E-Procurement an international perspective

By: Pumezo Gulwa

South Africa’s government is by no means the only one in the world grappling with procurement modernisation. Globally, governments have been pursuing initiatives to
affect good governance and the “smart spending” of limited funds. In the last two decades, many countries, states and local governments have pursued the implementation of a more effective procurement system and, in many cases, an electronic procurement (e-Procurement) system.

Pumezo Gulwa, Director of the eCommerce Centre in the Office of the Chief Procurement Office, shares the lessons learned from international best practice and from National Treasury’s implementation of e-Procurement.

The lessons can be divided into a few key categories: people, process, cost control, technology, regulation and functionality.

PEOPLE

It is tempting to become so enamoured of the technology that we forget what it is all about: our first and foremost duty as government is to better the lives of our country’s people by adhering to the developmental goals as stipulated in the National Development Plan (NDP).

Government’s larger objectives are to deliver goods and services in the most efficient manner and it strives to affect savings so that there will be more resources available for development work. Furthermore, the aim is to make it easier for people to do business with government, so that government is able to empower SMEs and deepen the economy, especially in rural areas.

Better technology supports this by enabling greater transparency in the procurement process, making the process more accessible and supporting better decision making for procurement professionals.

ENGAGING INTERNAL AND EXTERNAL STAKEHOLDERS

Skilled procurement personnel are crucial to a well-functioning e-Procurement system, requiring government to recruit skilled procurement staff and continually train them (classroom training, on-the-job training and mentorship). The objective is to professionalise government SCM practice to a larger degree.

Government can learn from the private sector’s advances in electronic bid management. This could result in a long-term partnership where
best practice can be shared. Furthermore, without the commitment and goodwill of the business community, e-Procurement applications cannot be successful. Therefore, it is important to keep the private sector and potential suppliers up to date with developments, which helps to shape their expectations and creates better understanding of the changes taking place.

PROCESS

Procurement systems should be holistic and include all relevant elements to enable all types and sizes of transactions. The procurement system should consolidate the entire procurement process, from soliciting suppliers, receiving bid notifications and managing contracts to raising purchase orders and fulfilling them.

Sourcing processes need to be re-designed to include mandatory use of e-Procurement.

Deploying catalogues and monitoring their usage in e-Procurement systems helps government organisations to reduce procurement cycle times, increase contract use and ensure that they achieve best prices.

International experience has shown that running a pilot project before full-scale implementation has clear benefits, such as a reduced turnaround time on projects. This applies where sub-processes were implemented and where there was proper reporting on process efficiencies.

Many government procurement systems are plagued by a lack of accountability. This can be dealt with by developing a system that is transparent and that encourages speed in the process by making it visible throughout the supply chain via a web-based interface. This enables procurement practitioners to identify any issues quickly and take immediate steps to fix problems.

COST CONTROL

e-Procurement improves the control of both direct and indirect costs. It can promote cost control in the following ways:

• Saves the valuable time of employees when they need to buy goods and services.
• Reduces cost by channelling purchases to approved suppliers and pre-negotiated contracts.
• Reduces red tape through streamlined processes.
• Reduces prices through increased competition, which forces organisations to produce better quality products at reduced cost.
• Some eCommerce sites enable eAuctions, where suppliers compete on price for goods that are frequently procured by government.

TECHNOLOGY

When purchasing a technology solution it must address the business problem. It must not just be an impressive technology solution. Technology must enable document management and keep track of the standards needed in contracts to ensure consistency.

The technology must also facilitate open communication between bidders and government agencies. More communication with bidders decreases the chances of unpleasant surprises or potential bidders walking away when problems come to light during the tender process.

Furthermore, technology also allows for new sourcing frameworks, such as running pilots or demonstrations before finalising that particular sourcing strategy.

REGULATION

Open initiatives can help government agencies to move past the problem of procurement laws that are outdated or that have been made redundant by changes in technology. Governments also need to harmonise public procurement legislation with existing rules and policies through new regulations and laws and by repealing outdated laws and regulations that affect public procurement.

FUNCTIONALITY

It is crucial for progressive e-Procurement solutions to have available detailed supplier information to enable intelligent decision making in awarding contracts.
Useful information includes:

• Which suppliers are reliable and deliver to standard
• Which ones can supply their products and services in which geographical areas
• Which suppliers fall within the SME bracket

Automation minimises the delays in procurement practitioners receiving what they need. To achieve this end, the e-Procurement platform must help preferred suppliers to more quickly respond to requests. It must also help the procurement practitioner to be faster in obtaining a purchase order and getting it into the supplier’s system. Compliance must be monitored by unobtrusive analytics.

ENABLING SMES

A more open and accessible e-Procurement system helps to empower small suppliers by offering clear procurement guidelines and free registration, while minimising the documentation required and reducing duplication in the submission of documents.

Indicating the geographical location of the SME and where it will be able to deliver goods and services, will help procurement practitioners to identify local
suppliers.

The intended outcome is to boost local economic development and deepen rural economies.

CONCLUSION

The South African government is in line with international e-Procurement trends and is rapidly modernising the government’s procurement system.

To date, the National Treasury’s Chief Procurement Office has implemented three technology-driven initiatives, all designed to drive e-Procurement:

• The Central Supplier Database (CSD) (www.csd.gov.za) helps government procurement practitioners to know their suppliers better. All current and potential suppliers to government are required to register on the CSD. This registration is free of charge. The CSD reduces the burden of compliance required before sourcing from a supplier. It also reduces paper use and the
duplication of records.
• The eTender publication portal (www.eTenders.gov.za) ensures that all tenders issued by organs of state are published in a central place and can be downloaded. This portal also shows bid outcomes.
• The gCommerce site (www.gCommerce.gov.za) is a web-enabled, amazon.com look-alike system for purchasing goods and services off transversal contracts awarded by the National Treasury.

The benefits of e-Procurement can already be seen from a supplier point of view (in terms of the savings on the carbon footprint: printing and travel costs). Supply chain management practitioners benefit from the system’s management of compliance issues and ability to easily track purchase orders for transversal items, from requisition up to receipting. As SCM modernisation continues, Treasury expects to see more benefits unfolding.

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