Innovating Public Procurement throughKorea ON-line E-Procurement System
April 2011
Kang-il SeoInternational Cooperation
DivisionPublic Procurement Service
(PPS)The Republic of Korea
Contents
1. Korea ON-line E-Procurement System
(KONEPS)
2. Impacts of KONEPS
3. Implementation Experiences
4. Recommendations
1. Korea ON-line E-Procurement System (KONEPS)
9 Consolidation of e-Document Exchangeand e-Reporting
2
4
Innovation in Services
The Korean Government initiated 11 e-Government projects to enhance national competitiveness utilizing information technology
Foreword: Korea’s e-Government Project
e-Government
Single Window for Civil Services
3 Integrated Social Security Information System
Internet-based National Taxation System
1 Government-wide e-Procurement System
INFRASTRUCTURE
Administrative Productivity
5 National Finance system
6 Integrated Administration System forLocal Governments
7 Nation-wide Educational Administration System
8 Standardized HR Management System
10 e-Authentication and e-Signature System
11 Government-wide IT-governance Environment
Increasing SME’s Market Opportunities
Combination of Centralized and Decentralized Procurement
Medium to large scale procurement for central government
agencies : handled by Public Procurement Service (PPS)
Small scale procurement: handled by each government agency
Local governments and public enterprises: autonomous procurement
Medium to large scale procurement for central government
agencies : handled by Public Procurement Service (PPS)
Small scale procurement: handled by each government agency
Local governments and public enterprises: autonomous procurement
Public Procurement Service (PPS)
PPS is the central government procurement agency of Korea under
the Ministry of Strategy and Finance
Total procurement volume of 38 billion USD in 2010 (30% of Korea’s
total public procurement)
PPS operates KONEPS, Korea’s public e-Procurement system
PPS is the central government procurement agency of Korea under
the Ministry of Strategy and Finance
Total procurement volume of 38 billion USD in 2010 (30% of Korea’s
total public procurement)
PPS operates KONEPS, Korea’s public e-Procurement system
Public Procurement System in Korea
Korea ON-line E-Procurement System (KONEPS)
Government-wide e-Procurement System
Developed and operated by PPS
Commonly used by all public agencies for procuring goods and construction works
International standards to ensure inter-operability
KONEPS
Characteristics of KONEPS
Single Window for Public Procurement
Publication of all public tender notices and related information at a single website
Bidders can participate in all public biddings after one-time registration
Characteristics of KONEPS
One-stop Service
Integration of Entire Procurement ProcessEntire procurement processes from supplier registration, bidding through to payment are conducted via the internet
One-click purchase at the Online Shopping Mall
160 types of documents handled online through the data
exchange linkage with 100 other public sector & private
sector information systems
KONEPS processes the entire procurement procedures through the 4 major sub-systems: e-bidding, e-contracting, e-payment and the online shopping mall
e-Contractinge-ContractingContract Registration
Composition and
sealing of Contracts
Contract Review
e-Biddinge-Bidding
Tender notice
Price Assessment
Evaluation / Analysis
Online Shopping Mall
Online Shopping MallProduct Registration
E-Catalogue
Product Search
Online Order
e-Paymente-PaymentE-Payment
Expenditure Mgmt.
Fee Management
KONEPSKONEPS
Functions of KONEPS
KONEPS at a Glance
Ministry of Public
Administration and Security
Ministry of Public
Administration and Security
Ministry of Strategy and Finance
Ministry of Strategy and Finance
Certification-Related Agencies
Certification-Related Agencies
Construction-Related
Associations
Construction-Related
Associations
Korea Financial Telecommuni-
cations & Clearings Institute
Korea Financial Telecommuni-
cations & Clearings Institute
Construction CALS
Construction CALS
Surety Insurance
Surety Insurance
KONEPS e-Tendering Processes
AuthenticationCertificate
CertificateAuthorities
IntegratedNotice
Other Bidding Systems
Commission for Bid Participation
PG SystemCertificate
Supplier Data
RelatedAssociations
AuthenticationCertificate
CertificateAuthorities
Contract Information
D-Brain System
Certificate forTex Payment
G4C System
OnlineTransaction
SupplierRegistration
IntegratedNotice
Bid Bond Encryption/Time Stamp
Performance Bond, etc
Electronic Funds Transfer
G4C SystemPublic Org.
(40,000)Surety
Company
EncryptionKey Issuance
System
SuretyCompany
D-Brain System
Banks
SupplierRegistration
IntegratedFor Bid
BiddingBid Opening/
EvaluationContracting
Delivery/Inspection/Acceptance
Payment
All procurement processes are digitalized
KONEPS electronically obtains information on the bidders (business
registration, credit rating, past performances, etc) from other public and private
information systems (no need for submitting paper documents and certificates)
KONEPS Online Shopping Mall
PPS establishes unit-price contracts for commonly and repetitively purchased products
Products on unit-price contracts are made available at Online Shopping Mall for direct orders from public entities
Electronic Data Interchange System (1997)Online Shopping Mall System (1998)e-Tendering System (2000)e-Guarantee and e-Payment System (2001)
Early
Development
(1997-2001)
Early
Development
(1997-2001)
KONEPSKONEPS
(2002)(2002)
KONEPSKONEPS
(2002)(2002) Establishment of KONEPS for the use of all public organizations (2002)
Phased Establishment
2. Impacts of KONEPS
Transactions through KONEPS
2007 2008 2009
$56 bn
$63 bn$86 bn
In 2009, over 70% of Korea’s total
public procurement (122 billion
USD) was conducted through
KONEPS
41,000 Public Entities
191,000 Registered Suppliers
Total Volume of TransactionsConducted via KONEPS
Total Volume of TransactionsConducted via KONEPS
Minimized face-to-face contacts
All the information are published on-line on a real time basis
The number of bid participants increased three-fold
USD 6.6 on the suppliers’ side, USD 1.5 in the public sector
Reduction of visits and contract-related papers, time-saving, etc
Savings of labor and time for searching for tender information
Savings from increased competition (not included in the figure)
Enhanced efficiency and transparencyEnhanced efficiency and transparency
Saves USD 8.1B worth of transaction costs annually Saves USD 8.1B worth of transaction costs annually
Improves transparency in doing business with the government Improves transparency in doing business with the government
Transparency and Cost Efficiency
17
Corruption Prevention through KONEPS
Increase public access to procurement information & decrease contracting officer’s discretion
• Reduce the possibility for corrupt and illegal activities involving abuse of classified information
• Clarify criteria for bid evaluation & disclose evaluation results• Digitalization of successful bidder selection reduces public officers’
discretion at the bid evaluation stage, therefore prevents corruption
Minimize face-to-face contact and increase information exchange between public organizations
• Minimize possible corruption between government officials and suppliers • Discourage defected companies’ participation in biddings & prevent
documents from being forged, consequently preventing corruption
Increased competition as a remedy to bid rigging
• Augmenting the number of bidders curbs collusion between bidders
Contribution to the Growth of SMEs
Benefits for SMEs
Minimal cost for marketing and promotion in the public sector
Easy access to tender information and broader bidding opportunities
Market opportunities for new technology products
SMEs participation
99.5% of the total 191,000 registered bidders are SMEs
97% of the suppliers of the On-line Shopping mall are SMEs
3. Implementation
Dimensions of e-Procurement Implementation
LeadershipLeadership
Business ProcessBusiness ProcessReengineeringReengineering TechnologyTechnology
Change Change ManagementManagement
Business Process Reengineering
• 80% of the total 565 processes in three categories (goods, services, construction works) were revised
• 152 processes were removed, and over 300 processes were streamlined through integration and digitalization
• 80% of the total 565 processes in three categories (goods, services, construction works) were revised
• 152 processes were removed, and over 300 processes were streamlined through integration and digitalization
Redesigning Procurement Work Process for Improvement
• Foundation for standardized product catalogue system (product classification / identification)• Determining standard e-Document forms
(eb-XML based standards with development guidelines)
• Foundation for standardized product catalogue system (product classification / identification)• Determining standard e-Document forms
(eb-XML based standards with development guidelines)
Standardization of e-Document forms and contents
Revision of Legal and Institutional Basis
• Provisions for the registration of information and mandatory reporting for e-Procurement services
• Revisions for the streamlining of procurement procedures
• Provisions for the registration of information and mandatory reporting for e-Procurement services
• Revisions for the streamlining of procurement procedures
Revision of Laws and Regulations for e-Procurement
• Ministry of Knowledge & Economy • Established in 1999/ revised in 2002, 2005, 2007• Provides for legally binding effect for digital documents
• Ministry of Public Administration and Security (MOPAS)• Established in 1999/ revised in 2001, 2005 • Legal force clarification for a digital signature
Framework Act on Electronic Commerce
Digital Signature Act
Revision of Relevant Regulations
• Mandatory: tender notice via KONEPS, sanctions against fraudulent bidders,
disclosure of award information• Optional: use of e-Bidding and e-Contracting• Grace period (3 months) and interim measures for smooth transition
Technology (1) – Intl. Standards for Interoperability
Adopting the most up-to-date technology standards to ensure
compatibility for data exchange with other external systems
eb-XML based web applications
Application of public digital signature
e-Documents are generated on and sent from the sender’s PC, and received by
the recipient's PC, to ensure end-to-end security system for e-Documents
PKI-based personal keys are issued for each individual tender and stored in the
responsible contracting official’s PC, so that the system operator may not access
the bid information
Adopting the government’s standard values (business registration information,
standard public institution codes, etc.) to ensure compatibility for data exchange
with other external systems
Technology (2) – Security and AuthenticationDigital signature and encryption technology is used for the security of e-Transactions (PKI method)
International Cooperation for e-Procurement
Costa Rica
MER-LINK
Commenced Full Service
in Dec. 2010
Mongolia
Mongolian e-GP System
Implementation by Aug. 2011
Vietnam
e-GP Pilot System
Operated since Jul. 2010
Cross-governmental expansion in planning
Tunisiae-Procurement F/S in 2009 Iran
e-Procurement F/S in 2008
Uzbekistane-Procurement F/S in 2009
4. Recommendations
27
Recommendations
A single e-procurement system for all public
organizations
Simplification and Clarification of Procurement
Regulations for Process Transition through BPR
Take the step-by-step approach from integrated bid
notice (e-Notice), bidding (e-Submission) and e-
Shopping Mall
Government leadership and establishment of a lead
agency
28
THANK YOU
29
Appendices
30
e-Biddings through KONEPS
2006 2007 2008 2009
207,633 213,539207,960
20.8 20.9 20.523.2
235,178
Number of e-BiddingsNumber of e-Biddings Total number of bid participants (unit: million)Total number of bid participants (unit: million)
31
Korea ON-line
E-Procurement System
(KONEPS)
Korea ON-line
E-Procurement System
(KONEPS)
Focal points in the implementation of KONEPS
Gateway to Government Procurement
E-Procurement PortalComprehensive Information ContentsIntegrated Information SearchCustomer Service
Standardized Procurement Process
ASP for public institutionsServices for suppliersSystem development for the System Operation Authority
Efficient Procurement Process
One-time registration for participating in all public bids Reducing the paper document submissions by bidders
Integrated Information & Shared Use
Comprehensive information on public bids and bid awarding Access to integrated data from public authorities and industry associationsShared use of information
Standardization of Fundamental data
Standardizing Product Catalog and consolidating the databaseCreation of e-CatalogStandardizing 149 e-Document forms
Reliable e-Document Exchange
Conformity to W3C/ebXML international standardsEnd-To-End security measuresSecurity assurance
32
Network Security
Separation of Internet and Extranet, Dual Fire-wall, Intrusion Detection System, Security Solutions, etc
System Operation complying with ITIL
Check and Balance between PPS and outsourced Operator, Programmers and System managers
Access control to system, program and D/B
National Computing & Information Resources Center
Automatic management of log access and program modification history, post-verification system
Service Stability against accidents
Dual operation of servers and networks, Back-up Center(Data mirroring), ITSM
Security and Operation Policies
33
Features of KONEPS Modules
Generation of e-Contact forms and electronic signing of the contract document
The contract info is stored in the systeme-Contract
The real-time fund transfer via data-linkage to the dBrain after payment request.
Unnecessary documents for inspection/tally and off-line payment request were removed.e-Payment
Businesses can take impartial opportunities, and public organizations can have multiple
choices, which satisfies various demands.
Repetitive purchase and vexatious bidding process have been simplified via registration of the
unit-price contract product and ordering function.
e-ShoppingMall
e-Bidding
All bidding notices of public organizations (central government entities, local autonomies and educational institutions) are published thru KONEPS.
It secures stability and confidentiality via digital-signature, encryption and e-Data.