e-GP for transparent public procurement

Following the establishment of an Independent Procurement Commission under the 19th Amendment to the Constitution, The Ministry of Finance is considering the introduction of an Electronic Government Procurement system to make the procurement process more transparent and corruption free.

The idea for electronic government procurements are not new and in 2014, the Ministry of Finance Annual report stated, “The government recognises the usefulness of implementing an Electronic Government Procurement (e-GP) system which could help increase transparency, easy access to information, increase competition and lower cost. The World Bank, ADB and other development partners recommend the introduction of electronic procurement as they are willing to provide technical assistance to implement e-GP in Sri Lanka.”

However, given the recent interest in the subject, Verité Research which provides strategic analysis for Asia, recently conducted a study on the problems of public procurement in Sri Lanka, best practices of e-procurement followed in other countries, and the benefits for local businesses and the government.

The study revealed that the Sri Lankan government spent approximately 597 billion rupees for public procurement in 2015. This is about 5.3% of its GDP, and 26% of total government expenditure.

Efficiency through e-procurement

“Introducing an e-procurement platform can significantly enhance the transparency, fairness and efficiency of Sri Lanka’s public procurement marketplace,” said Director General, Department of Public Finance, Ministry of Finance Priyanga Algama at the stakeholder discussion titled “E government procurement; enabling business through efficient systems” that was held recently at the BMICH organized by Verité Research.

“We are working on a Public Finance Bill and we will replace most of the regulations which governs public financial management in the country. Procurement is also a part of it. An independent body called National Procurement Commission has to be established under the 19th amendment to the Constitution, they are the authority regarding any changes that need to be made. An office has not been established yet, therefore we are continuing with the public procurement reform as well,” he said.

It was pointed out that E-procurement would ensure an enabled operating environment for suppliers, and increase value for money for government agencies when concluding procurement actions.

“We are revising the public procurement guidelines now; by end of this year it will be completed and handed over officially to the National Procurement commission to go ahead with that. We will include every important factor in the procurement reform government procurement, public private partnership (PPP) though it is not fully procurement, as the government has plans to start many PPP projects,” he noted.

President Maithripala Sirisena however earlier this month received Cabinet approval to set up the Independent Centralised Procurement Agency comprising of five members.

Algama emphasized that the government is committed towards implementing the e- procurement system as efficiency and productivity in the procurement expenditure will save millions of dollars.

He further said that the government had a discussion with the World Bank and they have agreed to support the country to introduce the electronic procurement system.

“The public procurement process in Sri Lanka suffers from inefficiencies, yet introducing an efficient procurement system will empower businesses and reduce wastage of public funds,” said Executive director of Verité Research Nishan de Mel.

According to De Mel, reducing waste in public funds even by one percent would save around Rs. six billion, a significant sum given that all of Samurdhi welfare handouts came to Rs. nine billion.

“So you can imagine what one percent savings on procurement means to the government. We are not talking about a trifling sum of money, we can change spending on welfare, education. This can be transformative in what the government can deliver. What we don’t count is how inefficient our use of the money in the budget is,” he said.

The Government delivers important social and economic goods to citizens using public procurement. However, the study conducted by Verité Research identified three key weaknesses in public procurement in Sri Lanka. They were; information, high transaction costs and anti-competitive practices.

Disadvantage in manual administration of procurement

Head of Legal Research, Verite Research, Sabrina Esufally highlighted that, “The information related to procurement, such as tender opportunities and contract awards was difficult to access, bidding imposed high transaction costs on businesses and government agencies, including costs associated with preparing and submitting bids, the manual administration of procurement was time-consuming and cumbersome for government agencies and Sri Lanka’s procurement marketplace had featured anti-competitive practices that have led to increased corruption.”

“For instance, the practice of accepting unsolicited proposals for large, high value projects that circumvent the process stipulated by the government’s procurement guidelines, and altering specifications to suit the supplier is a grave problem,” she said.

Esufally also pointed out that several countries have set up e-procurement platforms to streamline government procurement.

“Countries such as India, Bangladesh, South Korea, Philippines and Mexico have adopted this practice. E-procurement involves the use of electronic systems to handle any or all steps of the procurement process, from online publication of tender notices, supplier registration and e-submission of bids,” she said.

President, European Chamber of Commerce of Sri Lanka Dilipan Thigarajan said that E- Procurement platform would greatly improve purchasing. Firstly, it will allow information to be available to the suppliers very easily and accurately.

“Sometimes suppliers are getting information not from the buyer or from the authorized representatives of the buyer but a third party. That information is not accurate and that leads him to bid without proper information which is a disadvantage to the supplier,” he said.

“I have been in the power sector and dealing with Ceylon Electricity Board (CEB) and tenders take a long time to come out. There are a lot of entities involved and a large tender could take nearly a year. The E- procurement system could help overcome similar time consuming issues,” he said.

De Mel also pointed out that power sector is one of the areas that procurement system suffered a lot in Sri Lanka.

The power and energy sector needs an open and immediate procurement system to quicker its process, he said.

Speaking on how e-procurement can increase the efficiency of procurement, Esufally said that E-procurement results in cost savings both for government entities and suppliers.

“South Korea’s e-procurement platform saved suppliers USD 6.6 billion due to reduced labour and travel costs. Additionally, government suppliers in the Philippines saved USD 11.5 million in advertising costs from 2002 to 2011, due to the introduction of an e-procurement platform. In Bangladesh, e -procurement resulted in the price-to-cost ratio of awarded contracts decreasing by 10 – 12%,” she explained.

She further emphasized that E-procurement increases fairness in the procurement marketplace.

The study of Verite Research revealed that by making bids and procurement information more widely accessible, more suppliers are able to participate in public procurement.

Comparisons

“In Mexico, the number of contracts that were awarded to small and medium enterprises (SMEs) increased by 36% from 2010 to 2011. In Bangladesh, the number of registered bidders increased by 3500% (i.e. from 520 to 18,000 bidders) after the introduction of its e - procurement system. E-procurement systems also increase the transparency of the procurement process,” said Esufally.

De Mel noted that the system can ensure that suppliers are notified if bid specifications are altered prior to the close of bidding.

He further said that the system could also publish the procurement plans of supplier entities, the composition of Technical Evaluation Committees and bid selection criteria. In addition, the above measures would reduce opportunities and incentives for corruption in the bidding process.

Esufally highlighted that in Mexico, the existence of an e-procurement platform enabled journalists to discover corruption in the office of the President.

“E-procurement has increased the efficiency of public procurement. After the introduction of an e-procurement platform in Bangladesh, the processing time for public procurement contracts decreased from 51 days to 29 days. In India, e-procurement has facilitated a reduction of the tender time cycle from 90 – 135 days to 35 days,” she said.

With the tackling of corruption being one of the main issues the incumbent government promised to tackle, the introduction of such systems would greatly help the country move towards the Promised Land.