1 st High Level Seminar on E-procurement. Good Governance for Development in Arab Countries Initiative

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1 1 st High Level Seminar on E-procurement Good Governance for Development in Arab Countries Initiative E-procurement overwiew Marcella Corsi University of Rome La Sapienza Naples, January 2006 DIPARTIMENTO PER L INNOVAZIONE E LE TECNOLOGIE MINISTERO DEGLI AFFARI ESTERI DIPARTIMENTO DELLA FUNZIONE PUBBLICA

2 The views expressed do not imply the expression of any opinion whatsoever on the part of the Italian Department for Public Administration, and Formez.

3 An overview of e-procurement and governance Marcella Corsi, La Sapienza University of Rome The purpose of this report is to identify the main challenges and opportunities presented by the implementation of an e-procurement system, leading to an introduction of the topics to be discussed in the two days of work. The report is thus general in nature, although is divided thematically as much as possible. The author is a chief economist on the eg4m E-government for Mediterranean Countries Project, an initiative financed by the Research Ministry and managed by a group of Italian Universities working closely with the DIT and other institutional actors, some of whom are present at the conference. The main objective of the project is not only to lay down guidelines and to contribute towards the drive to make e-procurement more accessible for all countries of the Mediterranean, but also to implement examples of e-procurement compatible with the general lines that will subsequently by be drawn up. The participation today and tomorrow of Carlo Batini, coordinator of the project, will allow further analysis of other aspects of the project. More and more attention is being given to e-procurement because by now it is clear, especially in Europe, that this method of public procurement management is capable of delivering tangible results in terms of improved productivity in the work of the public sector. This is also visible in terms of economic rationality and increased GDP and has also contributed to a series of intermediate results that will be discussed below. E-procurement can be defined as an Internet-based means of electronic acquisition that accompanies the traditional methods of provisioning and which is conducted between the contracting authorities and suppliers of goods and services. Its multiple phases range through the identification of needs, setting of budgets, management of contracts, payments, monitoring and evaluation. Important challenges arise, both on organisational and economic/legal sides. Regarding the former, there exist pockets of resistance on the part of users; problems with professional and operational capacity have been noted. E-procurement is a system that works only if accompanied by the building of those capacities and competences necessary for its development. It is an innovation that requires much effort in terms of training and redefinition of the roles and capacities involved in the organisation process of electronic provisioning. 1

4 These aspects are not always adequately covered in the economic literature on this subject. The main challenges from the economic/legal point of view are as follows: Creation of a correct process of e-procurement and a revision of the normative framework in order to allow increased economic development in the single countries. Construction of a diverse technological scenario. Programme of structural reform to encourage a market for competitive private services. Launch of an education and literacy campaign in the subject. While there are many technological issues to be faced, the most pressing matters from the economic/political perspective involve contracts, monitoring and system benefits. These aspects are treated in standard manner in the economic literature but have implications not given adequate coverage in the economic and political debate. The models. There are at least two models for activity and organisation. Models to be examined and discussed in the general framework of a discussion on e-procurement in terms of transparency and reduction of uncertainty. These are the indirect type (Indirect Procurement System IPS -, as used by Consip in Italy for the central, regional and local public administrations) and the direct type (Direct Procurement System DPS -). The organisation-based models are basically of two types: centralised models, in which procurement is managed on behalf of the administration as a whole, and decentralised models, in which the single organisational units manage the provisioning processes themselves. In the indirect model the contracting authority does not come into contact with the ordering body, and the situation is vice versa in the second case. The procedural differences are obviously important. Each model entails a series of advantages and disadvantages, but what can we say the benefits are when we refer to e-procurement? The discussion should involve at least two different approaches to evaluation of e-procurement benefits. The direct or internal effects of old generation e-procurement are essentially expressed in terms of public sector efficiency, connected to the realisation of a broader and more competitive market for public services, to better services and opportunities for users. This is what is meant by the increasingly referred to phrase user-centred e-government. 2

5 Obviously this efficiency brings added public value that must be defined and measured together with the new services. What the EG4M project now needs to propose is a new generation phase of e- procurement that targets not only efficiency, but also indirect effects, particularly the socalled connectivity effect. The latter, which is actually the result of the series of benefits described beforehand, could have an accelerator or multiplier effect on the economy. In order to exploit the innovations arriving in the wake of the introduction of e- procurement, and to confront all the effects mentioned, it is also necessary to introduce organisational/management innovations (back office and front office) in the single administrations. Generally speaking, the final benefits derived from e-procurement should also bring increased public sector productivity, (and therefore an increased public sector proportion of GDP), a greater role for the public administrations, the removal of some restrictions and the overall growth of GDP. The intermediate results will obviously be improved services and savings in cost and time. The final overall results to be expected, apart from increased GDP, are improved work productivity in the public sector, economic rationalisation and organisational efficiency. These entail greater simplification, greater accountability for the actors in the process and also more transparency, competition, democratic participation in the information society and greater political efficiency. The various models used produce a diverse range of effects, benefits and disadvantages. For example, with regard to economic rationalisation, the indirect model carries notable benefits in terms of control of costs and coordination of stocks, but may be less advantageous for monitoring and coordination of costs.4 A major advantage of the decentralised modei is the high level of autonomy of the single administration, but one of its big drawbacks is the lack of coordination of the balance of procedures, non-uniform solutions for standard problems. This could have effects on simplification and accountability. Still on the subject of accountability, the strong points of the IPS are a standard decisional process and greater control, thanks to fewer decisional units. But with the DPS, on the other hand, the higher number of decisional units produces the of drawback is lesser control, and a benefit in the form of increased control on corruption and greater social and business accountability. 3

6 With regard to these evaluations, the experiences under way, the problems and prospects, the actors of the EG4M project augur the launch of a shared debate and work effort involving all participants at the meeting. 4