire goods and/or services from suppliers that best

meet requirements

•Significant exchange of information occurs between parties during the tendering

process

•Accuracy and efficiency of documentation is critical

•Electronic exchange of information speeds up the process, reduces errors and cost

Tendering


Tendering Developments

As more and more organizations realize the benefits of e-tendering, new features

have been introduced. It can be beneficial to consider historical developments and

supplier and buyer experiences from other buyers.

•Initially, tendering processes were paper based

•Early electronic systems were tied to dedicated networks and closed communities

•The growth of the internet facilitated meeting transparency requirements

•Electronic tendering systems were introduced in Canada in the 1990s

•As electronic tendering matures more and more tendering functions are being

integrated with the procurement process


Recent Developments

2000s – New functionality to support specific commodity procurement

- Virtual Plans Rooms to facilitate construction procurement

- Increased integration with procurement processes

- Electronic Bid Submission

- Integration with ERP and other cataloguing systems

- Support for Reverse Auctions

- Qualified Tendering

- International growth and adoption of e-tendering practices


International Tendering Experiences


International Growth

Public jurisdictions and private organizations throughout the world have improved

the efficiency and transparency of their procurement processes through e-tendering

- Various world bodies, including the WTO, the UN and IMF recognize the value of

e-tendering and are working together to develop guidelines for its implementation

- The World Bank ties its funding to transparency in procurement

- The Organization for Economic Co-Operation and Development (OECD) is made

up of representatives from 30 countries. OECD recommendations include:

- Procurement should be viewed as core function of the organization

- Procurement should be integrated with processes

- Procurement should be supported by policy oversight


The Philippines: Case Study

The Government of the Philippines has had tremendous success with the

implementation of an e-tendering service recognizing benefits in expense reduction

and improved transparency

-Implemented by MERX in 2000

-Faced many internal challenges common to other jurisdictions

- Limited familiarity with new technology

- Inconsistent processes

- Reluctance to adopt new processes

- Pilot focused on value of providing basic functions

- Search and notification features

- Electronic documents only


Philippines E-Tendering


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SUPPLIERS


Savings Savings Commodities and Services

53% Various drugs/medicines

43% Equipment for electrification projects

42% Printing of letterheads

33% IT equipment & supply & construction material

25% Supplies/Material and Services

19% Construction suppliers, IT equipment

17% Electrical/mechanical Supplies

15% Various office supplies/equipment

15% Office supplies/materials

11% Vehicles & Supplies/materials

The Government of the Philippines realized significant savings by implementing e-tendering


International Tendering Systems

Australia

- One of the early successful adopters of e-tendering

- Reverse Auctions used for some procurement

- Less successful with expanded functionality of QGEM Marketplace EP4C Initiative

- Challenges with take up and low level or transactions

- Expected savings tied to cataloguing and payment process not realized

Denmark

-ETHICS – Electronic Tender Handling, Information and Communications System

- Implemented in 1995

- Double the amount of tenders were released using the same level of staffing


International Tendering Systems

United Kingdom

- Early adopters of new tendering functionality

- ELTON – Electronic Tendering Online – Suffolk County Council

- Support for Electronic Bid Submission via email with reference PIN

- Tendertrust

- Support for smartcard authentication

- Failed due to issues with complex processes, requirement for local software,

and supplier reluctance to use multiple systems

- BIPS

- Large range of buyer value added services


Tendering Tools and Techniques


Tools and Techniques

Most e-tendering sites include basic features to process and distribute tender

notices and supporting documentation:

- Search and Alert functions for suppliers to locate opportunities

- Notice Creation functions to create notices and associate documents

- Ordering functions to obtain the documents and amendments

- Audit and tracking functions to support monitoring and follow up

More sophisticated systems include additional features to further benefit both the

buyer and supplier communities:

- Virtual Plans

- Qualified Tendering

- Electronic Bid Submission

- Reverse Auctions


Virtual Plans Room

Construction procurement involves additional challenges. Tender documentation can be

costly to produce and distribute. Virtual plans room functionality allows for the electronic

distribution of plans and specifications

-Virtual Plans room functionality helps facilitate access to drawings and specifications

-Suppliers can save time by accessing information online

-Sub-trades can view pertinent information without having to order complete plan sets

-Buyers can be more efficient not having to deal with amendment and distribution issues

-Unlike physical plans rooms:

- Electronic plans are available as soon as issued

- Plan takers and amendments are tracked to reduce the risk of noncompliant bids

due to missing information


Virtual Plans Room Features

Key features include:

–Ability to track distribution of electronic plans and specs

–Capability to identify and download drawings

–Support for hierarchy of drawings to better organize information

–Descriptive file names to facilitate finding information

– Preview / order concept for better buyer tracking

–Batch submission of files for more efficient processing of files

–Support for ordering paper copies to ensure equitable access


Electronic Plans and Specifications Screens

From WWW.MERX.COM


Virtual Plans Room

Challenges

–Perception of unfair practice if some suppliers not able to take advantage of

receiving documents electronically

– Varied bandwidth availability can impact download times

– Printing challenges at remote locations

Observations

–Adoption of Virtual Plans is growing within the industry

–Subtrades slower to take up use of electronic distribution than anticipated

–Ability to order paper copies is useful

– Local industry considerations need to be taken into account (i.e. role of

Construction and Trade Associations)

The UK Office of Government Commerce working together with suppliers noted the

cost of preparing, copying and distributing construction tender documents was

reduced by as much as 90% using electronic distribution


Qualified Tendering

Qualified Tendering is typically a two or more stage bidding process in which

potential suppliers expressing an interest in bidding are evaluated first. A list of

qualified suppliers is then drawn up from the evaluation exercise for the sole

purpose of inviting bids.

-Also referred to as Dynamic Purchasing, Select Tendering, Pre-registered

Tendering and Invited Tendering

-Qualified tendering can be used to support the creation and use of Master Vendor

lists, Vendor of Record lists, Standing Offers and Standing Arrangements


Qualified Tendering Process

-Initial opportunity notice typically open to the public

-Supplier arrangement opportunities open for extended period

-Notice and supporting documentation provides qualification details

-Supplier can submit proposal to join any time during the open period

-Notification of admittance or rejection sent out

-Call up notice published with specific requirements

-Qualified suppliers invited to respond

-Proposals evaluated on published award criteria


Qualified Tendering

Advantages

–Better proposals from qualified suppliers

–Use of forms speeds up evaluation

– Less work evaluating proposals from non qualified vendors

– Less risk of non-compliant proposals

Disadvantages

–Time required to identify suppliers

–Work to keep suppliers up to date

– Two cycles may be required to complete tendering


Electronic Bid Submission

Electronic Bid Submission is the electronic transfer of proposal bid data between

a potential supplier and contracting authority. The Electronic Bid Submission

system includes safeguards to the ensure the security and authenticity of the

material being transferred.

- Typically used for the submission of completed buyer forms and supporting

documentation

- Legislation provides for electronic documents having the same binding effect as

traditional contracts

– Ontario – Electronic Commerce Act

– Canada – Personal Information Protection and Electronic Documents Act

– Directive 1999/93/EC of the European Parliament and of the Council of 13

December 1999 on a Community framework for electronic signatures


Electronic Bid Submission Process

1. Tender prepared and posted – authorized buyer given secure access for

document retrieval once opportunity closes

2. Deadline and procedures for EBS clearly identified

3. Prospective bidders register, are authenticated, then given secure access key

4. Documents obtained – bidder downloads tender documents and/or forms

5. Bidders may undergo prequalification process

6. Proposal – response documents and/or forms submitted through EBS

7. System logs receipt and sends confirmation – updates supported if done prior to

closing

8. Submitted documents stored in a secure fashion with high level of security

9. Bids open by authorized buyer only after closing

10.Full audit trail of all actions maintained


Sample

Bid Agreement

Submit a Response for RFB-VT-12345

Please read the form below. Make a selection of whether or not your company is taking exception to any provisions within this solicitation, then select "Send Pricing" at the bottom of the page to continue.

The undersigned Bidder hereby commits to the Metropolitan Water District of Southern California for The Network to perform the work as described in the documents listed below at the prices named in this response to RFB-VT-12345; agrees that this bid is a valid and binding offer that will form a contract upon acceptance; and certifies that its has satisfied itself as to the nature, location and conditions of the word and examined all documents listed below and agrees to all provisions and requirements of the contract:

Without exception.

With the exceptions as explained in the General Comments box of this bid. Bidder understands that by taking these exceptions this bid may be rendered non-responsive.

• Details of all line items

• additional Info

The Bidders further certifies that it has not, either directly or indirectly, entered into any agreement, participated in any collusion, or otherwise taken any action in the restraint of free competitive bidding in connection with this Bid; agrees to submit and sign this Bid electronically and that entry of the signature PIN below is Bidder's valid, authorized, and binding signature; and certifies that it has completed all required attachments.

Bidder represents and warrants that the person signing this Bid is an authorized agent who has fulfilled all requirements to possess actual authority to bind Bidder to each and every term, condition, article and obligation of this Bid and any resultant Contract. Under penalty of perjury of the laws of the State of California, I declare that the forgoing is true and correct.

Digital Signature (PIN#):

Attachments to Your Response:

Would you like to attach one or more supporting documents with your response? Yes No

From www.bidnet.com


Implementation Considerations

•Supplier authentication process

•Electronic signature – technique (not a signature)

– Legal equivalent of signature

–Digitized signature

–Special password

•Support for proposal updates prior to closing

•Secure storage of submitted files

•No ability to open bids prior to closing


Electronic Bid SubmissionAdvantages

– Lower preparation cost and greater consistency–Shorter turnaround time–Easier to modify or withdraw bids anytime prior to closing–Virtual elimination of errors when used with forms–Ability to automatically eliminate noncompliant bids giving bidders an opportunity to make corrections

–No disadvantage to geographical location of suppliers– Improved audit trail to support dispute resolution

Disadvantages

–Time to upload package can be lengthy–Risk of computer or network malfunction can impact bid submission–Need for computer literacy and/or training–Some uncertainty and reluctance with supplier community

The Georgia DOT implemented online electronic bidding and has seen the level of Internet bid submission rates rise steadily


Reverse Auctions

Online, real-time dynamic auction between a buying organization and suppliers who

compete against each other to win a contract by submitting successively lower

priced bids during a scheduled time period.

- Controversial approach used to lower costs

- Instant ranking approach can be used to consider criteria other than price

- Reverse auctions typically used only where specifications can be determined with

precision

- Secure interactive system required to support Reverse Auctions


Preparation for Reverse Auctions

Prior to opportunity posting:

– Establish effective criteria to pre-qualify suppliers

– Procurement requirements accurately specified

–A competitive supplier base & key suppliers are willing to participate

–Availability of intelligence on past transactions within the market

Once conditions confirmed, notices published with process details:

– Auction scope and evaluation criteria

– Event and timing

–Rules for participation

–Valid bid increments

– Technical requirements for participation

Auction held once proposals received and other award criteria have been evaluated


Operation of Reverse Auctions

•Qualified bidders contacted in advance to confirm participation i.e. 2 days

•Operation of auction overseen by contract authority

– bids collected electronically without intervention

– ranked automatically and bidders informed simultaneously

– number of bidders can be identified

– invalid bid – notified immediately with explanation

•Auction closed according to predefined rules

– no new bids in set time

–bid time period ended


Reverse Auctions

Advantages

–Potential to reduce acquisition costs

–Supports rapid procurement of products

Disadvantages

–Higher level of training/support required to ensure participants know the

process

– Emphasis on price and low margins leaves little room for innovation

–Risk of influencing the market to position vendor or disadvantage competitor

– The most qualified vendors may choose not to participate

–Hard to maintain quality

– Political considerations – SME business is not supportive


Conclusion


SummaryMost procurement departments are under pressure to reduce costs while

maintaining procurement timeliness and quality.

Inconsistent procurement policy can result in negative consequences:

a. Cancellation of project(s)

b. Cost overruns and delays

c. Staff dissatisfaction

d. Litigation

e. All of the above

Procurement policy must be insightful and reflect the needs of your organization.

After policy is established selecting the right tendering tools and techniques

through careful analysis and pilot programs can help meet your procurement

challenges.

37 E-Tendering Innovations for BuyersOctober 4, 2005

Forum 2005

CPPC

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