Challenges and opportunities of e-Procurement

“End-to-end” e‑procurement

By adopting the new public procurement directives (“Directives”) in April 2014, the European Parliament completed another important step towards shifting to full (end-to-end) e‑procurement. The implementation of end-to-end e‑procurement, covering the use of electronic communications and transaction processing when buying supplies and services or tendering public works, is inter alia expected to generate significant savings, to facilitate and simplify public procurement procedures, and to further foster competition. However, end-to-end e‑procurement is not simply about implementing an IT project and replicating the “old” paper based processes; instead, it marks a substantial change in the system and methodology of public procurement and presents both new challenges and opportunities for bidders and contracting authorities.

Gradual implementation

The digitalisation of the public procurement process involves a wide range of measures, from publishing contract notices online (e‑notification) to electronic payment based on the Single Euro Payment Area (SEPA). The Directives aim at a progressive implementation of end-to-end e‑procurement. E‑notification, which is already available across the EU, will be mandatory as of March 2016. By the same deadline, all contracting authorities will be obliged to grant interested bidders electronic access to the (complete) tender documentation (e‑access). Electronic submission of offers (e‑submission) will be mandatory for central purchasing bodies (public bodies buying on behalf of other public buyers) by March 2007, while e‑submission will become mandatory for all contracting authorities by September 2018.

While the above-mentioned actions introduced by the Directives basically cover the pre – award phase, end-to-end e‑procurement also reaches the post-award phase by implementing e‑invoicing, which is already mandatory in a number of Member States such as Denmark, Sweden, Finland, Italy or Austria. E‑invoicing will be mandatory in all Member States by 2020.

Benefits vs. opportunities

Elimination of potential errors

Procurement activities (including budgeting, auditing, etc) of contracting authorities and bidders are currently based predominantly on “paper” procedures. Conducting paper-based procedures not only involves substantial efforts and costs for bidders and purchasing entities, but also provides a huge number of potential sources of (formal) errors. Formal errors represent essential burdens for bidders and contracting authorities when preparing a tender or participating in a tender procedure. E‑procurement eliminates paperwork and rework for contracting authorities. By standardizing the procurement process, e‑procurement platforms also eliminate a significant number of formal sources for errors (such as incomplete tenders, late tenders, wrongful/early opening of tenders, etc)..

Effective tool to fight corruption

E‑procurement has been identified as an effective tool for fighting corruption. It creates a very transparent environment and a more formal and reliable audit trail for the process of promoting, issuing, clarifying, evaluating and awarding tenders. The opportunities for illegally influencing the tender process are substantially reduced through implementing standardised procedures and tracking the complete tender procedure and any communication between bidders and the purchasing entity. Moreover, e‑procurement platforms provide a range of tools to reduce corruption, such as certain data management tools offering a granular view of every element of the tender, highlighting who has contributed to or accessed the information, or providing much greater insight into the procurement process so that patterns can be spotted and analysed. Specifically, the platforms track who submitted what, at what price and when.

Potential savings

Setting up a e‑procurement system also provides contracting authorities with an opportunity to re-engineer the entire procurement procedure and to improve overall administrative efficiency by cutting the duration of the purchase-to-pay circle, reducing administrative burdens, and improving audit ability. Public entities that have already implemented e‑procurement report savings of between 5 – 20% of their procurement expenditure. The Commission further estimates that the adoption of e‑invoicing in public procurement across the EU could generate additional annual savings of up to EUR 2.3 bn.

Advantages for SMEs

SMEs are expected to substantially benefit from e‑procurement due to various reasons, including increased transparency, standardized tender procedures, and procedural simplifications. E‑procurement can also provide simpler access to information (e‑notices, tender platforms, etc) and to a wider pool of tender opportunities. In addition, e‑procurement platforms can help economic operators to reduce their costs of participating in a tender (reduced mail costs, less printing, etc).

Critical success factors

E‑procurement’s advantages can only be fully realized when the systems and processes to manage it are in place. While bidders are generally only required only to have standard hardware equipment and internet access in order to participate in e‑procurement procedures, purchasing entities must ensure that the required hard- and software tools for creating and managing the procurement process comply with certain legal requirements: As a rule, the tools and devices for communicating electronically must be non-discriminatory, generally available, and interoperable. Contracting authorities must identify systems that do not restrict the ability of companies to participate in a public procurement procedure. However, the technical and legal framework does not seem to be “ready” yet for e‑procurement, since inter alia e‑procurement tools currently cover only a part of the overall e‑procurement processes; classification systems (CPV, CPC) appear to be too detailed for purchasing authorities when preparing their notices, but are not detailed enough for companies looking for business opportunities; and, most of the interoperability between e‑procurement systems/services has not yet been realized yet.

End-to-end e-procurement will significantly change the procurement process for all parties involved, both bidders and contracting authorities. Once the technical and legal framework has been established, e-procurement is expected to increase transparency, facilitate SME participation, enable stronger competition, and foster innovation and simplification.

author: Johannes Stalzer