The Governance Evidence of E-government Procurement

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The governance evidenceof e-government procurement

Siriluck RotchanakitumnuaiDepartment of Management Information Systems,

Thammasat University, Bangkok, Thailand

Abstract

Purpose E-government procurement (E-GP) can improve the traditional government procurementprocess. E-GP can help decrease corruption. This research aims to present the factors of E-GP that cancreate good governance in government procurement through e-auction.

Design/methodology/approach A survey was conducted with Thai public managers who areinvolved in e-government procurement. The sample size is 169 professionals representing67 government agencies.

Findings There are five factors that enhance governance procurement. These relate to thetransparent e-procurement process, committed public managers and political officials, honest vendors,and specific policies and regulations. A transparent e-procurement process has a positive effect ongood governance practice, increasing cost effectiveness and accountability, and decreasing collusionamong vendors. Vendor honesty has a negative impact on collusion. Supportive policy and regulationsrequirements improve cost effectiveness, accountability, and law enforcement.

Practical implications E-GP is not a guarantor of enhanced governance and reduced corruption.It requires a dedicated commitment to strong rule enforcement and penalties to achieve successfulimplementation of e-government procurement.

Originality/value Using a wide range of government agencies, the research addresses the bestpractices e-government procurement governance and the benefits of good governance in terms of costeffectiveness, accountability, collusion reduction, and stringent law enforcement.

KeywordsE-government procurement, Good governance, Thailand, Procurement, Governance

Paper typeResearch paper

1. IntroductionInformation technology has changed how goods and services are purchased in thepublic sector. E-procurement is an online system that can streamline the procurementprocess. In the digital era, government uses the internet to deliver services and tocommunicate with citizens and organizations. The Thai Government has implementede-government procurement (E-GP) to be more efficient and to enhance procurementgovernance and reduce corruption. Good governance refers to the process andstructure that insures good management of resources (ADB, 2004). Good governance inpublic sector management is focused on transparency and maximum benefits to thecountry, people, and society consistently and fairly. These include clear principles,citizen participation, responsibility, rule of law, effectiveness, efficiency with equityand accountability.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1750-6166.htm

The author would like to thank Thailand Research Fund for funding this research. The author isalso grateful to Associate Professor Mark Speece and Associate Professor Fredric W. Swierczekfor their constructive comments.

Transforming Government: PeopleProcess and Policy

Vol. 7 No. 3, 2013pp. 309-321

q Emerald Group Publishing Limited1750-6166

DOI 10.1108/TG-01-2013-0004

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There are many studies with regard to e-procurement (Croom and Johnston, 2003;Croom and Brandon-Jones, 2007; de Boer et al., 2002; Evenett and Hoekman, 2005;Hui et al., 2011). Much of the prior work to date has focused on the systemimplementation and effectiveness of the e-procurement system. Warsta (2004) found that

the most important corrupt interface between private companies and public offices isthe public sector procurement. Croom (2000) indicated that process efficiency is a keydriver of e-procurement performance. A recent work by Hui et al.(2011) highlighted theopaqueness and failure of public agencies to acquire the right quantity, specificationsand price in the Malaysian procurement process. Hackneyet al.(2007) found that humanfactors are critical in the e-reverse auction. Padhi and Mohapatra (2011) suggested astatistical approach based on pattern analysis to detect collusion. However, prior studiesare fragmented with little concern for the effect on both the e-procurement process andhuman involvement. They do not focus on identifying the key factors for assessing thegood governance of e-government procurement.

In 2011, for Transparency Thailand was rated 3.4 points on a scale of 0-10(ten equates toa low level of corruption), and ranked 80th among 183 countries. Thailand is perceivedto have a high level of corruption (Transparency International, 2006). One of the majorobjectives of e-government procurement (E-GP) implementation is to reduce corruption andits implementation success is still an issue. Lack of transparency in the tender awardingprocess is common in Thai Government procurement (Rotchanakitumnuai, 2012a).Moreover, excessive intervention from politicians and collusion among vendors createscorruption andmisuse of public resources (Rotchanakitumnuai,2012b). Forimplementationof good governance it is important to detect the components of e-government procurementgovernance from a number of government agencies at both the operational andmanagement levels to assess the best practices of e-government procurement.

This paper begins with a discussion of the theoretical literature and proposes anintegrated model which includes the e-procurement process, and three human factors

(public managers, vendors and politicians) to assess the effectiveness of e-governmentprocurement governance. This study will also identify the relationship of e-governmentprocurement governance best practices on the good governance. The focus is on thee-government auction approach business procurement.

The second part of the paper reviews the literature of e-procurement and goodgovernance. Next, the research framework of the antecedents of good governancein the e-government procurement auction and their impacts on good governance isdemonstrated. The research methodology and analysis are described. Finally theconclusions highlight the implications of the research results for good governance ofe-government procurement and future research directions.

2. Literature review

Procurement is the acquisition of goods or services by an organization. It normally is acomplicated process and uses a large number of resources including significant timeuse. Information technology has a major impact on reducing the steps of businessprocess, and increasing productivity. Electronic procurement is an information systemfor business to business purchase (Holmes, 2001). Electronic procurement uses theinternet to lower costs, change purchasing routines, reduce procurement time, andbuild relationships with suppliers (Chopra et al., 2001; Davilaet al., 2003; de Boeret al.,2002; Rotchanakitumnuai, 2013; Tassabehji, 2010). E-government procurement (E-GP)

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employs online information technology to purchase goods or services for publicagencies from businesses. E-GP can add service value and increase cost savings to thegovernment (Casaki and Gelleri, 2005; Iqbal and Seo, 2008; Rai et al., 2006). E-GP canimprove transparency and governance change business practice and encourage new

suppliers/vendors to participate in public procurement (Harris and Rajora, 2006). E-GPis an effective system which achieves good governance in procurement and limitspolitical interference (Heywood, 2002).

The procurement process is a major problem for good governance. The selection ofprocurement method and defining the product specification are important practicesthat can improve procurement (Hui et al., 2011). For instance, special tendering isapplied for big projects which require e-auction. Human resource is another factor thatrelates to corruption. Kennedy and Deeter-Schmelz (2001) found that top managementwas a significant motivator for the use of e-procurement. Government managers ordecision-makers set the priorities for procurement (Hardy and Williams, 2008). Politicalinvolvement also has major influence on corruption (ADB, 2004; Belwal and Al-Zoubi,2008) (Table I).

The interaction between government and private sector can cause favoritism andbribery in procurement (Hui et al., 2011). To prevent abuse and fraud, public policyshould emphasize regulations prevention, and best practices of e-procurementgovernance (Rotchanakitumnuai, 2010).

Authors Issue of study Research method

Croom (2000) The impact of web-based order processing systems forprocurement strategy in the management of maintenance,repair, and operating (MRO) supply

Exploratory study

Croom andJohnston (2003)

Issues relating to the impact of e-business developmentson internal customer service with a focus on electronic

procurement

In-depth interview

Saxena (2006) Developing attributes ensuring excellence in e-governance implementation

Case study

Hackneyet al.(2007)

Evaluation issues related to eReverse auctionImplementation

Case study

Croom andBrandon-Jones(2007)

The evaluation of e-procurement implementation andoperation from of e-procurement five key themes areconsidered system specification, implementationmanagement, changes to organizational characteristics,changes in total acquisition costs, and changes togovernance structures

Qualitative study

Belwal and Al-Zoubi (2008)

To assess the direction of e-governance and the publicperception of corruption, trust, and e-governance

Survey

Huiet al. (2011) The perception of the contractors and the procurementofficers on accountability, transparency, corruption,integrity and cronyism pertaining to the publicprocurement system

Qualitative work

Aman andKasimin (2011)

The impact of system specification and implementationmanagement on e-procurement system

Qualitative study

Padhi andMohapatra(2011)

Development of a statistical of collusion analysis ingovernment procurement auctions

Quantitative assessmentof bid-price-to-reserveprice ratio

Table I.Literature analysis

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2.1 Good governanceGovernance involves the process of decision making and the formal and informalstructures that are set to get and implement the decision (UNESCAP, 2007). Typically thegovernment sector has a problem with transparency in procurement (Mitra and Gupta,

2007). In this sector, there are both formal and informal government structures. Formalgovernment structures are described decisions on procurement and how they areimplemented. Informal decision-making involves kitchen cabinets or informaladvisors. Such informal decision-making is frequently the result of corrupt practicesor leads to corrupt practices. Good governance in procurement consists of integrity,transparency, accountability, and fairness. Good governance requires a fair process oftransactions and services with accountability administration (Bediet al., 2001; Saxena,2006). In general, corruption can be business or government related. Economiccorruption is the use of public office for private gains. Political corruption is the violationof the formal rules governing the allocation of public resources by administrators forfinancial gains or political support (Ampratwum, 2008). Hasan (2004) emphasized thate-governance can increase efficiency, effectiveness and organizational performance. It

provides a solution to corruption, bureaucratic inefficiency and ineffectiveness, nepotism,cronyism, the lack of accountability and transparency.

3. Research frameworkPast research indicates that an effective e-procurement process can improve transactioncosts and financial benefits to the organization (Amit and Zott, 2001; Arbin, 2003;Subramaniam and Shaw, 2004). Effective cost savings accrue from improvements in theprocurement process itself. These savings are realized through increased automation ofprocurement withimprovedaccuracy (Cox, 1999; Croom, 2000; Deeter-Schmelz et al., 2001;Kalakota and Robinson, 1999; Zsidisin and Ellram, 2001). A higher level of IT process andsystem compliance can increase the level of transparency (Croom and Brandon-Jones,

2007; Croom and Johnston, 2003; Neef, 2001; Subramaniam and Shaw, 2004). Goodgovernance in this research insures transparency in e-government procurement throughusing the e-auction approach. This approach provides effectiveness, accountability, andfairness. Transparent procurement can ensure a public organization getsthe bestchoice ofproduct/service with a reasonable price (Evenett and Hoekman, 2005; Hui et al., 2011).These six hypotheses considered are based on the good governance practices and theirimpact on the e-procurement process. The first hypothesis is:

H1. The more transparent the e-procurement process, results in significantly:

H1a. More cost effective.

H1b. Higher accountability.

H1c. Less collusion among vendors.

H1d. More stringent law enforcement.

The attitudes of executives, emphasizing good governance commitment are alsoimportant (Ararat and Ugur, 2003). Public managers have a major influence onenhancing good governance (Hui et al., 2011). Strong governance commitment is requiredin order to implement an appropriate E-GP system that ensures transparency (Leipold,2007). The second hypothesis is:

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H2. The higher commitment of public managers to governance, results insignificantly: the higher level of e-government procurement governance:

H2a. More cost effectiveness.




One of the risk factors that can create corruption is the collusion among biddersin procurement (www.freshfields.com). Hui et al. (2011) found that reduced vendorscollusion can enhance governance of e-government procurement. E-auction procurementhas a major role in diminishing collusion in procurement by broadening participationand expanding the suppliers or interested firms to join the e-government procurementauction (Almeida, 2006). It provides transparency to e-government procurement byproviding established procurement procedures and ensuring easier public access toprocurement data:

H3. The more honest the vendors, results in significantly:





Many studies confirm that politicians increased in government procurement corruption(Almeida, 2006; Granados and Masilungan, 2001; Pillay, 2004; Radics, 2001). Members

of government procurement boards have been changed for personal benefit (Aizawa,2008). Politicians can have a positive impact on governance procurement (e.g. insuringcost effectiveness, requiring transparency, and enforcing rule and regulations) (ADB,2004; Aizawa, 2008; Belwal and Al-Zoubi, 2008; Bhatnagar, 2003):

H4. The higher commitment of political officials for governance, results insignificantly:





Regulations and transparent procedures in e-government procurement (e.g. stricte-procurement standards, establishment of a procurement committee, streamlined processof e-government procurement, and public awareness and penalties for corruption andfraud) are examples of effective measures to improve good governance procurement(Aizawa, 2008). Specific government policies and regulations, and formal communicationto the public can enhance good governance practice (Rotchanakitumnuai, 2010):

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H5. The more specific public policies and regulations fore-procurement, results insignificantly:





Finally, politicians involved in the procurement process and who use public funds forpersonal benefits negatively affects the procurement process (Almeida, 2006; Hui et al.,2011):

H6. The less involvement of politician to governance, the more effective of thee-procurement process.

4. MethodologyA survey was conducted with e-procurement professionals in a wide range ofgovernment agencies. The questionnaire items measured by a Likert scale ranging from1 t o 5 ( 1 strongly unimportant, 5 strongly important). Respondents wereselected using purposive sampling to insure a variety of public agencies. Personalinterviews were used to gather data from at least two respondents responsible forpurchasing in the e-procurement department. One of the respondents was in a managerposition. The other was a purchasing professional. The names of governmentdepartments have been disguised due to confidentiality because this study originated asan investigation of good governance in Thailands e-government procurement initiative.A total of 169 respondents from 67 government agencies completed the questionnaire.The respondent profile is presented in Table II.

5. AnalysisAn exploratory factor analysis was conducted to examine the dimensionality of E-GPgovernance. The analysis suggested that the five factors based the literature reviewadequately summarized the construct (Table III). The convergent and discriminantvalidity of the constructs was confirmed. All five factors had an Eigenvalue above 1,with negligible cross loadings. All constructs of E-GP governance factors have the highlevels of reliability with Cronbacha ranging from 0.640 to 0.938 (Table III).

Table III identified the E-GP governance factors. The first factor was the stricte-procurement process. One item related to Selection of an online intermediary toadvise e-auction was dropped (loading factor ,0.5). The result showed that in a goode-procurement process, clear and fair specifications of product/service insure a positiveprocurement process (mean 4.72). Setting product/service priorities and onlineintermediary selection are the lowest scores.

The second factor relates to public professionals and managers should receive nobenefit from purchasing is ranked highest commitment to government (mean 4.83).Public managers recognizing the benefits of E-GP is positively related to governance(mean 4.81). The third factor considers Vendors. Reduced collusion among vendors(4.73) and no benefits offered to them (4.71) are critical to E-GP governance. The fourthfactor relates to minimizing politician involvement. This would enhance good

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governance or limited involvement in the e-procurement decision. The last factor isspecific policies and regulations that require E-GP governance. Documentation onE-GP increases good governance. These requirements reduce corruption and limitE-GP problems (mean 4.16).

Multiple regression analysis was used to determine the impact of the goodgovernance practices of e-government procurement on good governance. Table IVsummarizes the results and summary of six hypotheses is presented in Table V.A transparent procurement process with specific policies and regulations has a positiveeffect on good governance practice and improves cost effectiveness. This transparencyhas major impact on reducing collusion among vendors. In addition, vendor honestyreduces the impact on collusion. Only specific policies and regulations of goodgovernance practices have a significant impact on enforcement. Public managers had anegative impact on enhancing law enforcement. The last hypothesis was concerned withthe impact of politicians on the procurement process. Less politician influence(b 0.243) has a positive impact on good governance in the process.

6. Discussion and implicationsThe results from the survey show that a transparent procurement process has a positiveimpact on cost effectiveness, accountability transparency, and reducing the collusionof vendors. The transparent process consists of the determination of procurementproduct/service features specification including the priorities of purchased productsreceive services, and the appropriate method of procurement. Politician involvement hasno direct impact on the four impacts of good governance but have a major influence onthe government procurement process. In many countries, political officials have a high

Detail No. %

Age,25-30 21 14.5.30-40 41 28.3.40-50 52 35.9.50-60 31 21.4

EducationBelow bachelor 15 10.3Bachelor 103 71.0Master 27 18.6

Annual budget of e-procurement (USD)Less than US$333,000 46 31.7US$333,001-US$1.60 million 51 35.2US$1.61 million-US$3.30 million 17 11.7US$3.31 million-US$16.60 million 17 11.7US$16.61 million-US$33.30 million 7 4.8

More than 33.3 M. USD 7 4.8Working levelOperational level 93 64.1Management level 49 33.8Average duration of e-Auction adoption 4.7 years

Note:30 Thai Baht US$1Table II.

Respondents profile

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Items Factor loading Mean SD

Transparent e-procurement process (Cronbach a 0.640)Defined product/service specifications 0.516 4.72 0.559

Disclose procurement results to public 0.596 4.59 0.723E-procurement committee receives no benefit 0.742 4.44 0.798Appropriate procurement method selected 0.500 4.34 0.923Priority of products/services procured 0.560 3.97 0.912Selection of an online intermediary to advise e-auction 0.355a 3.60 1.05Committed public managers/staff(Cronbach a 0.835)No personal benefit obtained from government procurement fromvendors to staff 0.790 4.83 0.532Realize specific benefits to government from procurement 0.790 4.81 0.461Public managers has no personal benefit from e-governmentprocurement 0.718 4.73 0.748Staff follows the product/service specifications 0.673 4.52 0.774The public agency enforces laws 0.682 4.33 0.943

Vendor honesty(Cronbach a

0.861)No collusion of the vendors 0.813 4.73 0.766No benefits between vendors and public managers/staff 0.824 4.71 0.716No benefit offers to public managers/staff 0.814 4.66 0.768

Limited involvement of politician (Cronbach a 0.938)No intervention from political officials 0.962 4.66 0.836No political nominees involve in E-GP 0.954 4.63 0.799No political involvement in setting procurement priorities 0.827 4.61 0.868Specific policies and regulations (Cronbach a 0.797)Requirements limit E-GP problems 0.684 4.16 0.940Requirements reduce corruption 0.964 4.16 0.962Transparent of E-GP practices 0.521 3.95 0.930

Note: aItem with factor loading less than 0.5 is dropped

Table III.Good governanceelements in electronicgovernment procurement

Impact

Good governancepractices

Costeffectiveness Accountability

Reducedcollusion

Stringent lawenforcement

A transparente-procurement

process

A transparente-procurement process 0.422 * 0.443 * 0.462 * 0.207Public managers/

commitment 20.302 20.316 20.128 20.381 *Vendor honesty 20.126 20.195 20.303 * 20.073Limited involvementof politician 20.002 0.119 0.063 0.132 0.243 *

Specific policies andregulations 0.726 * 0.580 * 0.720 0.819 *

R2 0.335 0.240 0.229 0.373 0.132

Note:Significant at: *p , 0.01

Table IV.Analysis of goodgovernance practices

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level of influence on the e-procurement process which may impede E-GP governancepractice. Moreover, public managers have a negative impact on law enforcementbecause they are not involved in enforcement and have low influence on reducingcorruption. Specific policies and regulations have an impact on the cost effectivenessof procurement, accountability of the organization, and stringent law enforcement.Government agencies must enforce the law and punish the lawbreakers seriously.Lastly, less honesty vendors increase collusion among service providers. Collusionamong vendors is difficult to reduce even when traditional procurement is substitutedby technology-based procurement. Human factors are the biggest concern for goodgovernance in E-GP. The lack of awareness of the best good governance practices ine-government procurement represents a significant risk to government effectiveness.E-government procurement is not a guarantor for enhanced governance and reducedcorruption.

Many solutions to governance are suggested from this research. Vendors shouldnot receive benefits or support collusion among bidders. They should not bribe theprofessionals or the executives of government agencies. Sharing benefits withthe managers of government agencies must be eliminated. Politician should not beinvolved in setting the requirement for procurement, interfering in the procurementprocess or receive any gains from government projects, especially when participatingin the procurement auction.

H1 The more transparent e-procurement process, results in significantlyH1a More cost effectiveness 0.422 *

H1b More accountability 0.446 *

H1c Less collusion 0.462 *

H1d More stringent law enforcement NSH2 The higher the commitment of public managers, results in significantlyH2a More cost effectiveness NSH2b More accountability NSH2c Less collusion NSH2d More stringent law enforcement 20.381 *

H3 The more honest the venders results in significantlyH3a More cost effectiveness NSH3b More accountability NSH3c Less collusion 20.303 *

H3d More stringent law enforcement NSH4 Less involvement of politicians the e- procurement process, results in significantlyH4a More cost effectiveness NS

H4b More accountability NSH4c Less collusion NSH4d More stringent law enforcement NSH5 The more specific public policies and regulations, results in significantlyH5a More cost effectiveness 0.726 *

H5b More accountability 0.580 *

H5c Less collusion NSH5d More stringent law enforcement 0.819 *

H6 The lower the involvement of political officials in the e-procurement process, the moreeffective the process

0.243 *

Note: *NS not supportTable V.

Summary of hypotheses

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This research provides a rigorous analysis on governance issues in e-governmentprocurement. Specifically, this research specifies the key good practices of e-governmentprocurement governance, and its impact on cost effectiveness, accountability, collusionreduction, and stringent law enforcement. This study confirms key findings of the

negative role of vendors and politicians (Aman and Kasimin, 2011; Hui et al., 2011).There are five factors that enhance governance procurement: a transparente-procurement process, committed public managers, neutral political officials, limitedvendor collusion, and specific policy and regulation requirements. Additionally, thisstudy provides guidelines for future e-government procurement. However, by resultE-GP is cannot insure enhanced governance and reduced corruption. It requires adedicated policy with strong governance rule enforcement and penalties to preventgovernment managers, politicians or vendors malfeasance so that the potential goalsfrom the successful implementation of e-government procurement can be achieved.

7. Conclusion

The results showed that the three human factors of committed public managers, honestvendor and less politicians interfering play an important role in e-government. Publicmanagers should consider the maximum benefits to the agencies from governmentprocurement. Shared benefits with vendor or service provider in governmentprocurement must be eliminated. Transparent policy and detailed specifications of theproducts/services must be emphasized. Strong good governance procurement practicesneeds to be supported by the Thai Government, particularly eliminating theinvolvement of politician. It requires strong enforcement and penalty to achieve thepotential benefits from the successful implementation of e-government procurement. Itis critical to highlight the procurement governance practices because corruption affectsthe governments ability to manage the public budget more effectively. Corruptionlimits the economic growth and the social development of the country. Finally more

stringent law enforcement for corruption and fraud in government procurement has tobe undertaken more effectively including black listing dis honest vendors.

The limitations of this study relate to the purposive sample which includes onlypublic managers and measurement based on perceptions rather than actual behaviorsin good governance in procurement. Future research can extend the study to assess theactions of politicians and vendors to determine their impact on good governanceprocurement practices. Research may also investigate in more detail the strategicimplications of good governance procurement and evaluate their impact ongovernment.

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Web sitewww.freshfields.com

About the authorSiriluck Rotchanakitumnuai is a Professor of Management Information Systems,Thammasat Business School at Thammasat University. Her research focuses on e-business,e-service, and e-government. She is a recipient of the Outstanding Researcher Award ofThammasat University and Vice President of Academic Affairs of Thammasat University. Sheis also the President of Executive Board Members of International Conference on ElectronicBusiness and Conference Chair of The Eleventh International Conference on Electronic Business(ICEB2011). Siriluck Rotchanakitumnuai can be contacted at: [email protected]

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