So, Why Go Alone?

E-procurement is the latest wave to hit the IT departments. Though it has
potential to take care of most of the ills that have afflicted the government
procurement systems, its implementation has become debatable. Many good features
of e-procurement systems are not being used on account of non-aggregation of
demands by agencies and departments of governments-as every one is going for a
separate system.

The Web-based procurement system enables floating of large number of tenders
at one location, bringing larger participation of suppliers and quicker
finalization. Why should this feature not be utilized to get least transaction
cost and best possible price, apart from standardization of the procurement
process? Earlier, the big companies used to allow procurement of goods and
services by their branch offices. But the scenario changed after e-procurement
took off. It not only allowed them to aggregate the demand of their various
branches but also helped them do an expenditure analysis and then cut down on
unnecessary expenditure.

In the government, unfortunately, we have not been able to make use of this
unified tendering system. Individual departments and corporations in a few
states are going or contemplating to go for their own e-procurement system. This
will mean low volume of transaction, leading to higher transaction cost. One
state government, for example, started with a rate of Rs 4,500 per tender, where
the end-to-end solution was provided by a private company. Later, offers were
made to other states to join the bandwagon. If the Delhi Government had accepted
this offer, its departments and agencies would have paid Rs 8.1 crore in a year
for the 18,000-odd tenders floated in a year. It is believed that the rates have
now been reduced substantially and part of the cost has been transferred to
suppliers as participation fee. This brings us to the next question of sharing
of cost between buyer and supplier of goods and services.

The experience of Brazil is relevant here. It started centralized
e-procurement system for all federal government entities in 1997 with 61,113
registered vendors. At the end of 2004, about 1.97 lakh suppliers were
registered with the system and around 2,000 new registrations happen every year.
Their system allows online checking and pre-registration of suppliers through
Internet. The registration involves yearly payment of a small fee to COMPRASNET,
the e-procurement system. The system is now being made available to state and
municipal agencies.

Contrast this with our scenario where individual government
corporations/agencies with 200 to 1000 tenders a year are going for
e-procurement on their own. Naturally, the transaction cost would be higher, and
the ultimate beneficiaries will be the suppliers of e-procurement systems, who
get a higher transaction fee even though they use the common resources for all
such agencies/departments.

The procurement guidelines are now being looked after by the Finance
Ministry. If all governments follow the same GFR (General Financial Rules), then
why should there be any dissimilarity in the procurement process? Of course, the
local language interface will have to be provided to ensure its acceptability.

Experience worldwide has shown huge savings of resources by adoption of such
a system. When governments having disparate sales tax systems can agree to have
VAT with common features and be part of the network to share information on
taxpayers and inter-state sales, there should not be any problem in adopting a
single e-procurement system.

The author is Secretary (IT and Admin Reforms), Government of National
Capital Territory of Delhi and the opinion expressed is that of the author and
does not reflect the policies or views of the Government of National Capital
Territory of Delhi