Reducing Transaction Coststhrough e-Procurement

Joint Cooperative Committee

Sept. 2011

Kyungsoon ChangPPS South Korea

Contents

Quantitative ResearchⅠ

System IntegrationⅡ

Legislative SupportⅢ

ConclusionⅣ

1. Background

Ⅰ. Quantitative Research(’09)

Review the Effectiveness of e-Procurement Fully implemented KONEPS since 2000

One of the best practices for developing countries

Contribution to Low Carbon & Green Growth New horizon towards sustainable procurement

Future vision of Korean Government

Feedback as Reference to Promote e-Procurement Features: Centralized System/Single Window/One Stop Service

Legislative support for more stable operation

Ⅰ. Quantitative Research(’09)

2. Methodology

Outsourcing to Research Academics

Factors forAnalysis in Process

Carbon issue… Visiting & Paper Reduction

As-Was vs As-Is

End user/PPS/Supplier

Goods/Services/Constructions

As-Was vs As-Is

Ex) Selection of contract method, tender notice

Savings in 8 processes

Ⅰ. Quantitative Research(’09)

3. Analysis in Process

Ex) Tender inquiry, propose to bid, bidding

Savings in 5 processes

Ex) Tender inquiry, document submission, bidding

Savings in 6 processes

Services/ConstructionsGoodsServices/ConstructionsGoods

End User & PPS (Public) Supplier (Private)

Ⅰ. Quantitative Research(’09)

4. Cost Reduction

Survey from Users Focusing on Each Specific Factor

Statistics from DB of 2008 KONEPS

Provide Analysis in Terms of Goods and Services, and Construction

Provide Analysis in Terms of Public vs Private, Agencies, and Processes

Effect by Exempting Stamp Duty

Analysis on Shopping Mall

Ⅰ. Quantitative Research(’09)

4. Cost Reduction

Public vs Private

● Total amount of reduction is about $8bn

Due to - Sharp increase in the number of bidders (’05)16m -> (’08)20m - Significant increase in use of the Online Shopping Mall - Increase in number of procurement - Decrease in costs of visit and officer in charge

$6bn&611m from Private Sector$1bn&440m from Pubic Sector

$ 8bn & 52m

Ⅰ. Quantitative Research

4. Cost Reduction

Goods vs Services and Constructions

Due to - The number of biddings inc onstruction works/service is 156,651 which is one sixth of purchasing (897,240) - The number of bidders in construction or service is 22 mil which is 44 times greater than that of goods

$6bn & 688m from Private Sector$1bn & 364m from Pubic Sector

$ 8bn & 52m

Ⅰ. Quantitative Research

4.Cost Reduction

Low Carbon Green Growth

Annual volume of carbon reduction through KONEPS isapprox. 615,000ton/yr● Reduction from decreased visit : 592,000ton/yr● Reduction from paper savings : 23,000ton/yr● Economic effect is $26m/yr applying trading price for Certified Emission Reduction of EU

615,000 = 50,000,000 30-year old pines absorb annually

615,000 = Emitted when producing 1 million tons of gasoline

====5 folds of LG Chemical Ulsan factory5 folds of LG Chemical Ulsan factory

5,000,000,000 pine trees aged 305,000,000,000 pine trees aged 30

Wasted Budget Due to Independente-Procurement Systems Single systems’ maintenance cost is $6.3 mil

Initial investment is $31mil

Independent Systems Use Information from KONEPS The volume of contents in an individual system is only 28%

comparing to KONEPS

KONEPS is Mandatory in Special Purchasing Suppliers have difficulties in accessing individual procurement

system and using them

1. The Problems

Ⅱ. System Integration

2. Centralizing

Ⅱ. System Integration

Centralize to KONEPS Survey from system operators

- Investigate characteristics of each systems

KONEPS updates are centralized

On-going research project to check the feasibility of centralized

system

Others Identify system operators who support centralized system

Upgrade system that covers specific needs from different agencies

Provide contents to independent operators

- supplier information, fingerprint recognition, etc.

1. Necessity

Ⅲ. Legislative Support

National Contract Law and Local Contract Law Stipulate Use of KONEPS e-Procurement is stipulated in PPS notifications (12 in total)

Need Verification of Safety, Fairness, and Reliability Groundwork for stable operation of the representative system

- Annual contract volume is $76bn

More stable platform for expanding e-Procurement

Expansion to the Public Not only public sector but also private sector

Initiate e-Procurement support center

2. Main Contents for Legislation

Ⅲ. Legislative Support

Procedures and Methods Stipulate procedures and methods of e-Procurement by public

agencies Specify time limit of e-Documents sending and receiving

- effectiveness of e-Documents Allow administrator of PPS to establish and operation KONEPS,

and to request information from heads of related organizations

Open to the Public Private users can use the system upon permission

Expansion towards Other Countries PPS can provide support for international cooperation of

e-Procurement and the system’s expansion PPS can establish e-Procurement support center

Ⅳ. Conclusion

Prerequisites Single Window

Integrity

One Stop Service

Legislative Support Expand the base of e-Procurement

- Clarify rights and obligations of parties

Verify Stable operation and constant improvement

- Ten years of experience with KONEPS

New Horizon Expand verified confidence and know-how to private sector

Cost reduction and value-added creation

15

Thank You