4.1 Electronic Procurement Systems of other Organisations Airport and Aviation Services Limited (AASL)

Transcription

1 CHAPTER 4 OBSERVATIONS The observations reached through the methodology adopted in this research, can be categorised into four main areas. 1. Study of electronic procurement processes of other organisations 2. Existing manual procurement process of Sri Lanka Railways 3. Analysis of the Survey Findings 4. Findings of the Literature Review 4.1 Electronic Procurement Systems of other Organisations Airport and Aviation Services Limited (AASL) Airport and Aviation Services Limited (AASL) is a fully government owned company with statutory powers to manage and develop all civil airports in Sri Lanka. The company is one of the key engineering organisations in Sri Lanka. Its primary role is to provide safety, efficiency and reliability for all the functions in the Air Port. There are sixteen divisions (engineering and other) in Airport & Aviation Services Ltd. to perform the required roles for the airport. Electronics & Air Navigation Engineering is one of the key divisions extending a vital contribution in the provision of Air Navigation Services. Therefore, AASL is also a MRO (Maintain-Repair- Operate) organisation in which procurement is a major activity, needing attention. This was well understood by the company and in 2009, an Electronic Procurement System along with a MRP (Material Requirement Planning) solution was introduced. Since then, all the procurements under Rupees 1.0 Million are getting processed through the system. The purchases above this limit also get processed through this system, depending on the urgency and with the approval from the Board of Directors. 60

2 The Electronic procurement system of AASL : Following features have been built into the system. a. The applicable method of procurement : The system is used to handle all procurements below Rupees 1.0 Million. This means it is used for Limited Tender Method in which tenders are open only for the selected suppliers from the list of the registered suppliers. Company procures items which are standard in nature and of low value. Reference to Government Tender Guideline, this procurement process covers, Restricted Competitive Bidding and Shopping procedures. b. Identification of requirements ; The requirement is identified through the Material Forecasting Module of the MRP solution or through Purchase Requisitions sent by the functional sections in the AASL. c. Uploading the documents : The documents (List if items, specifications and conditions of the tender) are prepared by the Procurement Department and are uploaded to the tender section of the AASL website. Furthermore, Procurement Department selects a set of suppliers for the procurement from the list of registered suppliers. d. Informing suppliers : The suppliers are informed through system generated E Mails. e. Security The supplier is given a password to access and download the tender documents. This password is generated by the IT section of the AASL and issued to the registered suppliers, once a year. This password is not known even to the Procurement Department of the AASL. 61

3 f. Uploading the bid : Supplier is given a form to fill and provide information such as Unit Price, Taxes, Total Bid Price, Delivery and other terms conditions, deviations etc. Also he can upload any other relevant documents, too. g. The charges for the tender document : The charge for the document is also to be paid, by the supplier online and the documents can be downloaded once the payment is done. h. Tender closing and bid opening : Tenders are closed on a predetermined day at a predetermined time. Tenders can be uploaded until that time. Bid Opening is done at the same time of the Bid Closing. The suppliers, if they wish, can participate in the Bid Opening which is done electronically through the system and suppliers can view through a Multi Media Projector. Until the Bid Opening, no supplier can see the other supplier s bid. i. Evaluation : The documents (in soft form) are forwarded through the system to the evaluating officer or officers (TEC Members). They issue their decision through the system and a hard copy of the decision is extended to the Sectional Head, Chairman or the Tender Board, depending on the regulations and the Bid Value. j. Order placing The evaluation report is extended to the suppliers and the order is placed to the selected supplier through the system, through E Mail. 62

4 k. Material Delivery and Payments : Materials are delivered to the Stores or directly to the section which require the materials. Once the materials are delivered, the items are checked by the section / division which will use the materials. Then a Goods Received Note (GRN) will be issued and the Finance Section will issue the cheque. This payment is still done manually. The following Flow Chart provides the complete flow of the process 63

5 Demand Forecasting Module prepares List of Items and the required quantities Sectional heads send purchase requisitions Suppliers get registered On-Line with the Procurement Department annually. They download a form from site and submit through E Mail Procurement Dept. assesses the list and modifies, if necessary Procurement Dept. allocates Reference Number Procurement Department uploads the soft copy of the Item list, Specifications and Tender Conditions to the On-Line Tender System and selects Suppliers from the List of Registered Suppliers System sends E Mail to the selected Suppliers informing them about the tender The IT department generates Passwords for suppliers ( password gets expired in one year ). Procurement Dept. hand over the password to supplier but they do not know it. Suppliers ( only the selected suppliers ) access the documents and download them from AASL website Suppliers get clarifications through e mail Clarifications are sent to all the suppliers in the list Supplier fills up a form in the Tender and inputs the Bidding Price, Delivery, Deviations etc. and attaches other documents and submit. Supplier can change the price until the closing time.( The supplier can not see the other s prices. The Procurement dept. can not see the prices of suppliers until the closing time has elapsed.) Procurement Dept. sends soft copies to the evaluating officer. Documents are not printed for evaluation. The decision is also uploaded to the website Procurement Process of AASL Approval Process - Below 0.2 Million - Evaluated by the officer submitted the Purchase Requisition 0.1 Million to 1.0 Million - Two officers evaluate and Chairman Approves 1 to 50 Million - AASL Tender Boards 50 to Ministry Tender Board Above 150 Million - Cabinet Tender Board Procurement Dept. issues Purchase Order ( Hard Copy - signed ) Supplier deliver the materials to the Store or to the required section Receipts are entered in the Inventory Module Only the Purchases under one Million are ( Sealed Quotation type of purchases ) carried out through the online system The user Department checks the materials and certifies them Issue Goods Receive Note (GRN) by Stores Inventory Module of MRP get updated and the division which sends the request for materials receives an E Mail GRN is sent to Finance Dept. Finance department issue the cheque User request materials through Material Request Note in the Inventory Module of MRP User receives materials and the Inventory Forecast Module of MRP get updated Figure 4.1 : The Electronic Procurement Process of the Airport and Aviation Services Limited 64

6 4.1.2 Sri Lanka Telecom Limited (SLT) The telecommunication services in Sri Lanka exists in a fully liberalised and deregulated market. Sri Lanka Telecom (SLT), being the largest telecommunication service provider in Sri Lanka, provides various kinds of telecommunication solutions to the Sri Lankan market. Having been a fully owned government organisation until 1996, it became a private listed company with share composition consisting of 49.5% by government of Sri Lanka, 45% by Usha Tegas of Malaysia, 3% by employees of SLT and the balance with the public. Similar to SLR, Sri Lanka Telecom is also a MRO (Maintain-Repair-Operate) organisation operating under competition. Hence, the procurement and the supply chain functions are very vital for SLT. SLT usually procure the finished goods required for provisioning of different services.for stocking of inventories, SLT owns 3 sub stores and 14 regional stores apart from its main warehouse in Colombo- Peliyagoda. All these stores are computerized and stocks are updated, online. However, the purchasing function of SLT is centralized and is managed by a dedicated team Improvements to Procurement Function implemented by Sri Lanka Telecom (SLT) : 1. Material Classification : In order to maintain alertness on the most important and critical materials for the business, SLT has classified the total material purchases to three categories depending on the expected value and the criticalness to the business. Platinum High critical, High value Gold High critical, Low value Silver Low critical, High value 65

7 This classification allows SLT to apply different strategies for managing the procurements of each category. The Platinum category is given the highest priority since the impact on the business from these materials is very high. The procurement division should ensure that the right quantity is always maintained in the inventory. 2. Standardization of Items and Unit Rate Agreements : SLT has extensively carried out standardization for main critical items for the business such as customer premises equipment, furniture etc. This allows SLT to maintain uniformity and quality while entering into unit rate agreements with relevant suppliers. It facilitates quick and flexible order processing and also enhances the ability for better negotiation. 3. Material Forecasting & Aggregate Planning : Once the approval is given for the annual business and development plan, the bills of materials required for the projects are prepared by each division. Then the Procurement Division of SLT carries out a high level aggregation of materials and places orders to obtain better rates and higher priority. In addition, material forecasting is carried out to identify the material requirement for maintenance purposes. The procurement division together with the maintenance divisions closely monitor the stock levels in stores. 4. Implementation of e-procurement system and calling for online Quotations: SLT introduced its web based e-procurement system in end of 2005 and ever since, more than 90 per cent of the tenders are published in SLT website. The total time to purchase an item has greatly improved, with the implementation of the e-procurement system. 66

8 5. Outsourcing : Because of the state-of-art technology that is being used by the organisation, SLT receives a considerable amount of foreign consignments. Although SLT is having a dedicated wharf department, the freight forwarding functions are outsourced as much as possible E-Procurement Solution : The Procurement process of SLT for Standard Items and Specific Items are given in Figure 4.2 and Figure Standard Item Purchasing : The Standard Items are being purchased by SLT, from the Registered Suppliers by calling for quotations. SLT uses several modules of an Enterprise Resource Planning (MRP) Application for Purchasing, Inventory Controlling, Material Forecasting and for Document Management. The material forecasting is carried out by the MRP system based on material categorisation and the issue of inventory from each store. The system generates a six month material forecast for each store. Then the respective regional managers review the forecasts and give their input too, by considering the annual plans etc. An aggregated forecast is generated based on all regional forecasts and material orders are placed, according to the aggregated forecast. The Document Management System (DMS) assists in maintaining and managing purchasing related documents, in electronic form. All important documents are archived and stored in the system for future reference. When Tenders for standard items are uploaded to the SLT website, e mails are transmitted to the suppliers who have registered for those items. Each registered supplier is given a username and password to login to the system and each login shows the list of tenders which are intended for them. The 67

9 suppliers quote their prices in a standard form which cannot be seen by others until the opening of tenders. 2. Specific Item Purchasing : The Tender Documents are published in the website and the suppliers download them free of charge. The bids are handed over to SLT manually and the bidders participate in the opening of tenders too. This is called etender System of SLT. With the implementation of the e-procurement system, SLT was able to increase competition, specially among international bidders and could receiving many advantages. SLT could reduce the cycle time of procurements approximately by fifty per cent Online Letter of Credit (LC) Banks in Sri Lanka, have implemented their online systems and SLT can request for online Letter of Credit Applications. This system allows SLT, to monitor the status of LCs so that SLT is able to monitor deliveries. This helps SLT to optimize the procurement cycle. Therefore e-procurement system of SLT is designed to handle, 1. Purchasing of Specific Items through Open Tender Method. However, SLT does not carry out the complete process electronically. Only the uploading of document, onto the website, is done by SLT. This procurement procedure followed by SLT, is equivalent to National and International Competitive Bidding in the Government Procurement Guideline. The process is explained by the Flow Chart given in Figure

10 2. Purchasing of Standard Items through Limited Tender Method. This process is completely done electronically. Only the payment process is still done, manually. This procurement procedure of SLT is equivalent to Limited Competitive Bidding and Shopping procedures in the Government Procurement Guideline The process is explained by the Flow Chart given in Figure

11 Demand Forecasting Module of MRP gives List of Items and quantities Suppliers get registered with the Procurement Department and the supplier registration takes place once in 02 Years - This is a manual process Procurement Dept. assesses the list and modify, if necessary Procurement Dept. allocates Reference Number The procurement department generates Passwords for suppliers ( password expires in 03 months ) Procurement Department uploads the soft copy of the Item List, Specifications and Tender Conditions to the On-Line Tender System and selects Suppliers from the List of Registered Suppliers System sends E Mail to the selected Suppliers informing them about the tender Suppliers ( only the selected suppliers ) access the documents and download them from SLT website Suppliers get clarifications through e mail Clarifications are sent to all the suppliers in the list SLT - Procurement Process for Standard Items Supplier inputs the Bidding Price onto a standard form. Supplier can change the price until the closing time.( The supplier cannot see the other s prices. The Procurement dept. cannot see the prices of other suppliers until the closing time has elapsed.) The supplier can type other details as a text but cannot upload documents Procurement Dept. prepares a document to Tender Board and obtains the approval Procurement Dept. issues Purchase Order ( Hard Copy - signed ) Supplier delivers the materials to the Main Store at Peliyagoda Main Store enters the receipts in the Inventory Module of MRP Quality Department checks the materials and certifies them Main Stores issues Goods Receive Note (GRN) Inventory Module of MRP get updated Procurement Dept. prepares the invoice and sends to Finance Dept. Finance department issues the cheque User requests materials through Material Request Note in the Inventory Module of MRP User receives materials and the Inventory Forecast Module of MRP gets updated Figure 4.2 : Electronic Procurement Process of Sri Lanka Telecom (SLT) for Standard Items 70

12 Users ( Engineering Division ) give requirement to the Procurement Dept. Suppliers get registered with the Procurement Department annually Procurement Dept. allocates User ID and Reference Number and Enter the procurement into Procurement Module of MRP System. Procurement Dept. informs Technical Evaluation Committee through E Mail System sends E Mail to user informing the Reference Number The procurement department generates Passwords for suppliers ( password expires in 03 months ) TEC downloads Specimen Tender Documents from Document Management Module ( DMS ) of MRP System TEC uploads the Tender Documents and the Supplier List to DMS The Tender Board approves the Tender Documents and Supplier List Procurement Department uploads the Documents to the On-Line Tender System and selects Suppliers from the List of Registered Suppliers System sends E Mail to the selected Suppliers informing them about the tender Suppliers access the documents and download them from SLT website Supplier gets clarifications through e mail SLT - Procurement Process for Specific Items Clarifications are sent to all the suppliers in the list Suppliers visit the Procurement Department and deposit their bids in the Tender Box Tender Evaluation and Approval Process Procurement Department issues Purchase Order ( Hard Copy - signed and issued ) Supplier delivers the materials to the Main Store at Peliyagoda Main Store enters the receipts in the Inventory Module of MRP System sends E Mail to User and the Quality Dept. informing the receipt of materials Quality Department checks the materials and certifies them Main Stores issue Goods Receive Note (GRN) System sends E Mail to User, informing the receipt of materials Procurement Dept. prepares the invoice and sends to Finance Dept. Inventory Module of MRP get updated Finance department issue the cheque User requests materials through Material Request Note in the Inventory Module of MRP User receives materials and the Inventory Forecast Module of MRP gets updated Figure 4.3 : Electronic Procurement Process of Sri Lanka Telecom (SLT) for Specific Items 71

13 4.1.3 Indian Railways Indian Railways is the second largest railway network, under a single management. Similar to Sri Lanka Railways, Indian Railways too, is a Multi Traction System. The Indian Railway Network consists of 60,000 route kilometres with 300 railway yards and 700 repair shops. The number of Annual Purchases processed by Indian Railways is 0.2 Million and the total value of annual purchases is approximately 150,000 million Indian Rupees. According to Jain (2008),the Electronic Procurement in Indian Railways was started in May 2005 by Northern Indian Railway, with the intention of increasing transparency and by considering the mutual benefits that it would bring, both to Indian Railways and to the suppliers. This implementation was enabled by Indian Government IT Act The electronic procurement application of IR covers all types of procurements, including, procurement of goods, construction works and services, reverse auction, procurement of stores and auction for sale of scrap, etc. The basic functionalities and the process of the e-procurement application include, publishing Tender Notices on railway website, submitting offers electronically by vendors with digital signatures, preparation of the tabulation statements, depositing security money electronically and sending purchase order through . The security features available in the electronic procurement application include, Digital Certificate for Vendors, issued by a Certifying Authority, to allow only the authorized vendors to interact with the electronic procurement portal Digital Signature for electronic transactions Public Key Infrastructure for Data Encryption and Decryption 72

14 Time Stamping of electronic Tender Box and related documents, by Certifying Authority 128 Bit Secured Socket Layer (SSL) for secured Data Transmission Jain (2008) further explained that the Indian Railway e-procurement application basically allow vendors to, View and download Manuals, Instructions and General / Standard Tender Conditions (parts of Bid Document) Online Vendor Registration Search, view and download Tender Notices through Vendor Home Page (a web portal) Download Special Conditions through Vendor Home Page Download and upload Tender Documents Guidelines applicable for Indian Railway e-procurement System : Late bids after the due Date and Time are not permitted Manual Bids along with Electronic Bids are not permitted The Tender Box to be opened at the due Date and Time by two prearranged authorized officers All the received tenders should be opened and the vendors who submitted offers are to be acknowledged. Tender officials should sign the Tabulation Statement (a table having details of bids) generated by the e-procurement system If, Tenderers have not given any special conditions in their Commercial Rate Forms, then the system generated Tabulation Statement is to be sent to the Accounts Department for examination and corrections. If there are no issues, Accounts Department should endorse and return the form to the stores department in one day. 73

15 If, Tenderers have given any special conditions in their Commercial Rate Forms, then the system generated Tabulation Statement will be changed manually to accommodate such conditional offers and that manual statement will have to be examined and endorsed by the Accounts Department. After opening, verifying and acknowledging, the details of the offers shall be kept in secured (encrypted) form. The post tender opening activities are to be carried out as follows. Negotiations : shall be done through the Electronic Procurement System using Notice Folder under Negotiation Counter Offer : shall be done through the Electronic Procurement System using Notice Folder under Counter Offer Advance Acceptance : shall be done through the Electronic Procurement System using Notice Folder under Advance Acceptance Purchase Order : Shall be created manually and uploaded to Electronic Procurement System using Notice Folder under Purchase Order Modification Advice : Modification Advice shall be first created in the Material Management System and shall be uploaded to the Electronic Procurement System using Notice Folder under Modification Advice for the accessing by the vendors Challenges Implementing Electronic Procurement System for Works is a major challenge due to the complex nature of the Works Tenders Provision of trust is a major issue in electronic procurement. The system must meet the following security requirements. a. Privacy (information should not be accessed by unauthorized persons) b. Integrity (messages must not be altered or tampered with, during transmission etc.) 74

16 c. Authentication (sender and recipient must prove their identities to each other) d. Non-repudiation (proof is needed, that the message was indeed received) The confidence of the suppliers towards the system and also towards the organisation, are of prime importance. Therefore, alertness on the risk of breach of the security of the system, shall be continuously maintained. Training of railway employees and the vendors is very important due to the following reasons. a. It avoids rejection of the system by the employees b. It avoids, small vendors condemning the system because they find difficulties in acquiring the technology. Implementation of disaster recovery mechanisms too, is a problem. The electronic procurement process, of Indian Railways covers all types of procurement methods explained in Chapter - 2 (section 2.1.2) and that includes Open Tendering, Limited Tendering, and Reverse Auctioning. The complete e-procurement Process is given in figure

17 New Vendor visits IR Electronic Procurement System Home page Vendor registers online and obtains Login ID and a Password ( Vendor can get only a single ID for one location ) Figure 4.4 : E-Procurement Process of the Indian Railways Vendor ( using Login ID and Password ) accesses Manuals, Instructions and General Conditions - Free Vendor ( using Login ID and Password ) searches, views and downloads Tender Documents and Tender Notices - Free Vendor uses link to Certifying Agency and receives Digital Certificate. Digital Certificate is stored with vendor Computer Browser or as a Hardware Device ( Pen Drive ). Digital Certificate is valid for a specified period and for multiple tenders Vendor accesses pre - designed Tender Input Forms using Digital Certificate 1. Rate Form - Standard Form for submitting rates, taxes, duties, freight, discounts and other charges 2. Performance Form - For submitting details of past supply to railways, capacity of tenderer and other past performances 3. Special Conditions for Compliance Sheet - For vendor to give compliance to special conditions or to attach necessary special conditions to tender 4. Deviation Sheet - For vendor to give deviations to tender conditions Vendor pays the Cost of Tender 1. Manually as per the manual tender procedure 2. Electronically through payment gateway using Credit card Vendor enters payment details System sends payments details for verification Vendor Inputs rates to Standard Forms. The system produces Total Rates by adding taxes etc. Vendor changes Total Rates if necessary before submitting Vendor Digitally signs the forms, Time stamps and Notarises and Uploads the forms Vendor receives the acknowledgement with date and time of acceptance of the completed bid document by the system The completed Bid Document gets stored in a secured time locked database and kept encrypted until Tender Opening When the Date and Time of Bid Opening has lapsed, two Indian Railway Officers who have got permission open the Tender Box through their Private Keys Offers are verified by the system, checks whether they are attached with the Digital Signatures of the sender and automatically decrypts each offer using digital certificates of the Railway Tender Opening Officials The system tracks the reception of bids into the Tender Box and the bid opening process System prepares Tabulation Statement of the Bid Forms and each vendor is allowed to access the Tabulation Statement and the Vendor s Bid in PDF Format Each Commercial Bid document is stored in an archive, keeping their original encryption, hash function and the digital signature System generates comparative statement at the bid Opening Evaluation process ( TEC) and approval process ( Tender Board ) Vendor who gets tender awarded is informed about purchase through ( Purchase Order ) 76

18 4.2 Procurement Process of Sri Lanka Railways (SLR) Sri Lanka Railway, being a government department, follow the Sri Lanka Government Procurement Guideline for its procurements. The process is completely manual and has been practised over many years. The size of annual procurements carried out by SLR is as follows. Year Total Value of Procurements Number of Purchases ( in Million Rupees ) Local Foreign However, it does not mean that the number of procurements indicated against each year, got initiated within a year and got finalized within the same year. Furthermore, there are complaints that the items procured with difficulty are not getting utilized and are lying in stores for longer periods. These two problems are interlinked because the user (engineering) department tends to order more stocks than the actual requirement, in fear of stock-outs and long lead times. A well established procurement department and procurement process, availability of material management specialists, availability of technical know-how within the department, suitable positioning of procurement department within the SLR structure, a reasonable inflow of funds from Treasury and from within, streamlined process which is suitable for technology adaptation, are strengths of the Railway Procurement Function. Lack of procurement related skills at lower levels of staff, lack of coordinated effort for expediting and changing processes, lagging behind in technology adaptation, lagging behind in timely investments, procurement function is not geared suitably and lack of drive for change from top management, are weaknesses of the Procurement Function. 77

19 Ordinary Spare parts - Store Keeper (SK) of the User Department ( Ex CME ) prepares annual requirement based on Maximum / Minimum Levels and Consumption Fast Moving & Critical Items - Store keeper of the User Department ( Ex CME ) prepares Supplimentary Indent( SI ) based on Maximum / Minimum Levels and Consumption SK attachs the Standard Specification and given to the Head of user Dept. and he approves it ( with modifications depending on requirement ) Procurement Dept. groups the Items depending on the Supplier and on the Procurement Committee Level. Open Files and allocates Reference Number Procurement Dept. attachs a Standard Document to Specification and sends it by Post to the Suppliers from the List of Registered Suppliers Suppliers get registered with the Procurement Department Procurement Dept. uploads the Document to the Website Supplier requests for clarifications by Post or by Fax Figure 4.5 : SLR - Procurement Process for Standard Items ( Spare Parts through Restricted Competitive Bidding ) Clarifications are sent to all the suppliers in the list by Post or by Fax Supplier sends the offer by Post or visits the Procurement Dept. to deposit the offer in the Tender Box Procurement Dept. prepares a price schedule and sends to the Technical Evaluation Committee Procurement Dept. submits the evaluation report to the Tender Board Procurement dept. places the Order ( not a standard letter ) Local Supplies - Supplier delivers the materials to the Stores Foreign Supplies - Procurement Department opens Letter of Credit with bank Materials get inspected at the Port of Manufacturer s Country and shipped User department inspects items for suitability Materials delivered to the Railway Stores by shipping agent Stores department issues Goods Receive Note (GRN) Procurement Dept. prepare the invoice and send to Accounting Dept. Accounting department issues the cheque 78

20 Specific Items for Projects etc.- The Head of user department sends a letter to the Procurement Department with Specifications of the Items Procurement Dept. requests General Manager to appoint a TEC depending on the Procurement Committee level Procurement Dept. attach a Standard Document to Specification and send it to the TEC TEC attends to amendments of the document ( specially the Special Conditions ) and specifications and sends it back Procurement Dept. submits the document to the Procurement Committee ( Tender Board ) and gets approval Procurement Dept. publishes the Tender Notice in Newspapers and uploads the notice to the Website Local Tenders - The Bidders come to the Procurement Department and collect the Tender Documents. Foreign Tenders - The documents are sent to SL Embassies Suppliers request for clarifications by Post or by Fax Clarifications are sent to all the suppliers in the list by Post or by Fax Suppliers send the offer by Post or visit the Procurement Dept. to deposit the offer in the Tender Box Procurement Dept. prepare a price schedule and send to the Technical Evaluation Committee Procurement Dept. submits the evaluation report to the Tender Board Procurement dept. places the Order ( not a standard letter ) Local Supplies - Supplier delivers the materials to the Stores Foreign Supplies - Procurement Department opens Letter of Credit with bank Materials are inspected at the Port of Manufacturer s Country and shipped User department inspects items for suitability Materials are delivered to the Railway Stores by shipping agent Store Keeper issues Goods Receive Note (GRN) Procurement Dept. prepares the invoice and sends it to Accounts Dept. Accounts Department issues the cheque Figure 4.6 : SLR - Procurement Process for Specific Items ( Special orders through Open Competitive Bidding ) 79

21 4.3 Observations on survey findings With reference to Chapter 3 (Methodology), the survey which was launched through questionnaires, disclosed useful results in favour of electronic procurement implementation, within SLR Lead Times visualised from User Department s perspective The lead time visualised by the user department is different from the lead time seen by the procurement department. It includes the time taken for the internal processes too. Hence, the lead time seen by the user departments for different categories of items were checked and the outcome is as follows. Table 4.1 : Lead Times of items visualised by user departments Lead Times visualised by User (Maintenance) Departments Type of Items purchased by SLR Percentage of respondents perceived lead time as, Summary - Lead 0 to 3 3 to 6 6 to 9 9 to 12 More than Time of the User Months Months Months Months 12 Months Department Standard Items (Spare parts) - Local Standard Items (Spare parts) - Foreign Standard Items(Consumables) - Local Specific Items (for Projects) - Local Specific Items (for projects) - Foreign months (but not more than 06 months) to 09 months Months to 06 Months More than 09 Months or even more than 12 Months 80

22 The above table reveals that the lead time for user departments, Foreign items 50 % of annual purchases are greater than nine months. Standard Spare Parts - most critical items for maintenance also take 6 to 9 months The problems / issues in the SLR s procurement system observed by the user departments of SLR Summary of the data collected through the questionnaire, on problems that the user departments face, due to procurement related issues is shown on table 4.2. This table includes the observations too. Table 4.2 : Procurement related problems faced by the user departments Difficulties faced by Users User Department perspective Present Situation Mean Variance SD Significance of the Problem Factor Procurement Delays - Long Lead Time to Users Significant Not receiving value for money Complexity of Procurement process Significant Difficulties faced by Stores Department Difficulties in identifying procurement requirements Significant Quality of Items purchased Significant Procurement Guideline not catering SLR situation Cancellations of procurements Significant It can be observed that the user departments suffer from procurement delays, procurement planning issues, quality, cancellations and complexity of the process. In addition, the user departments pointed out the need of expediting payments to suppliers, standardization of requirements and re-organisation of procurement functions (formation of procurement circles). 81

23 4.3.3 The problems / issues in the SLR s procurement system observed by the Railway Procurement (Stores) Department Summary of the data collected through the questionnaire on problems visualised by the Railway Stores Departments is shown on table 4.3. Table 4.3 : Procurement related problems seen by the Stores Departments Difficulties / Problems Procurement (Stores) department perspective Present Situation Mean Variance SD Significance of the Problem Difficulties faced by Users Procurement Delays - High Lead Time to Users Significant Not receiving value for money Complexity of Procurement process Significant Difficulties faced by Stores Department Difficulties in identifying procurement requirements Significant Quality of Items purchased Significant Procurement Guideline not catering to SLR situation Cancellations of procurements Significant Difficulties faced by Suppliers Unsatisfactory Supplier Registration Process Significant Difficulty in informing suppliers Unsatisfactory Supplier perception on Transparency Significant Lack of supplier know-how on the process Difficulty in obtaining Clarifications Suppliers collecting Tender manually from SLR Significant Process not supporting supplier relationships Difficulty in collecting payments by suppliers Significant Difficulties faced by Procurement Department Availability of past records on procurements Difficulties in preparing tender documents Significant Tracking of procurements Significant Difficulties in Communicating with TECs etc Significant Lack of Technology usage Significant Lack of availability of procurement related skills Frequent Transfers of trained employees Significant Positioning of the Procurement Department

24 Difficulties to User Departments : It can be observed that the problems experienced by the User Departments have been endorsed by the Stores Department officers too. They also visualise the same problems in the procurement process. Difficulties to Suppliers : Furthermore, they indicated that the supplier registration process is unsatisfactory. Furthermore, suppliers experience problems in collecting documents and in collecting payments. Response, from suppliers for the questionnaire, was very unsatisfactory. But the few suppliers who returned the questionnaires, particularly stated, about the above problems. Difficulties to Stores Department : The stores department experiences problems in communicating with TECs, preparation of documents, tracking purchases, and inadequacy of staff having procurement related skills The Situation in other organisations in Sri Lanka before and after e- Procurement implementation Data was collected through the questionnaire from Airport and Aviation Services Limited and from Sri Lanka Telecom Limited. The summary of the collected information is shown in table 4.4. The table indicates the situation, before and after the implementation of e-procurement process. 83

25 Table 4.4 : Situation in Sri Lankan Organisations - Before and after implementation of Electronic Procurement Before implementation After implementation Significance of Whether Solved with e- Factor Mean Variance SD the Problem Mean Variance SD P Difficulties faced by Users Procurement Delays - High Lead Time to Users Significant Solved Not receiving value for money Solved Complexity of Procurement process Significant Solved Difficulties in identifying procurement requirements Quality of Items purchased Significant Solved Cancellations of procurements Difficulties faced by Suppliers Unsatisfactory Supplier Registration Process Solved Difficulty in informing suppliers Solved Unsatisfactory Supplier perception on Transparency Lack of supplier know-how on the process Solved Difficulty in obtaining Clarifications Significant Solved Suppliers collecting Tender Documents manually Significant Solved Process not supporting supplier relationships Significant Solved Difficulty in collecting payments by suppliers Solved Difficulties faced by Procurement Department Availability of past records on procurements Significant Solved Difficulties in preparing tender documents Significant Solved Tracking of procurements Significant Solved Difficulties in Communicating with TECs etc Significant Solved Lack of availability of procurement related skills Solved Frequent Transfers of trained employees Positioning of the Procurement Department Solved 84

26 4.4 Observations of the Literature Review The literature that were referred for this research explained about advantages of electronic procurement. The following list indicates the advantages of e-procurement with their references. The intention of preparing this list is to prove that the current procurement problems faced by Sri Lanka Railways can be overcome, through benefits that can be received, with implementation of e-procurement. Table 4.5 : Advantages of e-procurement and literature references Advantage of electronic Literature references procurement 1 Improved competition Pires and Stanton(2005), Turban et.al. (1999), 2 Value for money Leipold (2006), ADB(2004) 4 Transparency Leipold (2006), ADB(2004), Engstrom et.al (2006), Pires and Stanton(2005) 5 Cost saving, reduced transactional cost Leipold (2006), Reunis(2007), ADB(2004), Engstrom et.al (2006), Pires and Stanton(2005), Lusons and Gillingham (2003), Turban et.al. (1999) 7 Adhering to rules regulations Leipold (2006), Engstrom et.al (2006) 8 Reduced paper work Engstrom et.al (2006) 9 Improved supplier relations Pires and Stanton(2005) 10 Less bureaucracy Engstrom et.al (2006) 11 Improved flexibility Reunis(2007), Pires and Stanton(2005) 12 Reduced bribery ADB report (2007) 14 Improved payment process Turban et.al. (1999), 15 Quick return on investment Leipold (2006), 16 Deduce procurement delays Reunis(2007), ADB(2004), Engstrom et.al (2006), Pires and Stanton(2005), Lusons and Gillingham (2003), Turban et.al.(1999) 17 Tracking procurements ADB(2004), Lusons and Gillingham (2003), 18 Consistency Reunis(2007), ADB(2004) 19 Easy access to Information Engstrom et.al (2006), Lusons and Gillingham (2003), 20 Standardisation Engstrom et.al (2006) 85