CIOIN

Tom Wilson

Director, eProcurement Scotl@nd Programme (ePS)

Executive summary

How do you build a sound e-Procurement strategy? What are the rules that define the game? To find answers, we approached the Government of Andhra Pradesh, the Scottish Executive, and the KSPHC, all of whom have set e-Procurement benchmarks to address unique business challenges.

A few years ago, a lack of transparency, delays, reams of paper and even threats to the lives of bidders formed a fair description of the procurement system of the Andhra Pradesh government. Based on the advice of PricewaterhouseCoopers (PWC), the Andhra government selected C1 India to implement the exchange. It started out by identifying project managers and key officials in each department. These officials were subsequently trained by IIM-Ahmedabad to think like CIOs and function as a bridge between domain experts and firms vying for projects and assist in bringing about legislative changes to streamline the procurement process.

A pilot launched in January 2003 covered four agencies: Public Works Department, Andhra Pradesh Technology Services, Transport Corporation and Health & Medical Infrastructure Corporation. The e-Procurement Exchange has lent transparency to the procurement system and slashed processing time by over 70 percent. The state saved Rs 1,000 crore in 2004-05, a year that saw e-Procurement touch Rs 15,600 crore, accounting for 80 percent of the state's total buying.

Today, 70 government agencies use e-Procurement. The IT department has already drawn a roadmap that includes new modules like a contractors' database and an online payment facility.

Initially it was tough to secure buy in. "It was one thing to set up the e-Procurement Exchange but quite another issue to convince stakeholders to use it," says an official. The implementation had to be buttressed by an enormous effort in change management.

Meanwhile, Tom Wilson, Director, eProcurement Scotl@nd Programme (ePS), oversees the project that was started by the Scottish Executive (SE), which is responsible for education, health, justice, transport, and rural affairs. In 2000, SE initiated a cross-sector Procurement Steering Group to rectify a number of issues. The SE recognized that traditional tender process did not address ROI. It also realized that early e-Procurement solutions were buyer-centric, a stand they needed to steer clear of if they wanted the system to appeal to suppliers.

In conjunction with an early adopting group of local authorities and health organizations, the parameters for an e-Procurement platform were frozen. After an international competition, the Scottish Executive handed the contract to Cap Gemini in November 2001.

The SE realized early that unless stakeholders were shown the benefits and were trained in the use of ePS, implementations could fail. E-learning techniques were developed to guide suppliers through the system. The initiation formed an important aspect of e-Procurement success, says Wilson. Another was the use of created credit cards designed in collaboration with ISA.

On the other hand, Karnataka State Police Housing Corporation's suppliers too quickly grasped that if they wanted to be in the running, they had to participate in the reverse auction process because the lowest bid determined who took home the project. The traditional method typically saw only 5 class-A bidders and 10 class-B participating in tenders routinely. Now, KSPHC has 444 class-A and 106 class-B civil contractors registered with it.

After the success of its first e-tender, KSPHC decided to use the process with all its civil contracts. The system, however, is not without its pitfalls. KSPHC, looking ahead, has deployed a backup system in case of Internet disruption. In a real crisis, it could abandon an auction and start afresh. It's also possible for quotes to fall below a level where the quality of work becomes doubtful. In such a case, the organization can apply a circuit breaker by intervening in the proceedings.

Who said government agencies can't lead an IT revolution?