technical assistance consultant s report · technical assistance consultant’s report the views...
TRANSCRIPT
Technical Assistance Consultant’s Report
The views expressed herein are those of the consultant and do not necessarily represent those of ADB’s members, Board of Directors, Management, or staff, and may be preliminary in nature.
Project Number: 42537 August 2012
The Philippine Government Electronic Procurement System (PhilGEPS) – Organizational Study (Financed by PATA 7244-PHI: Strengthening the Philippine Government Electronic Procurement System Prepared by Nide Marie Bombay Philippines
DISCLAIMER
The views expressed in this report are those of the author and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. ADB encourages printing or copying information exclusively for personal and noncommercial use with proper acknowledgement of ADB. Users are restricted from reselling, redistributing, or creating derivative works for commercial purposes without the express, written consent of ADB.
TABLE OF CONTENTS
1. INTRODUCTION ....................................................................................................... 1 1.1 Approach and Methodology ............................................................... 2 1.2 Structure of the Report ....................................................................... 2
2. OVERVIEW OF THE PHILGEPS .................................................................... 3 2.1 System Accomplishments ................................................................. 3 2.2 System Features and Components ................................................... 4 2.3 Strategic Objectives and the PhilGEPS Roadmap ........................... 5
3. THE CURRENT PHILGEPS ORGANIZATION, STRUCTURE AND STAFFING ............................................................................................................ 5
4. ORGANIZATIONAL CHALLENGES ............................................................... 6
5. INTERNATIONAL BEST PRACTICES AND ORGANIZATIONAL MODELS . 9
6. FRAMEWORK FOR DEVELOPING THE PHILGEPS BUSINESS MODEL AND STRUCTURE ............................................................................................. 11
6.1 Vision/Goal and Analysis ................................................................. 12 6.2 PhilGEPS’ Role and Functions ........................................................ 13 6.3 Other Considerations and Assumptions in Designing a New
Business Model and Structure ...................................................... 15
7. ALTERNATIVE BUSINESS MODELS FOR THE PHILGEPS ....................... 21
8. PROPOSED BUSINESS MODEL FOR THE PHILGEPS ............................. 19
9. PROPOSED STRUCTURE FOR THE PHILGEPS ........................................ 24 9.1 Systems Planning and Development (SPD) ................................... 25 9.2 Systems Operations and Management (SOM) ............................... 25 9.3 User Support Services (USS) ........................................................... 26 9.4 Business Development and Promotion (BDP) ............................... 26 9.5 Administration and Management Support Services (AMSS) ........ 26
10. MOVING FORWARD ................................................................................... 27 10.1 Recommended Workplan and Timetables .................................... 27 10.2 Key Risks and Assumptions .......................................................... 27 10.3 Key Implementation Challenges .................................................... 28
ANNEXES
ANNEX A: TOTAL NO. OF TRAINED AGENCIES AND PERSONNEL .......... 31
ANNEX B: TOTAL NO. OF PHILGEPS TRAINED BY ENTITY ...................... 32
ANNEX C: APPROVED PHILGEPS PLANTILLA ............................................ 33
ANNEX D: PHILGEPS ROADMAP ................................................................... 34
ANNEX E: CAPACITY MATRIX ........................................................................ 50
ANNEX F: LIST OF PERSONS INTERVIEWED ............................................... 51
List of Acronyms and Abbreviations
ADB Asian Development Bank AO Administrative Order APP Annual Procurement Plan COA Commission on Audit CUS Common use supplies DBM Department of Budget and Management eGP Electronic Government Procurement EO Executive Order EPS Electronic Procurement System GOCC Government owned and/or controlled corporations GPPB Government Procurement Policy Board GPRA Government Procurement Reform Act ICT Information Communication Technology IT Information Technology IRRs Implementing Rules and Regulations LGU Local Government Units MOOE Maintenance and Other Operating Expenses NCB National Competitive Bidding NGAs National government agencies OGP Open Government Partnership PDF Portable Document Format PDS Philippine Digital Strategy PhilGEPS Philippine Government Electronic Procurement System PS Procurement Service RA Republic Act SLAs Service Level Agreements SMEs Small and Medium Enterprises SUCC State Universities and Colleges WB World Bank
LIST OF FIGURES AND TABLES
FIGURE 1: CURRENT FUNCTIONAL ORGANIZATIONAL CHART OF PHILGEPS ............................................................................................................ 6
FIGURE 2: FUNCTIONAL ORGANIZATIONAL CHART UNDER PHILGEPS ROADMAP ............................................................................................................ 8
FIGURE 3: FRAMEWORK FOR ORGANIZATIONAL DESIGN AND DEVELOPMENT ................................................................................................. 11
FIGURE 4: BUSINESS MODEL WITH CORPORATE CHARACTER .............. 21
FIGURE 5: BUSINESS MODEL AS GOVERNMENT UNIT OUTSIDE PS STRUCTURE ...................................................................................................... 22
FIGURE 6: BUSINESS MODEL TO LEAD GOVERNMENT IT SYSTEMS ...... 23
FIGURE 7: RECOMMENDED PHILGEPS MODEL .......................................... 23
FIGURE 8: RECOMMENDED PHILGEPS FUNCTIONAL STRUCTURE ......... 25
TABLE 1: HISTORICAL FUNDING LEVELS FOR PHILGEPS .......................... 7
TABLE 2: SUMMARY OF DIFFERENT EGP SYSTEMS .................................... 9
TABLE 3: PHILGEPS ROADMAP SUMMARY ................................................. 13
TABLE 4: SUMMARY OF DIFFERENT FUNCTIONS AND TASKS ................. 14
TABLE 5: PHILGEPS BUSINESS CANVASS .................................................. 20
TABLE 6: RECOMMENDED WORKPLAN ...................................................... 27
1. Introduction
In April 2012, the Philippines Government Electronic Procurement System (PhilGEPS)1 commissioned the preparation of the T3 Organizational Study with support from the Asian Development Bank (ADB). The goal of the study was to provide strategic direction and define an appropriate government structure that is most suitable to the PhilGEPS. The adoption of a new organizational arrangement has been identified as a key driver for growth and sustainability and is supported by Administrative Order (AO) 17 and the Office Order 2012-206 of the Department of Budget and Management (DBM). Under the Government Procurement Reform Act(GPRA) that was passed in 2003, the PhilGEPS became the single portal to serve as primary source of all government procurement information. Since then, the system has grown to support over 9,000 government procuring entities at the national and local levels and over 50,000 registered suppliers nationwide. Many stakeholders continue to benefit from the use of the PhilGEPS. The government has saved over P564 million in advertising costs alone. It is also getting better prices and substantial savings in procurement administrative costs and time. With the continued increase in participation, it is providing greater opportunity to a growing number of small and medium enterprises (SMEs) and seeking to be a critical part of the overall national agenda for transparency and accountability . While the system has evolved to become the single portal for all government procurement, its structure remains largely unchanged. Its organizational capacity to operate the system and efficiently respond to demands of its user base continues to be a challenge. The impressive growth in its client base and the numerous new demands of the government to use the system for increasing transparency in the government procurement process poses a number of serious challenges to the current PhilGEPS organizational structure. The PhilGEPS Roadmap and Workplan (2012-2014) identified the adoption of a revised organizational model that will strengthen and sustain the PhilGEPS management and operations as a key action area.2 This Organizational Study is being undertaken to explore strategic and operational options for the PhilGEPS to consider in selecting the model. Specifically, it will:
1. define an overall governance framework within the overall government procurement system
2. define an appropriate organizational structure that can support the
efficient operations of the system
3. recommend the type of government organization suitable for PhilGEPS so that it can effectively carry out its mandate.
1 The PhilGEPS is the on-‐line e-‐government procurement portal of the Philippine government. Its website address is http://www.philgeps.net. Its physical office is located at the 25th floor, Raffles Corporate Center, F. Ortigas Avenue, Pasif City, Metro Manila, Philippines 2 PhilGEPS Roadmap and Workplan, Table 2, page
1.1 Approach and Methodology The study recognizes the importance of engaging senior managers of PhilGEPS, the PS, the GPPB and the DBM in the design of the PhilGEPS Organizational Structure. These managers were consulted and updated in each step of the srudy process beginning with the approval of the Consultant’s Inception Report. This process made it possible to solicit buy-in from the decision makers, ensure focus and effectiveness of the report and avoid any “surprises” in the recommendations. More importantly, the methodology recognizes the importance of consulting with its “clients” i.e. the buyer agencies, suppliers and civil society, to better understand their needs and seek their insights so that the structure could be made more responsive and purposeful in it use. Various stakeholders in the public and private sectors were interviewed to solicit and validate inputs for the model. This included PhilGEPS senior managers, key policy makers, staff, selected PhilGEPS users (i.e. buyers and suppliers), key technical consultants, and its outsourced provider. Workshops were conducted to facilitate the gathering of inputs. The list of persons interviewed is listed in ANNEX F.
1.2 Structure of the Report The structure of the report is as follows: Chapter 2 is a brief history & summary of the current state of the PhilGEPS, including its vision, roadmap, organization, technology and services and systems accomplishment. Chapter 3 presents the existing PhilGEPS Organization, Structure and Staffing including its governance framework and leadership Chapter 4 identifies the many organizational challenges being experienced by the PhilGEPS and the context of these issues Chapter 5 provides insights on international and regional best practices. It also includes a discussion on key considerations, principles and assumptions in defining a new organizational structure Chapter 6 presents the framework used for analyzing and developing the PhilGEPS Business Model. It also discusses the result of the consultant’s review and analysis. Chapter 7 presents a discussion of alternative organizational models for the PhilGEPS, the strengths and weaknesses of each alternative Chapter 8 discusses the proposed business model Chapter 9 presents the proposed functional Structure for the PhilGEPS Chapter 10 outlines the tasks that need to be undertaken to implement the new structure. In addition to the next steps, it identified timelines, risks and implementation challenges for the transition phase.
2. Overview of the PhilGEPS The PhilGEPS started as a pilot system for the purchase of common-use supplies, materials and equipment. In 2003, the government enacted Republic Act (RA) 9184 known as the Government Procurement Reform Act (GPRA)3 This law paved the way for adopting key procurement reforms and institutionalized the use of the PhilGEPS as the single central portal for all public procurement activities.4 The main objectives of PhilGEPS are:
(i) To establish an open, transparent, efficient and competitive marketplace for government procurement;
(ii) To get better prices;
(iii) To build the framework to continually improve the procurement processes; and
(iv) To maintain sustainability of its operations over the long term.
Many national policies and laws prescribe the use of the PhilGEPS. The E-Commerce Act (RA 8792) advances the use of information technology in public sector governance and promotes the use of electronic transactions in government and identifies e-procurement as a strategic tool for reducing procurement costs both for government and the private sector. The Philippine Development Plan 2011-20165 recognizes the use of ICT systems like the PhilGEPS for reducing opportunities and incentives for graft and corruption. Moreover, it advocates the widening use of the PhilGEPS in the bidding process of government agencies to ensure greater participation and cost effectiveness in procurement. The Philippine Digital Strategy (PDS)6 affirms the role of the PhilGEPS in sharing more government data online for improving the efficiency of government procurement operations and meeting its goals in achieving transparent and efficient government services. The PhilGEPS is under the administrative supervision of the Department of Budget and Management (DBM) while functional supervision is with the Government Procurement Policy Board (GPPB), an inter-agency body composed of Cabinet Secretaries from the ten largest buying agencies and a representative from the private sector.
2.1 System Accomplishments As of May 2012, over 14,000 procuring units of government are registered with the PhilGEPS. A large number of these units utilize the system primarily to publish bid opportunities for common use supplies, civil works, consulting services and other goods and to distribute tender documents to more than 40,000 vendors and suppliers. ANNEX A shows the summary of agencies at the national and local levels registered with PhilGEPS. PhilGEPS has also trained over 23,000 government procurement personnel across 9,434 procuring entities at the national and local levels as well as 7,200 suppliers 3 http://lawphil.net/statutes/repacts/ra2003/ra_9184_2003.html 4 Article 3, Government Procurement Reform Act (Republic Act 9184) 5 http://www.neda.gov.ph/PDP/2011-‐2016/default.asp 6 The Philippine Digital Strategy, Commission of Information and Communications Technology, 2011, Chapter 2
nationwide. ANNEX B shows the summary of agencies and agency personnel trained for all agencies nationwide. Even with just three functionalities on the system, both government and private sector are convinced that there has been tremendous benefit from the implementation of the PhilGEPS. Government is experiencing greater participation (competition) in the bidding process for common-use items. Prices of common goods, particularly those purchased by the Procurement Service, have gone down by an average of 10% - 25% compared to pre-PhilGEPS tenders.7 There is also increased internal efficiency and substantial savings in the agency administrative budgets, particularly in office supplies and internal administrative time, as bid documents, pre-bid conference bulletins and other bid related documents could now be automatically downloaded from the system. But the biggest quantifiable impact of the PhilGEPS to government is the savings resulting form the reduction in advertising bid opportunities. As of May 2012, the government has saved over Php 600 million in advertising costs from using the PhilGEPS. Moreover, by having a common portal that can automatically show prices, bid documents and other procurement document requirements, the majority of the government procuring entities are able to adopt more standardized processes and use standardized forms for their procurement activities. In this manner, the system is contributing to making the procurement function more uniform without centralizing the buying process. The market survey conducted by PhilGEPS in 2010 to benchmark supplier satisfaction on the use of the system showed that suppliers generally find the PhilGEPS to be a cost effective and efficient way of doing business with government.8 PhilGEPS is providing suppliers with increased business opportunities without the need to transact with agencies face to face. Suppliers nationwide can now have equal access to a bigger market. In interviews with some industry association representatives, suppliers expressed the opinion that the use of the PhilGEPS is promoting transparency and accountability and is also contributing to economic growth. Many small and medium enterprises are now able to access and participate in government procurement and even more so, a growing number have successfully been awarded contracts.
2.2 System Features and Components The system is a web-enabled application that is easily accessible to any user through the Internet using a common browser and the Adobe PDF reader. It supports multiple access views depending on a user’s role and offers three major features – an Electronic Bulletin Board, a Supplier Registry and an Electronic Catalogue. Through the support of the ADB and the World Bank, modifications identified by the Philippine Country Assessment Report were introduced for the system’s application to ADB- and World Bank- funded NCB and shopping procedures. PhilGEPS is in the process of deploying the expanded merchant registry and the virtual store for online ordering. By the last quarter of 2012, it will deploy an e-bidding and e-payment facility. It is also scheduled to introduce user charges and fees for the use of the system. New features including an Agency Procurement Plan
7 Interview with Executive Estanislao Granados, Procurement Service 8 Market survey results conducted by I-View in July 20110. The market survey was a component of the Business Plan for User Charges and Fees commissioned by PhilGEPS with the assistance of COST Philippines and DFID.
(APP) module, the Auditor’s module and an e-learning module are programmed for development in the short term.
The PhilGEPS outsourced through a competitive bidding process, all technical aspects of the system operations, including the expansion, infrastructure, facilities, support and operational management, in accordance with its requirements and service levels. The service provider is paid an annual fee based on the system components delivered and accepted by the government over a five-year contract period. The contract for the provider has been extended for another eighteen months to give time to complete and deploy the five new functionalities, to rethink its outsourced model and to prepare for a re-tender.
2.3 Strategic Objectives and the PhilGEPS Roadmap The institutional and system functions of the PhilGEPS are now being viewed from how public procurement in the Philippines is envisaged to be in the long-term. These expanded roles are designed along the premise that the government is serious about improving the procurement system and in using PhilGEPS as a tool to combat corruption and promoting economic reform in the country. In November 2011, the PhilGEPS prepared a roadmap and Workplan 2012 – 2014 to comply with the requirements of Administrative Order (AO) 17 that “directs the use of the PS and the PhilGEPS by all agencies in procurement activities in accordance with RA 9184”. AO 17 aims to provide and identify the direction, process and key action plan of the PhilGEPS to carry out its mandate and contribute effectively to the goals of transparency and efficiency in public procurement. The preparation of the Roadmap included a review of the existing organizational and functional processes, an assessment of the agency situation vis-à-vis the environment in which it is operating and, development of new strategies including an interim organizational structure and budget. 3. The Current PhilGEPS Organization, Structure and Staffing The PS is the organization responsible for the strategic definition of the PhilGEPS and its management. The PS Executive Director assumes overall responsibility for all activities of the PhilGEPS and provides direction, general supervision and control over the work of all employees. The day-to-day operational management responsibilities rests with the PhilGEPS Group, a unit lead by a PhilGEPS Director who reports to the Executive Director of the PS. The Executive Director of the PS and the PhilGEPS Director are interdependently responsible for planning, organizing, leading and controlling the PhilGEPS operations while the Secretary of the DBM provides overall leadership. The PhilGEPS staffing levels have grown marginally since it started its operations. PhilGEPS total staff complement is 26 composed of 17 contractual and 9 job order positions. There are no permanent plantilla positions for the PhilGEPS. ANNEX C presents the detailed organizational staffing list. Although the PhilGEPS, is under the administrative supervision of the DBM, its functional supervision is with GPPB, an inter-agency body headed by the Secretary of the Department of Budget and Management as chairperson and the Director-General of NEDA as alternate chair with the secretaries of Public Highways, Finance, Science and technology, Health, Trade and Industry, Transportation and Communication, Education, Defense, Energy and Interior and Local Government,
and a representative from the private sector as members. Figure 1 below shows the existing functional organizational chart of the PhilGEPS.
Figure 1: Current Functional Organizational Chart of PhilGEPS
The existing PhilGEPS organizational structure does not lend itself to fulfilling the vision for the ideal PhilGEPS organization because of the following reasons:
i) the structure was initially designed as a unit to support procurement of Common Use Supplies (CUS) only
ii) It does not have all the functional areas required to deliver the vision and lacks the flexibility needed to expand the system
iii) the self contained units comprising the PhilGEPS organization results in relative isolation of the system to its user base, effectively inhibiting the required interaction and collaboration
iv) the static organizational structure leads to inefficiency and inflexibility, which in turn results in backlog in the development and deployment of new features.
The specific impact areas of the existing organizational structure are discussed in the next section. 4. Organizational Challenges While substantial progress has been made in deploying the system in government, many challenges remain and new issues are constantly being raised. These include: (i) the limited IT infrastructure and Internet access of both buyers and suppliers (ii) persistent resistance to use PhilGEPS in the agencies’ procurement process (iii) integration and interoperability issues (iv) PhilGEPS capacity to deliver training to a fast growing user base. (v) procurement policy issues that affect the consistency in the use of the PhilGEPS (vi) the seeming lack of awareness of both buyers and
suppliers on the existence or use of the system, vii) buyer compliance to PhilGEPS rules and procedures and, vii) the non responsive organizational
structure of the PhilGEPS to new/additional demands of its users. Many of these issues are complex and any solution will take time and require considerable resources to implement. Moreover, all solutions will demand greater leadership from PhilGEPS and a concerted effort among a number of government agencies to work closer together. The PhilGEPS organizational structure has been identified as a key factor that will impact on the ability of the PhilGEPS to resolve these issues and fulfill its mandate. Since it was launched, the PhilGEPS organizational structure remains largely unchanged. It continues to be administratively under the supervision of the PS, an organization whose responsibility is limited largely for the procurement of common use goods while functionally supervised by the GPPB. Since 2010, the DBM exercised some functional authority over the PhilGEPS because of the substantial budgetary support that it is providing beginning that year. This existing organizational arrangements among the GPPB, DBM and the PS has led to a number of serious concerns with functional authority and administrative supervision that is creating confusion, resulting to unclear reporting lines and accountability. The PhilGEPS has no permanent plantilla9 or budgetary allocation from government or any user fee policy to support its workforce cost. All employees are on contractual status and have no security of tenure. The PhilGEPS also has no control over its budgets. Consequently, its ability to meet the many demands for training and support services for its expanding user base is severely restricted, likewise its capacity to further develop the system. ANNEX C shows the list of existing PhilGEPS Staff and Plantilla positions as defined in the Roadmap. Table 1 below shows the historical funding levels for the PhilGEPS.
Table 1: Historical Funding Levels for PhilGEPS The PhilGEPS Roadmap 2012 – 2014 proposed an expanded organizational structure with more functional units and a slightly larger staff complement for approval by the DBM under its government’s Rationalization Plan. Figure 2 below shows the Organizational Chart proposed to implement the Roadmap.
9 Plantilla positions refer to the government authorized positions and job titles based on the government approved organizational structure
Funding Level andSources of Funds (2006-2010)
2006 2007 2008 2009 2010 Funding Source
Operations 33,845,737 44,151,193 8,294,603 9,067,470 12,267,828PS Funds, PhilGEPS
funds
Systems Dev't & Licensing 38,518,980 38,518,980 38,518,980 E-Gov Fund
Advisory Services* 5,000,000 5,000,000 not known 15,000,000 10,000,000 Grants
TOTAL 38,845,737 49,151,193 46,813,583 62,586,450 60,786,808
*Advisory Services Estimated Figures
Figure 2: Functional Organizational Chart under PhilGEPS Roadmap
The PhilGEPS is concerned that adding more technical people and support units for marketing and accounting alone will not solve the organizational issue. Its ability to respond to the demands of its users including the required flexibility to enhance or upgrade system features is seriously impaired by its existing structure. Many of the stakeholders interviewed believe that the system can be better positioned to add value to the procurement process and do more (and better) in promoting efficiency and transparency in government procurement. Its ability to attract and retain people also remains weak because of the temporary nature of its contractual engagement. Moreover, it is unable to compete with the much higher rates that are offered by the private sector for the same technical positions. The PhilGEPS is also constrained to follow the same bureaucratic administrative processes that govern the PS and the DBM, most of which do not apply to the operations of an electronic procurement system.10 Even with an increased resource support that is defined in the Roadmap, the PhilGEPS still pales in comparison to most existing eGP systems in other countries in terms of staff deployment, capital outlay and operating budgets.11 Table 2 below summarizes these components for key eGP systems around the world.
10 PHILIPPINES: Case Study on the Philippine Government Electronic Procurement System (PhilGEPS), June 2011, p 35. 11 PhilGEPS Roadmap and Workplan 2012-2014, Novemebr 15, 2012.
Table 2: Summary of Different eGP Systems
5. International Best Practices and Organizational Models Over the last few years, a significant number of countries and government organizations embraced e-procurement as an important element of their bureaucratic reforms for creating conducive national business. In these countries, electronic procurement organizations are generally viewed as a strategic support within the public sector that can add value to government agencies and assist them in achieving their overall service delivery objectives. A World Bank survey (2007)12 of fourteen countries where e-procurement had been introduced confirms the use of different business and organizational models for the successful development and implementation of eGP systems. The designs vary from a government owned and funded model like those in Singapore and Korea to a shared service model that is fully managed by a third party outside of government such as the Canadian system. Some employ very simple flat structures while others use a more integrated multi-level matrix organization to supports the full end-to-end procurement process. Most of these models started in one form and evolved over time as their requirements changed. Regardless of the model, the following common factors influence the type of structure:
1. the complexity of procurement activities and systems
12 Draft E-Government Procurement Toolkit, (Update of Multi-Lateral Development Banks e-GP Toolkit ). November 2011
Country Registration Fee Service FeeHong Kong Free
S$55 (+GST) unlimited number of supply heads
India
Andhra Pradesh Free buying entity pays posting fees based on value
Karnataka Rs 500, renewal is Rs 100
RM 450/3years; same renewal every three years
Canada no fees for basic access Cdn$39.90 for out of jurisdiction tenders
British Columbia Cdn$150 e-bidding fee annually
USA
Kentucky no registration fees1.75% transaction feepaid buy buying entity
Australia Free
United Kingdom free for Low-Value Contract Transaction fee for high value contracts
North Carolina no registration fees
Singapore
Malaysia
2. size of procurement transactions
3. procurement laws and policies for e-procurement
4. funding and investment levels
5. the amount and levels of risks that government is willing to undertake
6. the reforms that government wishes to address with the
implementation of the system
7. availability of technical expertise
8. the capacity to manage and implement software application and other
system technologies.
While there is some evidence of formal and dedicated procurement functions and positions, there is no prescribed standard or blueprint for defining organizational structures for eGP. There are also no norms on structures and forums to co-ordinate and foster cooperation in procurement activities within or across government sectors. Some countries have chosen a model that is integrated in the central procurement agency (Hong Kong, Korea, Singapore, UK) while others have adopted a devolved type with an e-GP division developed in each agency or government unit (India, Indonesia, Malaysia). Still others use a non-integrated model that is for the most part managed by the private sector (Canada,). All models have demonstrated success in implementing their eGP systems
The following are common key design considerations13 that are found across all models:
1. Regardless of the business model, the government remains responsible for the management of business services being delivered and will need an operations management unit responsible for managing the service operation even when the service is fully outsourced to a third party.
2. Not all models or approaches work in all environments. Governments need to take into consideration the various technical and business challenges that exist within their individual environments. The approach for a system implementation should be driven by business needs versus technical needs, as the implementation of e-GP is primarily a business issue.
3. The implementation of the e-GP system should always be associated with the institution of procurement reforms across government, and supported by a comprehensive information management system that enables future data mining and auditing of the procurement process. The eGP system, when properly deployed, can become one of the most effective resources for managing and monitoring government procurement.
4. The success of the e-GP system implementation has more to do with the leadership and organizational structure supporting the system than the system itself. Establishing a sound organizational structure and leadership with the ability and authority to develop and implement the necessary governing rules, laws and policies to support an e-GP system is a must.
13 ibid, page 110.
5. The implementation and on-going support of an e-Government Procurement program will require a significant amount of investment by government. The business model that is chosen must reflect government’s commitment and ability to keep the system right resourced.
6. The institutional role of the eGP system in any model should include the authority to design, develop (or commission) and implement an efficient and effective system across other government entities. It should also have the authority to prevent various entities from fragmenting the system by developing their own systems – the territorial behaviour common between government departments should not be carried into cyber space, rather, the system should serve as a unifying and guiding institution for a process as complex as procurement.
6. Framework for Developing the PhilGEPS Business Model and Structure Designing the model and structure depends entirely on the organization’s objectives and the strategy chosen to achieve them.14 It is a long and tedious process that may be broken down into three major components: i) Strategy ii) Organization and iii) Human Resource Development. Each of these three components can be further divided into at least four subtasks ranging from situational assessment and technology/environmental scanning, to identification of competencies and providing job descriptions, and to plantilla creation and training. The Framework for Organizational Design and Development is depicted in the Figure 3 below:
Figure 3: Framework for Organizational Design and Development
14 http://www.businessdictionary.com/definition/organizational-structure.html#ixzz21DVjlQpo
Given the time constraint, this study will only cover about half of the process – up to the development of the PhilGEPS Organizational structure and identification of functional competencies for the proposed units.
6.1 Vision/Goal and Analysis RA 9184 and the Roadmap 2012-2014 are the primary sources of information for reviewing the vision and strategies of the PhilGEPS, These two documents were then used to:
i) assess the overall organization in the context of its mandate, goals and directions, its needs and its current capabilities.
ii) review the processes to be performed by the system as well as the procurement processes where the system will be involved.
iii) evaluate the environment in which the organization is to function, including consideration of success stories and/or best practices.
Article III, Section 8 of RA 9184 defines the vision and mandate of PhilGEPS as ”the single portal that shall serve as the primary and definitive source of information on all government procurement.” All agencies at the national and local levels are mandated to use the system. The Roadmap states that the PhilGEPS’ vision has four elements: i) to be the competitive marketplace for government procurement, ii) to add value in procurement policy, monitoring and compliance to AO 17 and RA 9184, iii) to contribute to efficient operational procurement performance and, iv) to increase Integrity and transparency in procurement. In addition, it seeks to maintain its excellent reputation as a trusted source of procurement information for all of government. In addition to the overall vision and policy direction, the Roadmap and Workplan also contains information and analysis on the agency situation, the environment in which it operate in, the strategies and key objectives. Annex D provides the detailed PhilGEPS Roadmap. Table 3 below presents the PhilGEPS Roadmap Summary
Table 3: PhilGEPS Roadmap Summary
The PhilGEPS vision and goals require an organization that is highly responsive and capable of developing, deploying and managing an eGP system to enhance transparency and competitiveness in public procurement for all levels of government. Key aspects of the vision and goals are:
i) accessibility and visibility in government and with all its stakeholders
ii) technical capability and leadership, including championing the use of IT for the procurement process
iii) organizational and technical flexibility that will allow the adoption of eGP best practices as these practices surface and evolve over time
iv) long term sustainability, including the ability of the system to provide continuity in development and deployment of functionalities as well as continuous support and upgrading of those functionalities that have already been deployed.
These four elements form the first level or core criteria for designing the business model and structure.
6.2 PhilGEPS’ Role and Functions The role of the PhilGEPS today is much more strategic, dealing a wider scale and scope. As the primary source and repository of government procurement information, it is envisioned to be a vital support component of the overall financial planning and budget execution systems, procurement policy formulation, and a tool for better government contract management and audit. In addition, it will embrace all agencies in the public sector for the procurement goods, civil works and consulting services. Two key aspects of the PhilGEPS function were used to rationalize the scope and role of the PhilGEPS organization namely, the tasks to be performed and how it will “source” these functions.
Vision Goals Results/What does PhilGEPS want to be known for
*Private sector utilizes PhilGEPS to market/sell their goods & services to government
*All government agencies institutionalize the use of PhilGEPS for their procurement
* Primary source of consolidated procurement planning information
*100% compliance to RA 9184 & AO 17 and all policy pronouncements of the GPPB
* Primary source of accurate data on completed & ongoing procurement activities of all agencies
*PhilGEPS is central repository for all eligibility documents for bidding
* Primary source of supplier business information eligibility documents
*All bid documents made available/ downloadable through PhilGEPS
3. Efficient Operational performance in gov’t procurement
* 100% registration of all gov’t agencies at national and local levels (provinces, cities and municipalities)
*100% of gov’t agencies at the national and local levels (provinces, cities and municipalities) utilize the PhilGEPS for all their procurement
* Generate involvement & support for procurement in all sector including CSOs & citizens
*Excellent reputation as as the only trusted source of procurement information for all of gov’t
* Data generated utilized as primary data for monitoring and compliance
*Sustained operational growth & dev’t of the PhilGEPS system
1. Competitive Marketplace for gov’t procurement
*Reliable, trusted & primary source of all gov’t procurement information
2. Value-added in procurement policy, monitoring & compliance to
AO 17 & RA 9184
4. Integrity & Transparency in Procurement
a. Tasks to be performed - Table 4 below summarizes the different components of the function and the tasks required for each component:
Table 4: Summary of Different Functions and Tasks
FUNCTION TASKS
System Development and Management
• identify, design and develop new system
functionalities and features • manage the systems (technical & contractual)
operations and maintenance • undertake information systems planning and
development for new functionalities, including upgrading of the existing system
• Database Administration • Network Administration and the management of its
internal IT systems • Security Administration, Disaster Recovery
planning and administration • Software licensing • Technical Risk Management
FUNCTION TASKS
Stakeholder Development and Management
• Training • Customer Relations and User Help Desk • Data Administration (data directory, data
standards), Monitoring and Performance Management
• liaising, coordinating and interacting with procurement related agencies
• Marketing and Business Development • Public Relations
Organizational Development and Management
• Project Management • Organizational Administration and Management • Human Resource Management • Finance and Accounting • Corporate Planning, Policy and Research, Data
Analysis • Legal • Corporate Risk Management
b. Sourcing of the components or tasks –This determines how the functions could be provided by the PhilGEPS in the most efficient and effective way. An organization has three options in sourcing its tasks and services: 1) in-house provision, 2) outsourced or 3) shared service.
i) In-house provision means that the delivery of the service will be done directly by PhilGEPS. This approach was the preferred option by most institutions for many tears. It provides direct control and supervision of the functions, provides greater security and confidentiality, and was initially thought to be the more cost efficient means of delivering the functions. Over time, however, many organizations have began to downsize their organizations especially when they were not getting the level of output that that they need or want from their in-house units. Also, while directly employing staff to do the work may be cheaper initially, it is relatively inflexible as is the case in government and carries a lot of future expenses such as benefits.
ii) Outsourcing can be defined as the contracting of an external
organization to assume responsibility for a specific task or function of an organization. This method of sourcing has the advantage of having access to skills and technology from the service provider that would otherwise not be available from in house staff. It has flexibility in that the scope, coverage and cost of the contract for the functions can be limited to actual needs on a year-to-year basis and Accountability is a strong recourse when the service provider fails to meet the contractual service level agreements (SLAs). Because of this nature, the provision of the function is normally much improved. However, this alternative has a number of disadvantages such as the possible loss of control and/or confidentiality arising from having non-employees managing the functions and handling sensitive data and the need for effective contract management to ensure that the SLAs are actually being met.
iii) Shared Services is an alternative to outsourcing. The common needs
and concerns of a group of government business units suggests that it may be possible to achieve economies of scale and streamline the provision of the function by setting up a shared service. A good example for shared services is the DBM-PS. Procurement is a function that all government agencies in the past performed in-house. Economies of scale and streamlining functions were achieved with the setting up of the PS as a common provider of the procurement function for different departments and offices. A government agency may simply avail of the services of the PS instead of conducting an in-house procurement exercise.
These major aspects of the function were identified to be the second level criteria for designing the model.
6.3 Other Considerations and Assumptions in Designing a New Business Model and Structure
In addition to the key areas enumerated in this section, the design of the organization and structure would also have to consider as a third level criteria the following:
1. Policy Considerations.
The PhilGEPS, the GPPB and the PS are the main mechanisms of the Philippine Public Procurement Sector. Together, these entities are the pillars of public procurement and are instrumental for increasing transparency and efficiency. AO 17, a policy declaration in support of RA 9184, reinforces the linked and sometimes intertwined roles of these institutions and highlights the need to strengthen their organizations. A new business model should consider the interrelated working relationship between PhilGEPS, the GPPB and the PS, including the different roles of other institutions involved in the procurement process. Additionally, a new business model should address specific policy requirements for procurement operating processes and procedures with respect to the use of the system and the attendant changes in the procurement process brought about by its use. Examples of these include financial policies covering the payment mechanisms and utilization of fees collected by PhilGEPS and rules governing the use of the virtual store including those relating to framework agreements. There are also new government pronouncements and policies that require better use of the system by all of government, even those at the local levels, who have very limited or no access to the system. The adoption of a new business model and structure should be seen as a tactical measure to improve service delivery operations at the agency level, institutionalize the use of the system in the procurement process including provide better monitoring and planning. The PhilGEPS has also been identified to support the government’s commitment to the Open Government Partnership (OGP) initiative and the Country Procurement Assessment Report (CPAR), a joint document of the Government of the Philippines, the Asian Development Bank (ADB) and the World Bank (WB). The broader policy consequences from these commitments will be taken into account in developing a business model to ensure consistency with the overall policy on governance, value for money and economic development.
2. Mandate, Vision and Mission. Any new business model will be developed within the provisions of Article III, Section 8 of RA 9184 and following the Vision and direction defined in the Roadmap 2012-2014 .
3. Operational Considerations. The PhilGEPS has the responsibility for ensuring uninterrupted service and continuous development of the system. The business model should support the progressive development and operations of the system and allow expansion of the system features and functions over time in conjunction with the capacity and technology infrastructure available. It needs to continuously support various levels of features and functions and make sure that the system has sufficient capacity to support projected user loads and storage requirements at all times. Additionally, a new model should strengthen security and security management that will lead to better systems integrity.
4. Legal and Regulatory Framework. The existing supporting legislative framework including EO 26215 and EO 322 16 both issued by then President Estrada, EO 40 17 issues by then President Arroyo, R.A. 8179 or the Electronic Commerce Act18 and R.A 9184 or the Government Procurement Reform Act (GPRA) and its implementing rules and regulations (IRRs) sufficiently provides overall policy level guidance to support and institute the PhilGEPS in public procurement. The legal framework provides high-level guidance to all public entities on how the PhilGEPS will be utilized within the public procurement lifecycle in accordance with the directives and policies set out for its use. The framework does not pose any restriction for the PhilGEPS to adopt a new business model whether as a corporate character or as a regular government entity.
5. Human Resource Requirements. One of the drivers for shifting to a new business model is the challenge of hiring and retaining sufficient, competent technical resources to support the system operations. PhilGEPS needs to have a good resource pool and a structure that is flexible enough to reposition these resources as it sees fit in any stage of its life cycle. A new business model and structure must ensure that a more professional approach to hiring and retaining resources can be adopted in order to match skills and resources to the key tasks required to successfully deliver e-procurement across the public sector and elevate the expertise to a level capable of meeting the objectives. It should be able to offer rates that are comparable to those in the private sector and not be constrained by the relative inflexibility of civil service rules.
6. Governance and Management Considerations. For the PhilGEPS to be a more potent service to its users, government needs to adopt a more integrated approach to public procurement. This means streamlining the structure of the overall procurement organization and operating beyond its existing traditional government structure so that it can enable other procurement entities involved in the procurement process such as the PS, the GPPB, the Commission on Audit (COA), and the agency procuring units to work together more effectively in creating a more transparent and competitive government procurement process. The synergy that is created by the PhilGEPS and these institutions will result in better procurement policy making, more accurate and efficient budget projections or spend actions and more administrative cohesion. In this way, the new structure will also substantially contribute to the goals of good governance and national development.
One possibility of doing this is by considering integration of common services such as administration and finance, IT support, human resources etc. among the different procurement entity units. This will mean that the procurement entities such as PS-Common Use Supplies, PhilGEPS, logistics, importing and procurement administration (or agent) can be subsumed under one organization as different business units with common services structured in matrix type groups to support all the business units.
15 http://elibrary.judiciary.gov.ph/index10.php?doctype=Executive%20Orders&docid=12136853611830343075 16 http://www.gppb.gov.ph/laws_rules/laws/EO_322_2000.pdf 17 Executive Order (EO) 40 entitled Consolidating Procurement Rules and Procedures for all National Institutions and Requiring th Use of the Government Electronic Procurement System. 18 http://www.lawphil.net/statutes/repacts/ra2000/ra_8792_2000.html
7. Leadership. Political and institutional leadership are two of the most decisive factors in designing the model. Without adequate leadership, there is a high risk that the system will not be able to perform effectively or sustain its operations in the long run. As an independent business unit, the leadership role will be critical in making sure that the organization can work at the national and local levels towards achieving its vision. Given the inherent complexity and decentralized nature of the overall procurement structure in government, a strong leadership will be necessary to deal with policy and regulatory issues that may arise in implementation and to drive the change process that will be required by the system if it is to be institutionalized in government procurement.
8. Budgetary Implications. Sufficient financial resources are required for the system to be developed, maintained and sustained over the long run. The new business model will have to recognize that the system will require an average of Php 100 million annually for its operations and continuing development. Moreover, it must have a sustainable funding mechanism such as user fees or a regular government subsidy to support its existing operations and expansion. In addition, it will require some seed money equivalent to six months working capital to buffer its costs during the transition to a new structure.
9. Demands of the suppliers user base The demand for PhilGEPS and the success of its operations is dependent primarily on two factors - content and the PhilGEPS “brand”. Suppliers will patronize PhilGEPS if it can have real time access to bid opportunities and awards for all government agencies. Having information on all procurement opportunities will expand the suppliers’ customer base and supply chain networks, a key element for increased business. In this context, it will be important for PhilGEPS to make sure that 100% of agencies at the national and local levels register with the system and post all bid notices and awards. Suppliers will continue to use the PhilGEPS because the system is perceived to be transparent and reliable (“it can be trusted”). A new business model needs to ensure that the quality of the PhilGEPS service including utility of the functions, no or negligible down times, speed of access or connection and after service function such as preregistration requirements and service, the help desk and customer service related mechanisms would be continuously upgraded. The new model should allow PhilGEPS to constantly review and redefine its service level standards and immediately recalibrate when necessary. It should help improve its credibility and perceive independence – two factors that are critical for its sustainability in the long term.
10. Technological requirements of the system, including the increased availability of third party services There any many options available in the marketplace today that may be adapted to a government e-GP environment. The new model should facilitate greater access to these systems so that it can easily respond to new requirements, meet greater volumes and scale deployment of new functionalities. The organization should also have the flexibility to source its
requirements through third party services, shared service or any other manner of sourcing that is proven to be most efficient and effective.
11. Strategic organizational positioning and framework The success of the PhilGEPS to a large extent depends on its capability to function effectively and independently as a business unit. Heather Baser and Peter Morgan define this capacity as “the ability of an organization to create value and function as a resilient, strategic and autonomous entity”.19 A Capacity Analysis Matrix was developed for the PhilGEPS20 was used to review and validate the five core interrelated capacity elements essential for developing an effective business model. The Capacity Analysis Matrix is presented in ANNEX E. This matrix will be an additional filter in4 developing a business model and structure. In addition, a Business Model Canvas21 was prepared to describe and align the building blocks and core activities that are necessary in designing a good PhilGEPS business model. The Business Model Canvas is a strategic management tool that was prepared by Alexander Osterwalder. It provides an approach to, a process for and a way of thinking about the requirements of the PhilGEPS organization given the complexity of the institutional arrangement, the fragmented process and the numerous overlapping procurement rules and regulations that govern the procurement system. The Business Model Canvas for the PhilGEPS is shown in Table 5.
19 Heather Baser and Peter Morgan, Capacity, Change and Performance: Study report for the European Centre for Development Policy Management. 2008 20 ADB Technical Assistance Consultant’s Report: Case Study on the Philippine Government Electronic Procurement System (PhilGEPS). The Capacity Analysis Matrix , p21 21 The Business Model Canvas was initially proposed by Alexander Osterwalder based on his earlier work on Business Model Ontology