Procurement Perspectives: Electronic tendering gaining traction after many years

For over a decade government has been trying to move to an exclusive electronic tendering based system.

The technology for completely integrated e-tendering is now available. Most municipalities are working with at least some aspect of e-procurement. The vast majority of government agencies do advertise tenders via various electronic versions however, still receive the bids in a hard copy. In many cases owners do have the ability to use a complete system of advertising and receiving bids via e-procurement for goods and services.

Construction is a bit more complicated, and two-part closings pose some problems for very complicated projects and may take more development of documentation to become the norm in government procurement.

The term electric tendering means: “the use of a computer-based system directly acceptable by suppliers irrespective of their location that provides them with information related to bid solicitations.”

A number of events and obstacles have delayed the full shift towards e-procurement, and in particular e-tendering.

Nevertheless, despite the growth in the use of electronic forms of contracting, up to and including electronic tendering, e-procurement has not yet emerged as a comprehensive solution to all procurement needs, although changes in marketing and sales practice, and developing technology may eventually permit this to occur in all levels of government.

E-procurement can be said to have produced five major benefits to the extent that it has been successfully implemented:

• Considerable reduction of administrative and operational costs. It can reduce order process lead time in the range of 50 to 70 per cent; reduce transaction cost, offering, according to its proponents, as much as 70 per cent savings; and allow a no paper transaction.
• It permits a user self-service procurement system by automating the approval and routing process; permitting access to real time information and inventory status relating to products, order status, etc.; and allowing new technology to be integrated into an existing information system.
• It can change the focus of buyers from transaction to strategy by eliminating or reducing buyer administrative tasks; allowing buyers to concentrate on value added tasks; and improving the sourcing process.
• It can improve supplier leverage by bolstering communication with preferred suppliers; allowing the negotiation of better discount on volume; and automating internal and external follow-up on orders.
• It can sustain the benefits of a strategic sourcing initiative. E-procurement works well where it responds to a customer need, that is, where it creates at least the perception of cost-saving or improvement in service.

I have always taken the position that potentially e-procurement may save municipalities billions over the long-term. Since larger municipalities often are highly sophisticated purchasers in highly specialized markets, e-procurement may open the prospect of sourcing goods and services and other requirements from a wider range of suppliers than has hitherto been the case.

I have also suggested in previous articles that e-procurement could significantly improve the efficiency of purchasing in the areas of maintenance, repair and operating supply — an aspect of purchasing in which municipalities are generally fairly active.

Cost savings must also be balanced against concerns about the risk and security of e-procurement.

Three general areas of concern may be identified:

• The inadequacy of infrastructure. If the equipment and software are not adequate, or personnel are not properly trained, there is little likelihood of achieving the desired improvements over a traditional paper-based system.
• Compromising of internal corporate governance mechanisms and controls.
• Potential exclusion of suppliers who are less advanced in the technology of e-procurement, which is an especially important concern if there is a risk of thereby excluding minority, small or other disadvantaged suppliers, which could be socially damaging and politically unacceptable.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com.

Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.