UNIVERSITY OF LJUBLJANA FACULTY OF ECONOMICS

and

INTERNATIONAL CENTRE FOR PROMOTION OF ENTERPRISES

(ICPE), LJUBLJANA

MASTER’S DEGREE THESIS

E-PROCUREMENT IN INDIA WITH A CASE STUDY ON MSTC LIMITED (A GOVERNMENT OF INDIA ENTERPRISE)

Ljubljana, September 2008 BHASKAR MAJUMDAR

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Author’s statement

I, Bhaskar Majumdar, hereby certify to be the author of this Master’s Degree thesis, which was written under mentorship of Prof. Dr. Aleš Groznik and in compliance with the Act of Authors’ and Related Rights- Para.1, Article 21. I herewith agree this thesis to be published on the website pages of ICPE and the Faculty of Economics.

BHASKAR MAJUMDAR Ljubljana, September 2008.

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ACKNOWLEDGEMENT

This thesis is the final part of the MBA program. There are many people whom I would like to thank for their active support and help in completing the thesis. First of all I would like to express my sincere gratitude to my mentor, Prof. Dr. Aleš Groznik, University Of Ljubljana, who had been guiding me since the inception of the thesis work. Without his constant guidance, encouragement, suggestions and ideas completion on this thesis would not have been possible. A special thank you goes to Mr. Priyadarshi Thakur, Director General, ICPE, who has constantly encouraged me. I like to thank all the teachers for support and encouragement throughout the entire MBA program. I would like to thank Mr. Aswin Shrestha, Program Director, ICPE, for his help in all kind of matters. I am grateful to the management of MSTC Limited for selecting me for this one year International MBA Program. I am fortunate enough to have helpful colleagues at MSTC Limited, who have supported and helped me during my stay at Ljubljana. I thank all of them. I am extremely grateful to my parents and my wife Mahua, son Richik, daughter Arundhoti, who have supported and encouraged me throughout the entire research process. Last but not the least I thank all the staff of Faculty of Economics, Ljubljana University and all the staff of the ICPE, Ljubljana. Ljubljana, September 2008 BHASKAR MAJUMDAR

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TABLE OF CONTENTS Sl. No.

Contents

Page

List of Tables III List of Figures III Acronyms IV1 INTRODUCTION 1.1 Description of the Problem 11.2 Purpose of the thesis 11.3 Research Objective 21.4 Goals of the thesis 21.5 Methods of the thesis 41.6 Background 51.7 Profile of MSTC Limited 71.8 Limitations 91.9 Chapter Scheme of the thesis 9 2 CONCEPTS AND DEFINITION OF E-PROCUREMENT 2.1 Concept of E-Business with Special Reference to Procurement 102.2 Definition of e-procurement and other related E-business 13 3 STUDY OF VARIOUS FACTORS 3.1 Purchase Processes of Government Industries in Practice 173.2 Study of Existing Tender System 18 3.2.1 Modes of tendering for placement of orders 19 3.2.2 Registration of Suppliers 20 3.2.3 Vendor Rating 20 3.2.4 Preparation of Tender Enquiry 20 3.2.5 Two Part Tendering 20 3.2.6 Three Part Tendering 20 3.2.7 Bank Guarantee 22 3.2.8 Evaluation of Tenders 223.3 E-Procurement Scenario of India with Special Reference to

Government Industries 23

4 RESEARCH METHODOLOGY 4.1 Introduction 304.2 Research Purpose 304.3 Study design 314.4 Research Strategy 314.5 Data Collection Method 324.6 Sample Selection 334.7 Analysis of Data 344.8 Quality Standards 35

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5 ANALYSIS OF RESPONSES 5.1 Introduction 365.2 Survey results 36 5.2.1 Analysis of Company profile 38 5.2.2 Analysis of Introduction to E-procurement 39 5.2.3 Benefits from E-procurement 39 5.2.4 Risk with E-procurement 445.3 Interpretation of data 45 5.3.1 Company Profile 45 5.3.2 Introduction to E-procurement 45 5.3.3 Benefits from E-procurement 46 5.3.4 Risk with E-Procurement 465.4 Cross Case Analysis 47 5.4.1 Company Profile 47 5.4.2 Introduction to E-procurement 47 5.4.3 Benefits from E-procurement 48 5.4.4 Risks with E-procurement 48 6 MODELS OF E-PROCUREMENT AND ROADMAP 6.1

Introduction 49

6.2 Case study on MSTC Limited and analysis 496.3 E-procurement Practices Concerning Organizational aspects 49 6.3.1 The User Registration Obligations 50 6.3.2 Special Admonitions for International Use 50 6.3.3 Integrity Pact 50 6.3.4 Buyer Specific Terms and Conditions 51 6.3.5 Seller Specific Terms and Conditions 536.4 E-procurement practices concerning procedural aspects 566.5 Technical aspects 586.6 Operational aspects 596.7 Model of E-procurement 616.8 Roadmap for E-procurement 616.9 Contemporary Studies 65 7 RECOMMENDATIONS AND CONCLUSION 7.1 Recommendations 697.2 Conclusion 69 REFERENCES AND SOURCES References 72 Sources 75 Appendices i

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LIST OF TABLES Sl. No. Title

Page

Table 3.1 Capability index 23Table 3.2 Government IT budgets for developed and developing

countries 24

Table 3.3 Traditional budgeting and budgeting for ICT investments 25Table 3.4 Information and communication technology situations in six

developing countries 26

Table 3.5 Correlation of Internet access and penetration 26Table 5.1 Analysis of company profile 38Table 5.2 Introduction to e-procurement 40Table 5.3 Benefits from e-procurement 42Table 5.4 Responses on risk with e-procurement 44

LIST OF FIGURES Sl. No. Title

Page

Figure 2.1 The Dimensions of Electronic Commerce 11Figure 2.2 Electronics Commerce Frame work 12Figure 3.1 Flow chart of purchase activity 21

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ACRONYMS BSP Bhilai Steel Plant GOI Government Of India BS British Standards CMO Central Marketing Organization SMS Short Message Service B2B Business To Business B2C Business To Consumer BG Bank Guarantee BIS Bureau Of Indian Standards CA Certification Authority CIL Coal India Limited CPV Common Procurement Vocabulary CS Computer Science CVC Central Vigilance Commission Of India

DGS&D Director General Supply And Disposal DIN Deutsches Institut Fur Normung DPS Dynamic Purchasing Systems DRP Disaster Recovery Plan EC European Commission EDI Electronic Data Interchange EFT Electronic Fund Transfer EFT Electronic Fund Transfer EMD Earnest Money Deposit e-RA Electronic Reverse Auction ERP Enterprise Resource Planning EU European Union FAQ Frequently Asked Questions GFR General Financial Rules GUI Graphical User Interface HOD Head Of Department ICT Information And Communications Technology IS Information Systems

ISSAI Iron And Steel Scrap Association Of India ISSAI Iron And Steel Scrap Association Of India IT Information Technology

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MM Materials Management MOIL Manganese Ore (India) Limited MS Management Science NIT Notice Inviting Tender NSIC National Small Industries Corporation OECD Organization For Economic Co-Operation And Development OGC Office Of Government Commerce (UK Administration) OLRA Online Reverse Auction OR Operations Research OSS Open Source Software P&M Plant & Machinery PSU Public Sector Undertaking Of India Q&A Questions & Answers RFQ Request For Quote SAIL Steel Authority Of India SD Security Deposit SSL Secure Sockets Layer VDE Violaxanthin De-Epoxidase

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1 INTRODUCTION 1.1 Description of the Problem

Under the twin pressure of globalization and liberalization, Indian industries have been on a relentless drive for cost reduction. Supply-chain management has been globally recognized as one of the areas, which can contribute effectively to cost reduction. E-procurement applies user-friendly e-commerce technology to simplify and streamline the purchase process and to integrate buyer and suppliers business processes. It is an efficient process, which eliminates paper work and human intervention and aims to eliminate any possibility of irregularities. This also enables total transparency in the system. Another important aspect that the government and PSU’s need to look into is driving organizational compliance with negotiated contracts. This would enable governments to keep and sustain their savings. Salient features of Public Procurement:

• It relates to the expenditure of public money. • It adheres to the principles of equity, fairness, and natural justice. • It adheres to the Law/Statute viz. Indian Contract Act 1872 & Sales of Goods Act

1930. • It adheres to the prescribed rules including GFR and procedures issued by

Government from time to time. • It follows well-defined authority with delegation of powers & responsibility with

accountability to Public/state. • It discharges all functions in most efficient, fair, just, economic and transparent

manner following all prescribed law, rules, norms and procedures within jurisdiction. • It is possible for 100% Audit including concurrent audit on regular basis. It is also

subject to scrutiny by vigilance through Central Vigilance Commission of India (CVC) as well as by other investigating agencies.

• It is possible to answer to Public/State, Parliament/Legislature & court of law. 1.2 Purpose of the thesis The purpose of the thesis is to analyze various aspects of e-procurement and the importance of the holistic treatment of business process renovation in order to facilitate the transition towards e-business and implementation of e-procurement. Key problems of adoption of e-procurement, in government of India industries. How to apply the various e-procurement applications in a sound way that reinforces the procurement

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practice and sourcing strategy of a company. Thus there is a demand for an investigation like this Master thesis to scrutinize the present position of e-procurement in government of India and determine how e-procurement applications can be adopted in government industries and improve procurement performance. This yields the research problem. How can e-procurement applications be adopted in government industries of India to support the different procurement tasks in a way that improves procurement performance. 1.3 Research Objective The objectives of this research are to:

• Understand E-procurement and its commercial potential. • Identify organization’s objectives for adopting E-commerce. • Understand technical issues related to E-procurement. • Undertake a case study on e-procurement implementation in MSTC Limited (a

Government of India Enterprise). • Find out the precautionary measures to be adopted. Security features to be adopted for

public transactions. • Find out the growth of e-procurement. • Find out the volume of purchase through e-procurement. • To study cost reduction in purchase price through e-procurement.

The study will include detailed study of the followings with special reference to the organization MSTC Limited (A Government of India Enterprise):

• Present business scenario. • Purchase processes. • Materials used. • Life cycle analysis

1.4 Goals of the thesis Central issues in the research problem are:

• Understanding E-procurement and its commercial potential • Identify organization’s objectives for adopting E-commerce • Technical issues related to E-procurement • Undertake a case study on e-procurement implementation in MSTC LTD. (a

Government of India Enterprise) • Find out the precautionary measures and security features to be adopted for public

transactions • Find out the present position and growth of e-procurement • Benefits specially cost reduction in purchase price through e-procurement.

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Here it is necessary to carry out in-depth study to identify organization’s objectives for adopting E-commerce. Here in this case why government organizations in India would adopt e-commerce. From the publications available it is seen that answer to this question is different for government department and government industries. From the government department side if one sees the Government of India Office Memorandum No. 8 (5)/EII (A)/2006 dated January 10, 2007, it speaks very positively regarding implementation of e-procurement. It speaks benefit of as e-procurement system increases transparency and probity by keeping a traceable electronic record of transactions online. E-procurement systems help organizations consolidate data on procurement of various goods directly or indirectly. These data enable them to go in for bulk purchases and negotiate with suppliers for greater discounts. Instead of 20 different independent units of the department buying a particular product in small numbers, a centralized and well-networked procurement system in the organization would help track the periodic demand for the product and bulk purchase orders can be made accordingly. If the organization can easily demonstrate to the supplier that there is a consistent demand, it can successfully leverage its purchasing orders. Moreover, by channeling all orders supplies through a specified route, the purchasing organization can reduce the number of transaction needs for these items. It also speaks value proposition of an e-procurement solution for a government department ensures economy and efficiency in procurement- Reduction in costs, (which could go up to around 20-25%), can be accomplished through efficient processes like expansion of supplier base, better price negotiation and shorter procurement cycle, thus reducing inventories. Through an easy and effective reporting and analysis tools, one can improve efficiency in report maintenance, check maverick buying, and create seamless data integration. Clarity of specifications and adherence to time frame are other benefits. It promotes competition among bidders, provides equitable treatment of bidders. The system promotes fairness and transparency in bidding offers (the last two assume great importance in public organization as measure to prevent corruption). This also states that e-procurement holds the potential to free the civil servant from endless paper work and familiar worries relating to inadvertent non-compliance to above requirements. The major drawback in the manual system are: possible discrimination in issue of tender document, possible physical threats to bidders during filling of bids, cartel formation - suppressed competition, pressures on department officials, inordinate delays in tender finalization, high degree of physical interface with the government staff for obtaining tender document, clarification, submission of bids and tender opening etc.; inadequate transparency and the lack of Management Information System (MIS) reports on past procurements (egovonline.net) For government industries it can be seen that immediate after passage of IT Act-2000 few industries have taken initiative for implementation for e-procurement. One such industry is SAIL (Steel Authority of India Limited). From the strategic approach, SAIL has adopted the aggressive strategy. They were the first movers heading for the adoption of a technology and now are a good example for adoption of e-procurement solutions (SAIL annual report 2006-07). SAIL aims to enhance its growth capacity, facilitate links for value addition, and sustain

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higher levels of cost and quality competitiveness by adopting new technologies or linking advance technology. The online bidding process is transparent. The cost benefits are directly related to the operating services like ordering and streamlining the administrative activities and helpful in avoiding duplication. High volume buying is made easy, more options are available; negotiation and the most suitable price are few of the benefits attached to e-procurement. Reduction in fixed cost, reduction in manpower cost, financial charges, reduction in variable cost through technological interventions are also established as factors for adopting e-procurement in SAIL. Apart from decline in procurement cost, e-procurement has led to a substantial reduction in the lead-time for purchase of materials, by simplifying paperwork and procedures, using the power of internet to building up new buyer-supplier relationship. The most crucial non-cost benefit is that it restricts the maverick spending and streamlines the entire purchasing system and supplies. The entire of purchase process time is reduced. SAIL aims to create a seamless interface with its suppliers and end-users. There are mostly tangible and non-tangible cost benefits that can be made available to a company after the implementation of e-procurement. Effects of e-procurement can also be felt on the internal organizational relationships by savings from investments. Some of the most important non tangible benefits are process efficiencies where the burden of paperwork and other formalities are reduced to minimum, transparency in the purchase process, and increase in output per employee, diminution of the procurement cycle, better spend management and optimal inventory level. Strategic benefits identified are improved and strengthened supplier relationships, standardization of best practices, increased responsiveness to customer demands (National Thermal Power Corporation Limited, 2006). So there are two streams of approach. While government departments it is under national e-governance plan and for government industries it is a question to remain competitive and survival. The way to reach the objective is to address the theoretical foundation for procurement and e-business value creation mechanisms. These two areas will form a framework that will be used for exploring how different e-procurement applications work, and used as a basis for describing, positioning, and analyzing e-procurement literature and case studies. The analysis of the case studies will lead to an explanation of how the procurement performance can be improved by the use of e-procurement applications in the government of India industries. 1.5 Methods of the thesis The methodology of the thesis will be of systematic approaches to data collection. To begin with, exploratory research will be carried out to find out what is happening; to seek new insights; to ask questions and to assess phenomenon in a new light. It will be particularly useful in deeper understanding of the problem. The focus initially will be detailed study of

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factors regarding implementation of e-procurement and will be narrowed down progressively to the factors that are relevant to the India government organization. The first step is to develop a theoretical framework based on detailed literature survey on the subject with the help of relevant books, journals, various web sites related to subject. The study will be based on both primary and secondary data. Secondary data will be Primary data will be collected for the case study on e-procurement from MSTC Limited (a Government of India Enterprise) engaged in e-procurement of goods and services for major industries of India. These data are specific in nature and are important business document. Accordingly, these are to be collected from the key personnel of e-commerce department. In addition, data can be collected from IT department, Operation department etc. 1.6 Background Governments worldwide are faced with the challenge of transformation and the need to modernize administrative practices and management systems. Under the twin pressure of globalization and liberalization, Indian industries have been on a relentless drive for cost reduction. Supply-chain management has been globally recognized as one of the areas, which can contribute effectively to cost reduction. Recently, the government industries of India have began to recognize the potential opportunities offered by information and communications technology (ICT) and e-business models to fit with citizens’ demands, to offer better services to citizens and to increase efficiency by streamlining internal processes. As the world's economy becomes increasingly competitive, sustaining competitiveness and the resulting profitability depends less on the ability to raise prices. Those competitive dimensions cannot be delivered without an effectively managed supply chain. Firms with the most competitive supply chains are and will continue to be the big winners in contemporary business. It is electronic procurement, the productive use of the Internet to improve the effectiveness and efficiency of the supply end of the supply chain (Presutti, 2003). Information and Communications Technology (ICT) causes a “paradigm shift” introducing “the age of network intelligence” reinventing businesses, governments, and individuals (Tavi, 2008). While previous generations of e-procurement laid the groundwork for the new technologies available today, they lacked the flexibility and functionality to provide the true benefits that companies require. The first-generation solutions were targeted strictly at procurement professionals and provided limited workflow automation of purchasing processes. These tools were built just to manage predetermined transactions, making them extremely inflexible and difficult to use, even for procurement professionals. The second- generation e-procurement solutions, which leveraged Web-based technology, aimed to extend their reach to end users, but they still lacked the flexibility and ease of use needed to attract broad usage.

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By comparison, third-generation e-procurement technology being implemented today delivers the ease and flexibility to stimulate use on every desktop throughout an organization. With pervasive deployment, organizations can increase control, and maximize cost savings and efficiencies. For example, businesses can truly understand how their actual spending being invoiced compares to their procurement plan. With this information, spend analysis can be part of daily operations and govern organizational accountability, ensuring that a company is fiscally prudent and spending according to its values. A key characteristic of third-generation solutions is visibility. While the first and second generations of e-procurement systems offered separate solutions for different business functions, such as procurement and finance, the new generation is focused on building a value-based supply chain where all relevant information feeds into one system, driving efficiency. Third-generation technology is business-rules driven based on the policies and priorities of the organization. Business rules might include buying from vendors who maintain certain criteria, such as green and other corporate responsibility values; compliance with bookkeeping standards, legislation, contracts, and best practices; or real-time monitoring of spending compared to budget based on the procurement plan. In a typical large PSU (Public Sector Undertaking) and government department, procurement runs into billion of dollars and complexity is inherent in the procurement process. What is to be procured is wholly dependent on the nature of its business, and therefore varies from enterprise to enterprise. In today’s scenario, adopting an effective cost saving mechanism is integral to any company’s continued existence. Companies across different sectors of industry have been trying to simplify this extremely crucial aspect of their business, in extracting optimal quality, and timely, speedy transactions at the minimum possible cost (Menon, 2004). The Internet has brought about many changes in business, economics, information and entertainment. Now transfer of information has no geographical and time barrier. Virtually all the manufacturers, suppliers, distributors, customers all across the world are now connected to each other through World Wide Web (www). Activities and transactions related to buying, selling, etc. could now be brought under the realm of internet. The pressure on each business enterprise now is to plan transformation to e-com paradigm, to what extent, in how many stages and at what speed. In the Internet based system, not only transparency can be ensured but everything is also on record (Narayana, 2004). As Central Government Departments and Public Sector Enterprises are spending public money in the area of purchase, contracting, etc. it is, therefore, the right of the public to have access to the information desired by them. Therefore, transparency is desirable at a place of public use.

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Another important aspect that the government industries and Public Sector Undertaking of India (PSU) need to look into is driving organizational compliance with negotiated contracts. This would enable government to keep and sustain their savings. Salient features of Public Procurement in India are that it relates to the expenditure of public money. It has to adhere to the principles of equity, fairness, and natural justice. It is to as per the Law/Statute viz. Indian Contract Act 1872 & Sales of Goods Act 1930. It has also to adhere to the prescribed rules including General Financial Rules (GFR) and procedures issued by Government from time to time. It has to follow well-defined authority with delegation of powers & responsibility with accountability to Public/state. It also has to discharge all functions in most efficient, fair, just, economic and transparent manner following all prescribed law, rules, norms and procedures within jurisdiction. It is subject to 100% Audit including concurrent audit on regular basis. It is also subject to scrutiny by vigilance through Central Vigilance Commission of India (CVC) as well as by other investigating agencies of the state. In addition, the industries are answerable to Public/State, parliament/legislature & court of law (DGS&D). Government must implement a solution that shortens the procurement cycle without paralyzing other functions. This e-procurement process recommendation should improve the procurement cycle without upsetting the government policies and procedures necessary to the successful governance of the populace and businesses. Government to Business consists of the electronic interactions between Government agencies and private businesses. It allows e-transaction initiatives such as e-Procurement and the development of an electronic marketplace for government. Companies everywhere are conducting business-to-business e-commerce in order to lower their costs and improve inventory control. The opportunity to conduct online transactions with government reduces red tape and simplifies regulatory processes, therefore helping businesses to become more competitive. One of the main challenges for an e-Procurement project is the establishment of an appropriate and context tailored strategy. Every project or initiative needs to be rooted in a very careful, analytical, and dynamic strategy. This seems to be a very difficult task, requiring a focus on many aspects and processes, a holistic vision, long-term focus and objectives (Menon, 2004). 1.7 Profile of MSTC Limited MSTC Limited (earlier Metal Scrap Trade Corporation Limited) is a PSU (Public Sector Undertaking) under the administrative control of the Ministry of Steel, Government of India. The company was set up in 1964 to act as a regulating authority for export of ferrous scrap. Government of India, Members of Steel Arc Furnace Association and members of ISSAI (Iron and Steel Scrap Association of India) had made with the investment.

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MSTC became a subsidiary of Steel Authority of India Limited (SAIL) in 1974. In 1982, it got delinked from SAIL and became an independent company under Ministry of Steel. It was a canalizing agency for import of ferrous scrap until 1992. MSTC has two major portfolios of business. One is known as the Marketing Division, which looks after the procurement of industrial raw materials in bulk for its Principals (for the organizations for whom imports are made). The sourcing is done either from foreign manufacturers / traders or from domestic producers. The items that are procured include HMS, HR Coil, Billets, Wire Rods, LAM Coke, Coking coal, Naphtha etc. that are mainly consumed by the steel industry in the country. The second portfolio provides a virtual marketplace for domestic sellers and buyers to do business in metal scrap (ferrous/non-ferrous), surplus stores, machineries, obsolete spares, vehicles, and plants etc. The methodology adopted includes open tender, public auction and e-auction. Of late, MSTC has emerged as a major player in the country for promoting e-commerce. Its e-auction portal has become popular tools for transacting business over the Internet in a transparent manner. E-procurement applies user-friendly e-commerce technology to simplify and streamline the purchase process and to integrate buyer and suppliers business processes. Presently, MSTC is offering four models for e-procurement to fulfill the various requirements of different buyers.

• E-tender: In electronic tender buyers can decide eligibility of vendor. Eligible vendors can quote from any place over internet. Buyer has the option of obtaining Techno Commercial Bid manually or over internet. The price bids will be seen only at the appointed hour.

• E-tender with multiple bids: Same as above. In addition the vendors may revise their

Price Bid any number of time before the closing time of Price Bid. • Reverse e-auction with price bid: This is reverse of forward e-auction. Buyers can

decide the eligibility criteria of vendors. Techno Commercial Bid can be obtained manually or over internet. Only the vendors fulfilling the Techno commercial criteria can participate in Price Bidding, which is progressively lowered by the bidders.

• Reverse e-auction with quantity and Price Bidding: Same as above. In addition to

price, vendors can bid the quantity they desire to supply (MSTC e-commerce website).

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1.8 Limitations Due to time constraint author has chosen a limited research area for this thesis. This thesis adheres to the procurement domain within the field of government of India industries. The issue of e-procurement in government industries is investigated from a procurement position. Buying for private use is quite different from buying for business use. Aspects such as image, brand, and reputation are more profound in B2C than in B2B. Consumer behavior is not the focus of this thesis and will therefore not be included at all. In this thesis, focus will be on the upstream side of government of India companies towards the supplier side. The development of software and communication tools is rapid and forever ongoing. It is not possible to keep up with the latest developments from the software vendors. Thus, this research has more of a conceptual approach to information technology and does not focus on the precise technical descriptions of the various IT applications. 1.9 Chapter Scheme of the thesis This thesis is divided into seven chapters. In this first chapter, an introduction to the related field is introduced, followed by research purpose and research problem. This chapter also contains on overview of MSTC Limited. The second chapter reader is provided with a literature review of previous research conducted within the area of the overall purpose, which serve as theories for the study. In the third chapter, describes present scenario of procurement in the government industries of India. In the forth chapter methodology will be discussed. In the fifth chapter, the author will present the empirical data. In chapter six describes findings. Theories will be examined, in order to conduct an analysis. In chapter seven recommendation of the author from the study is presented and finally conclusion.

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2 CONCEPTS AND DEFINITION OF E-PROCUREMENT In this chapter author will discuss various definitions of e-procurement. Concept of e-procurement discussed with reference to literature. 2.1 Concept of E-Business with Special Reference to Procurement The history of electronic commerce is a history of how Information Technology has transformed business processes. Some authors will track back the history of electronics commerce to the invention of the telephone. EDI (Electronic Data Interchange) is widely viewed as the beginning of electronic commerce if one considers electronic commerce as the networking of business communities and digitalization of business information. Electronic commerce applications were first developed in early 1970s with innovation such as Electronic Fund Transfer (EFT). The Internet was conceived in 1969, when the Advanced Research Projects Agency (a Department of Defense organization) funded research of computer networking. The internet began life as an experiment by US government in 1969 and its initial users were largely technical audience of government agencies and academic researchers and scientists. When the internet commercialized and users began flocking to participate in the World Wide Web in the early 1990s, the term electronic commerce was coined (Turban et al., 2004). The web became a popular mainstream medium (perceived as the fourth mainstream medium in addition to print, radio, and TV) in a speed, which had never been seen before. Electronics Commerce (EC) describes process of buying, selling, transforming, or exchanging products, services or information via computer networks including internet (Turban et al., 2004). Electronics commerce can be of several forms depending on the degree of digitalization (the transformation from physical to digital) of the product/service sold, process and delivery agent. (Choi as cited in Kao and Decau, 2001) created a framework shown in Figure 2.1 explains the possible combination of these three dimensions. EC field is diversified one, involving many activities, organizational units, and technologies. Therefore, a framework that describes its content is useful. Figure 2.2 introduces one such framework (Turban et al., 2004). With the increasing use of the Internet, new models of commercial interaction are developing as businesses and consumers participate in an electronic marketplace and reap the resultant benefits (Business America, 1998). Definitions of electronic commerce vary considerably, but generally, electronic commerce refers to all forms of commercial transactions involving organizations and individuals that are based upon the processing and transmission of digitized data, including text, sound, and visual images. It also refers to the effects that the electronic exchange of commercial information may have on the institutions and processes that support and govern commercial activities. Another classification of electronic commerce is where the

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broadest definition includes electronic fund transfers and credit card transactions, and the infrastructure needed to support electronic commerce. The narrower definitions include business-to-business electronic transactions, business-to-consumer transactions, and business-to-consumer where the transaction includes an electronic payment of some kind. In this thesis Business-to-Business e-commerce will be discussed.

Figure 2.1: The Dimensions of Electronic Commerce

Source: Kao and Decau, 2001 In another definition EC defined electronic commerce is about doing business electronically. It is based on the electronic processing and transmission of data, including text, sound, and video. It encompasses many diverse activities including electronic trading of goods and services, online delivery of digital content, electronic fund transfers, electronic share trading, electronic bills of lading, commercial auctions, collaborative design and engineering, online sourcing, public procurement, direct consumer marketing, and after-sales service. It involves products and services, traditional activities and new activities like virtual malls (European Commission, 1997). A common classification of e-commerce is by nature of transaction or the relationship among participants (Turban et al., 2004). Our discussion will be limited to B2B electronic business with special emphasis on scope of procurement of India government owned industries using internet. The e-Procurement process is unique to government. While corporate purchasing has become supplier management and driven by business partnerships, government procurement remains

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Figure 2.2: Electronics Commerce Frame work

Source: Turban et al., 2004.

dedicated to leveling the playing field between competitors by use of the sealed competitive bidding and awarding bids to the lowest bidder meeting specification. Government records are open and the prices revealed in the public arena. Thus, under public scrutiny, public purchasers must attempt to conserve the taxpayer’s money in an open arena. Fortune 500 companies boast of maintaining a key supplier base of 10-15 first and secondary suppliers where as Government has much more as registered vendors and many more that bid, but never make it to the vendor list. Given this divergence, a Government has to adopt e-procurement solutions that take into account the above factors. Government must forge its own model of e-procurement and, by doing so; encourage the competition so heartily sought. Government must create a model that pays for itself, thus maximizing the taxpayer contribution without damaging small and emerging businesses (Menon, 2004).

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This e-procurement model should improve the procurement cycle without upsetting the government policies and procedures necessary to the successful governance of the populace and businesses. Companies everywhere are conducting business-to-business e-commerce in order to lower their costs and improve inventory control. Government industries also should conduct online transactions, which reduces red tape and simplifies regulatory processes, therefore helping businesses to become more competitive (Menon, 2004). With this background, government industries started thinking e-procurement as viable alternative to the traditional tender based procurement system, which may improve the procurement system retaining the spirit of equality, economy, and transparency. 2.2 Definition of E-procurement and other related E-business Different authors defined e-procurement differently. As per Vaidya et al.(2006) the terms "e-Procurement" and "e-Purchasing" have been used synonymously in many jurisdictions in an attempt to prove their involvement in the e-Commerce revolution (MacManus, 2002), the term "purchasing" has a narrower scope. e-Procurement refers to the use of Internet-based (integrated) information and communication technologies (ICT) to carry out individual or all stages of the procurement process including search, sourcing, negotiation, ordering, receipt, and post-purchase review (Croom & Brandon-Jones, 2004). While there are various forms of e-Procurement those concentrate on one or many stages of the procurement process such as e-Tendering, e-Marketplace, e-Auction/Reverse Auction, and e-Catalogue/Purchasing, e-Procurement can be viewed more broadly as an end-to-end solution that integrates and streamlines many procurement processes throughout the organization. Although the term end-to-end e-Procurement is popular, industry and academic analysts indicate that this ideal model is rarely achieved and e-Procurement, implementations generally involve a mixture of different models. End-to-end solutions offer robust and usually rich functionality, they are designed specifically to excel in just one or a few applications and thus pose various challenges. While e-commerce is simply a transaction conducted electronically, e-Procurement is the automation of many procurement processes via electronic systems, especially the Internet. Over the last 40 years, while private and public sector organizations have been utilizing Information Technology (IT) systems to streamline and automate their purchasing and other processes, it is only in the last decade e-Procurement systems have attracted attention. There is no doubt that the use of the Internet in e-Procurement provides several advantages over earlier inter-organizational tools (Dai & Kauffman, 2001; Koorn, Smith & Mueller, 2001). For example, Electronic Data Interchange has been providing automated purchasing transactions between buyers and their suppliers since it was launched in the 1960s. Enterprise Resource Planning (ERP) followed in the 1970s, and then came the commercial use of the Internet in 1980s. It was only in the 1990s that the World Wide Web - the multimedia capability of the Internet - became widely enabled and provided the essential resource for the automation of procurement (OGC, 2002).

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According to Koorn, Smith, and Mueller (2001), there are three types of e-Procurement Systems: Buyer e-Procurement Systems, Seller eProcurement Systems and Online Intermediaries. As indicated this paper is focused predominantly on Buyer e-Procurement Systems. This paper will not refer to the end-to-end eProcurement system in order to avoid confusion and also will not consider general email, electronic fax, voice communications, or non-internet/Web based approaches, which are regarded as partial traditional e-Procurement solutions. Some of the commonly used tools in the public sector are e Tendering, e-RFQ (Request for Quote), e-Auctions, e-Catalogues, and e Invoicing. As per Rothkopf and Whinston (2007) there has been a notably growing interest for corporations in using auctions for supply chain procurement (Kouvelis, Chambers, and Wang, 2006). Auctions have been a common market mechanism for many centuries, although systematic academic examination began only several decades ago. Researchers and practitioners are quickly recognizing the potential benefits of advanced auction techniques. Package bidding is of particular interest in supply chain procurement, given its potential to handle efficiently multiple component auctions. Many firms are currently conducting online auctions for the procurement of raw materials, transportation lanes, and other services (Anandalingam, Day, and Raghavan, 2005). Procurement auctions involve a single buyer and several suppliers or sellers. Procurement auctions reverse the traditional auction setting, in which multiple buyers bid on a product sold by one seller. Procurement auctions raise buyers' saving advantage through increased price competition. Nevertheless, sellers' efficiency can be significantly improved through bundle bidding, which may allow volume discounts and assure complementarily of products and services (Anandalingam, Day, and Raghavan, 2005). There is a recent growing interest in studying procurement auctions, particularly in the online auction context, by scholars in economics, Operations Research (OR), Management Science (MS), Information Systems (IS), and Computer Science (CS). Inefficiencies may arise from two aspects. Buyers cannot observe bidders' costs, and therefore do not have accurate information about who is the highest quality seller. As per Construction Management Association of America, online reverse auction (OLRA) method has become a popular tool for purchasing commodities in the last decade. Online reverse auctions, also known as electronic reverse auctions, e-bidding, and reverse bidding. An e-RA (electronic reverse auction) is an online, real-time dynamic auction between a buying organization and a group of pre-qualified suppliers who compete against each other to win the business to supply goods or services that have clearly defined specifications for design, quantity, quality, delivery, and related terms and conditions. These suppliers compete by bidding against each other online over the Internet using specialized software by submitting successively lower priced bids during a scheduled time period. This time period is usually only about an hour, but multiple, brief extensions are usually allowed if bidders are

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still active at the end of the initial time period. Two issues used in this definition characterize the OLRA technique. The first issue is the area of application and the procedure defined as to win the business to supply goods or services that have clearly defined specifications for design, quantity, quality, delivery, and related terms and conditions. The definition does not distinguish between procurement of goods and of services. This approach of combining goods and services can be observed through the bibliography on both reporting of savings and technology application. The second issue is the application of OLRA services defined as compete by bidding against each other online over the Internet using specialized software. The specialized software and internet services are defined as a requirement, which in fact is the driving force behind the OLRA applications. E-procurement is the purchase of goods or services electronically and is an integral part of an overall strategic procurement plan in the current business environment. The plan includes, but is not limited to strategic sourcing or supplier rationalization, supply chain automation, and participation in one or more market places. The commodities purchased can be operational resources (non-production) or production resources (raw materials). Another type of auction used in e-procurement is Dutch auction, a type of forward auction, in which a seller of a large block of items seeks bids within a specified price range for the whole block. The auction begins with a high starting price, which is progressively lowered until the seller finds an acceptable bid. Vickrey auction is another type: Type of sealed bid auction where the successful buyer or seller pays only the second-best price. This mechanism serves as an incentive for the potential buyer to offer a value that is the true value of the item in his or her judgment. It was invented by the Canadian Nobel-laureate economist William Vickrey. It is also called second bid auction or second price auction (BusinessDictionary.com). According to Wilson (2002), e-procurement as the amalgamation of sales and purchasing business models and calls for differentiating based on application and functions. The first application is the “buy-side procurement” which refers to one organization using electronic systems to purchase goods. The second application is sell-side procurement. This term is used to describe how one supplier sells to a number of buying organizations using electronic systems such as, using e-procurement systems and e-commerce technology. This model is also referred to as e-sales. The third application is e-marketplace and trading hubs, which are a combination of industry consortium and the trading exchanges. The marketplace model brings together many different buying and selling organizations in one trading community. However, the second and third types are not discussed in this thesis. According to Grackin (2001), to simplify the different e-procurement models, there are two basic co-existent models that many companies consider when contemplating an e-procurement strategy. First is the “enterprise solution” model in which a company can build direct electronic links with its trading partners. A company can create a solution (with the help of packaged applications), which could both direct and indirect procurement processes.

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The second model by is an e-market place solutions typically created by an independent dot-com, or industry consortia. This model is focused on procurement of indirect goods such as office supplies, building broad participation, and providing aggregate view of the available products. It also represents new channel of the sell-side and alternative source for the buy-side i.e. potential to procure commodities at lower prices (Grackin, 2001). However, purchase volumes of Indian government industries are billions of dollars and it is not likely that industries would participate in e-market. Rather individual industries are inviting bids from suppliers. E-procurement, a new avenue for buying direct and indirect goods and services, is an effective procurement system, making waves in purchasing circles. The service provider plays a crucial role in offering sourcing and procuring solutions that satisfy customer needs and provide ample value addition to the service provided. E-procurement Solution would help Government capture and settle all spend and readily obtain global user and supplier adoption. This improves process efficiency, increases compliance, and garners sustainable savings across the enterprise (Menon, 2004). Under the twin pressure of globalization and liberalization, Indian Industry has been on a relentless drive for cost reduction (MSTC e-commerce website). Supply-chain management has been globally recognized as one of the areas, which can contribute effectively to cost reduction. Customers, citizens, and businesses are faced every day with new innovative e-business and e-commerce models implemented by the private sector and made possible by ICT (Information and Communication Technologies) tools and applications. The advent of the Internet, digital connectivity, the explosion and use of e-commerce and e-business models in the private sectors are pressuring the government sectors to rethink hierarchical, bureaucratic organizational models. Citizens are referred as customers for governments, since governments need to empower rather than serve, to shift from hierarchy to teamwork and participation, to be mission oriented and customer focused, and to focus on prevention rather than cure. Governments industries are faced with the challenge of transformation and the need to modernize administrative practices and management systems. Recently, the public sector has began to recognize the potential opportunities offered by ICT and e-business models to fit with citizens’ demands, to offer better services to citizens and to increase efficiency by streamlining internal processes. ICT causes a paradigm shift introducing the age of network intelligence, reinventing businesses, governments and individuals. Paradigm shifts prevail in the public sector too. The traditional bureaucratic paradigm, characterized by internal productive efficiency, functional rationality, departmentalization, hierarchical control, and rule-based management is being replaced by competitive, knowledge based economy requirements, such as flexibility, network organization, vertical/horizontal integration, innovative entrepreneurship, organization learning, speed up in service delivery, and a customer driven strategy towards procurement functions. These new paradigms thrust the shift toward e-Procurement paradigm, which emphasizes coordinated network building, external collaboration, and customer services.

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3 STUDY OF VARIOUS FACTORS

Purchase process of the industries owned by India government, are guided by purchase policy of government. It has to adhere to the principles of equity, fairness, and natural justice. It has to act as per the Law. It has also to adhere to the prescribed rules and procedures issued by government from time to time. Technicality of Purchase procedure is discussed in detail in this chapter. 3.1 Purchase Processes of Government Industries in Practice

The job of purchase department in a government industry is to provide, to the user departments right material at the right time in right quantity of right quality at right price from the right source. To meet these objectives the activities undertaken include selection of sources of supply, finalization of terms of purchase, placement of purchase orders, follow up, maintenance of relations with vendors, approval of payments to vendors, evaluating, rating and developing vendors. The aim of the purchase process is for effective and timely procurement of various goods and services in a fair, transparent, and objective manner. Purchase policies are framed as per the requirement of the company and in accordance of the industry scenario in which the industry belongs. Purchase policy is translated in to purchase manual, which guides the purchase process of the company. As per the policy every government organization need to have well documented policy guidelines in to execute the procurement activity in a uniform and well-coordinated manner with least time and cost overruns cannot be overemphasized. This is a very important document required to guide officials in their day-to-day work. It is, therefore, essential that a codified purchase manual containing the detailed purchase procedures, guidelines, and also proper delegation of power is prepared by all the organizations so that there is a systematic and uniform approach in decision making. Such an integrated approach is not only likely to put a cap on corruption but would also ensure smoother and faster decision-making (MOIL purchase manual). The provisioning of stores needs to be done with utmost care to avoid any surplus purchases. The equipment to be purchased should conform to the latest specifications and technology available in the market. In order to give equal opportunity to all the bidders and to maintain the sanctity of tendering system, it is of paramount importance that any change in the tender terms & conditions, specifications and tender opening date etc. is notified to all the bidders, sufficiently in advance of the revised tender opening date. The specific loading criteria should be incorporated in the tender enquiry in unequivocal terms and evaluation of offers should be done on the basis of laid down criteria so that the sanctity and transparency in the tender system could be maintained. It should be ensured that under no circumstances, a bidder is counter offered a rate higher than what has been quoted by him. Techno-commercial evaluation of offers should be carried out as per laid down criteria in a transparent manner. Once it has been established that the offers meet the laid down specifications, there should not be any further ‘grading’ or ‘pick and choose’. The contract needs to be awarded to the lowest bidder meeting the laid down specifications.

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In order to safeguard the government interest, it would be appropriate to take reasonable amount of performance Bank Guarantee (BG) valid up to warranty period for due performance of the contract. The genuinety and validity of the Bank Guarantees needs to be carefully checked and monitored and whenever extension in the delivery period is granted, the validity of the Bank Guarantee should also be appropriately got extended so as to protect the government interest. The genuineness of the BGs and the wordings should be checked from the issuing bank to be in order without fail. The payment terms should be defined unequivocally and should not be changed after award of the contract. As far as possible, the payments terms should be so structured that the payments made to the contractors are linked and are commensurate with the actual progress supplies / installation / commissioning. It is very important to establish the reasonableness of prices on the basis of estimated rates, prevailing market rates, last purchase prices, economic indices of the raw material / labor, other input costs and intrinsic value etc., before award of the contract. After conclusion of the contract, any relaxation in the contract terms / specifications should be severely discouraged. However, in exceptional cases where the modifications/amendments are considered to be absolutely essential, the same should be allowed after taking into account the financial implications for the same. The delivery period should be extended on bonafide request and not in a routine and casual manner. In case of delay in supplies by the supplier, the liquidated damages should be recovered. In a nutshell, there is a need to discipline the suppliers so that the non-performers could be weeded out and the suppliers who can be relied upon with consistent performance, in terms of quality and delivery schedule are encouraged (Central Vigilance Commission report). 3.2 Study of Existing Tender System While studying the existing tender system of government industries it is considered to study one or two established company (a company that has spread across India and have big purchase department and also a wide range of items in their purchase list). The author finds that Coal India Limited and Manganese Ore India Limited qualify these criteria. Additionally these companies are purchasing mining items also in addition to normal items purchased by other government industries. Both are leading government companies. Coal India Limited is one of the largest coal producing companies in the world. The company's operations include 470 underground and open cast mines, 20 beneficiation plants, and one coal carbonization plant. Coal India provides a wide range of extraction, coal reserve identification, and exploration activities. With annual production of coal 379.79 million tonnes, Established in 1975, the holding company operates through eight subsidiaries, including Eastern Coalfields, Bharat Coking Coal, and Mahanadi Coalfields. Coal India offers consulting services through its subsidiary Central Mine Planning & Design Institute (CIL website).

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Manganese Ore (India) Ltd is engaged in mining of Manganese ore from the mines located at different parts of India. The company has two large processing plants producing Electrolyte Manganese Dioxide and Ferro Manganese. The company requires various equipments, spare parts, and store items to carry out the above mining and processing activities. Another reason for selecting these companies was due to ease of availability of information about their purchase. Existing tender system is based on the following objective and purchase policies. The primary objective is to procure plant and equipment, spares and other stores and materials required by the company with a view to:

• Helping and maintaining continuity of production by correct supplies as per users’ requirement, in time.

• Ensuring that items purchased are most economical, taking into account their quality, durability, efficiency etc.

• Developing effective and on-going vendor relationships to ensure fair play and equity. The materials obtained shall be:

• Of right quality • In right quantity • At the right time • At right prices • From right sources

3.2.1 Modes of tendering for placement of orders For procurement of government of India departments and industries procedure followed is domestic open tender also known as advertised tender normally applicable for all demands above certain indent value. Open tenders are advertised in leading newspapers, as per policy of press publications of respective companies. The website address also published in the advertisement/ NIT (notice inviting tender) published in the newspapers. They are categorized as: A. Global Tender (advertised) B. Limited Tender C. Single Enquiry D. Operating DGS&D (Director General Supply and Disposal) rate contracts. E. Operating rate/running contracts concluded by its Subsidiaries. F. Repeat Orders: Repeat Orders are avoided normally. G. Orders for products with administered pricing. H. Emergency Purchase/local purchase/Committee purchase as per delegation of power. I. Purchase without resorting to normal tendering procedures may be resorted to (i)

Spot/Cash purchase for low value purchases. (ii) Purchase without tender (negotiated).

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3.2.2 Registration of Suppliers In order to have dependable sources of supply of stores, spares and equipments of right quality at the appropriate time, suppliers are registered after ascertaining certain basic facilities available with them. Performance of such registered suppliers shall be reviewed from time to time. 3.2.3 Vendor Rating Vendor performances are evaluated on the following three major parameters:

• Quality • Delivery • Price

Vendors are classified on the basis of Composite Performance Index (CPI). 3.2.4 Preparation of Tender Enquiry The invitation to tender and instructions to the tenderers are most important document as the firm’s proposal/tender is based on them. The Tender Enquiry should, therefore, are carefully prepared setting out in clear terms the requirements of the purchaser as to quality, quantity, delivery required etc. Some reasonable amount of EMD should always be asked for from the bidders with tender. 3.2.5 Two Part Tendering In case of 2-Part tendering, the first part of the tender will consist of 2 sections. PART-I Section A Consisting of technical offer and a check list. PART-I Section – B: Containing Commercial Terms & Conditions. PART – II: The second part of the tender shall consist of details of prices only. The price bids will be opened for only those tenderers whose offer in Part-I is found to be techno-commercially acceptable.

3.2.6 Three Part Tendering 3-Part tendering considered in purchase of high technology and high value Plant & Machinery items with detailed and complex specifications and where it is considered that the vendors shall need to have special expertise in the manufacturing and supply of the equipment. Figure 3.1 shows purchase activity through tender system.

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Figure 3.1: Flow chart of Purchase activity

Demands for procurement raised from User department

Technical scrutiny by HOD

Data of indents compiled

Invitation of tenders done for indented quality and quantity

Purchase department

Tender document preparation, advertisement, intimation to empanelled vendors

Tenders received in sealed envelopes

Part (a) of the tender is opened in due time

Part (a) of the tender is evaluated

Part (b) of the tender is evaluated

Part (c) of the tender is evaluated

Preparation of report/ recommendation

Purchase department

Placement of purchase order

Placed for corporate approval

Evaluation Report

Source: Own creation

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3.2.7 Bank Guarantee In order to safeguard the government interest, it would be appropriate to take reasonable amount of performance Bank Guarantee (BG) valid up to warranty period for due performance of the contract. 3.2.8 Evaluation of Tenders Tenders are to be treated as confidential documents and except at the time of public opening of tenders, prices quoted are not to be disclosed to anybody by any employee of the Company. Techno-commercial evaluation of offers is carried out as per laid down criteria in a transparent manner. The contract needs to be awarded to the lowest bidder meeting the laid down specifications. Whatever the procedure followed and forms adopted for conclusion of contracts the same have to fulfill the provision of certain basic laws of the country. Namely the Indian Contract Act and the Sale of Goods Act. The contract is between the seller and the buyer. A sale is thus a bilateral contract. Where contracts provide for settlement of disputes by arbitration the relating law to Arbitration is applicable. While following tender for purchase for government industries it is of paramount importance that equal opportunity is to all the bidders and to maintain the sanctity of tendering system. The payment terms should be defined unequivocally and should not be changed after award of the contract. It is very important to establish the reasonableness of prices on the basis of estimated rates, prevailing market rates, last purchase prices, economic indices of the raw material / labor, other input costs and intrinsic value etc., before award of the contract. After conclusion of the contract, any relaxation in the contract terms/specifications should be severely discouraged. Global tender enquiries should be issued as far as possible and published in Indian Trade Journal, leading newspapers and websites. The copies of the tender notices should be sent to all the registered/past/likely suppliers and also to the Indian Missions /Embassies of major trading countries in case of imported stores. Unwanted, obsolete, vague provisions should not be incorporated in the bid documents. Wherever it is intended to distribute the order amongst more than one bidder, the ratio and manner in which the quantity is to be distributed should be pre-decided and disclosed in the bid documents. Contracts should be awarded in a transparent and objective manner. The estimated rate is a vital element in establishing the reasonableness of the prices being paid and, therefore, it is very important that the same is worked out in a realistic and objective

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manner on the basis of purchases made by other organizations, prevailing market rates, the market trend and assessment based on intrinsic value etc. The pre-qualification criteria are yardstick to allow or disallow firms to participate in the bids. Pre-qualification criteria should be fixed in such a manner that all competent contractors are brought into competition (CVC). 3.3 E-Procurement Scenario of India with Special Reference to Government Industries One of the success stories of e-government is eEurope. The eEurope initiatives have been both highly politicized and highly results oriented. The EU has showed its ability to track, monitor, and evaluate the implementation of each Action Plan, using a comprehensive system of key indicators and benchmarking reports produced and submitted to leaders for review and further action. The deliberately detailed implementation of eEurope and the political commitment of the EU leaders to construct and actually enforce a knowledge based economy and society for the benefit of all, distinguish the EU from other global, regional and sub-

Table 3.1: Capability index

United Kingdom

• Highly Developed E-environment and infrastructure • Wide market access and network • European Community standards • Government promoted as exemplar in e-commerce

India

• Emerging E environment and infrastructure • Growing domestic base of world class technical

expertise • Rapid development of rural E-Commerce through State

and local government initiatives Malaysia • Burgeoning E infrastructure

• Development of technical expertise • Strong E-government initiatives

South Africa

• Relatively rapid internet progress • Largest African E economy • Gateway to southern Africa • Government pushing e-commerce

Singapore

• Highly developed E environment and infrastructure • Gateway to South East Asian markets • Proactive E-Government and E-Commerce related

government initiatives

Source: Commonwealth Working Group on Electronic Commerce, E-Commerce in Commonwealth countries making it Happen, 2000.

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regional actors. The positive effects of political will and enforcement through effective implementation benchmarking are perhaps the first lessons that developing countries may well learn from eEurope (Basu, 2004). What (Basu, 2004) described regarding e-government is equally true for e-commerce in India government industries. A study by Anderson Consulting found vast differences among countries in the maturity of their e-government effort. Perhaps the key finding, however, was that even the most mature countries have tapped less than 20% of the potential (Table 3.1) ICT and e-governance, coupled with smart and timely government policies, have the potential to reach development objectives faster and at a lower cost than conventional approaches. It is essential to trace here the required infrastructure of the developing countries in this context. The objective here is to understand the balance of revenue spent to develop such capability and level of utilization. It is beyond any argument that in the context of developing countries, ICT is one of the most significant forces of modernization. Investment in communication infrastructures, and in training and learning, would enable developing countries to increase their competitiveness as external service provider. To provide a better understanding of the affordability, Table 3.2 illustrates IT budgets for some developed and developing countries. The table also separates targeted e-government funding from overall IT expenditures by the government (where known). Many governments choose not to separate these two and consider all government IT spending to be e-government spending. The table shows the vast spending differences between developed and developing countries.

Table 3.2: Government IT Budgets for Developed and Developing Countries

Government India

Philippines Hong Kong

USA

UK

IT Spending in Million US $

556 120 250 52,000

10,000

IT Spending as % of Budget

2-3 0.8 1.2 13

2.4

E-Government spending as Part of IT Budget (%)

34 75 - 0.08

5.2

Source: Basu, 2004. Conventional budgetary structures may not take into account the specific needs of certain most e-government projects, particularly those involving long-term funding requirements and collaboration across agencies. In order to maximize the benefits of e-government for developing countries financing issues must be addressed. One commentator (Harvard Policy Group) considered that there is a virtually inverse relationship between transitional government budgeting and ICT investments (Table 3.3).

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Table 3.3: Traditional Budgeting and Budgeting for ICT Investments

Focus of traditional government

budgeting Characteristics of high-value ICT

investments Single-year (or biennial) expenditures Multi-year investments Programme-by-programme performance

Enterprise or cross-boundary performance

Financial cost/benefits

Financial and non-financial costs/benefits

Level of effort within existing work flows

Changes in the flow of work

Ongoing operations ‘Start-up’ operations

Control Innovation Source: Harvard Policy Group, 2001

Development of e-governments is directly proportional to the IT infrastructure that is capable of supporting and enabling the execution of e-government. An e-government infrastructure in general comprises network infrastructure, security infrastructure, application server environment, data and content management tools, application development tools, hardware and operating systems, and systems management platform. However, many developing countries do not have the infrastructure necessary to deploy e-government services throughout their territory. A recent study by Harris compared the ICT situations in six selected developing countries, based on World Bank data for 2000. Table 3.4 illustrates the availability of two important technologies, telephone lines, and personal computer penetration, for several developing countries, as well as the number of Internet users. An interesting finding is that the developing countries are very non-homogeneous with respect to technology availability and use, differing by two orders of magnitude. In a developing country, the gap between the educated elite and uneducated poor is wide. The educated populations have the necessary resources and have the means to use information and communication technologies. There is the possibility that professionals in large cities in India may find it about as easy to access computers as their counterparts in the UK or Canada; however, the situation would be clearly different for those in rural areas. This digital divide between those who already have access and those who would not gain access for a long time may result in long lasting and widening economic gaps between the ICT haves and have-nots. The potential digital divide is clearly a concern, and yet it applies to many types of infrastructure. In fact, ICT may offer more hope in this respect than other infrastructures, as technology and communication costs are continuously dropping. Table 3.5 shows access cost of internet and internet usage of some developing countries and developed one. Yet most of the developing countries understand the enormous potential of ICT.

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Table 3.4: Information and Communication Technology Situations in Six Developing Countries

India Bangladesh Thailand Malaysia China Philippines

Fixed lines and

mobile telephones (per 1000 people)

35.5

5.0

142.6

412.3

177.6

124.4

Personal computers (per 1000 people)

4.5

1.5

24.3

103.1

15.9

19.3

Internet users

5.0 million

100,000 2.3 million

3.7 million

22.5 million

2.0 million

Source: Basu, 2004.

The ICT policy should aim at increased application of IT in all occupations, enhancing the IT industry base, creating a robust state information infrastructure and creating human resources for IT. Also it should aim establishment of an information infrastructure comprising a high-speed broadband communication backbone, nodes, access network, distributed data warehouses and service locations to cater to the needs of trade, commerce, industry and tourism and also to enhance the delivery of government services to the people.

Table 3.5: Correlation of Internet Access and Penetration

Correlation of Internet VS penetration (based on 20 hours of monthly net access)

Country Access cost (% of GDP per capita) Internet users per 1000

India 16.82 5South Africa 5.26 35

Malaysia 4.85 90Singapore 0.84 302

UK 0.91 554Source: CIOL Enterprise Connect, 2002

Developing countries are increasingly adopting information and communication technology (ICT) to enhance government services and business transactions. An ICT-enabled procurement system and government adoption of e-commerce can transform business processes between the suppliers in the private sector and the Government. E-procurement promotes greater accountability of the Government, increases efficiency, and cost-effectiveness and enables equal access to the public sector market. Country like India can use

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e-procurement as a tool to achieve better governance and enhance economic development. India has the potential to develop e-commerce systems. Successful implementation of e-procurement remains a challenge. It requires a fundamental transformation of traditional government organization, development of infrastructure and financial and human resources (UNESCAP). Government industries are faced with the challenge of transformation and the need to modernize administrative practices and management systems. Recently, the public sectors of India have began to recognize the potential opportunities offered by Information & Communications Technology (ICT) and e-business models to offer better services to citizens and to increase efficiency by streamlining internal processes. ICT causes a paradigm shift introducing the age of network intelligence, reinventing businesses. The traditional bureaucratic paradigm, characterized by internal productive efficiency, functional rationality, departmentalization, hierarchical control and rule-based management is being replaced by competitive, knowledge based economy requirements, such as flexibility, network organization, vertical / horizontal integration, innovative entrepreneurship, organization learning, speed up in service delivery, and a customer driven strategy towards procurement functions. These new paradigms thrust the shift toward e-procurement paradigm, which emphasizes coordinated network building, external collaboration, and customer services (Menon, 2004). In a typical large PSU and Government, procurement runs into millions of Dollars and complexity is inherent in the procurement process. In today’s scenario, adopting an effective cost saving mechanism is integral to any company’s continued existence. Companies across different sectors of industry have been trying to simplify this extremely crucial aspect of their business, in extracting optimal quality, and timely, speedy transactions at the minimum possible cost (Menon, 2004). Salient features of Public Procurement: It relates to the expenditure of public money (DGS&D). To adhere to the principles of equity, fairness and natural justice .To adhere to the Law/Statute viz. Indian Contract Act 1872 & Sales of Goods Act 1930. Industries are to adhere to the prescribed rules including General Financial Rules -2005(GFR) and procedures issued by government from time to time. Well-defined authority with delegation of powers and responsibility with accountability to Public/state to discharge all functions in most efficient, fair, just, economic and transparent manner following all prescribed law, rules, norms and procedures within jurisdiction. 100% Audit including concurrent audit on regular basis. Purchase department answerable to vigilance in-house, through Central Vigilance Commission, Government of India (CVC) as well as by other investigating agencies. Purchase department also answerable to Public/State, Parliament/Legislature & court of law. In India while planning e-procurement, one has to consider these aspects (Menon, 2004). A successful transparent e-procurement system requires policies, legislation, and a legal framework conducive to reorganizing the Government and its services to the citizens,

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businesses, and institutions. The areas needs to be addressed are re-engineering internal processes of government/public administration, factors critical to the successful implementation of e-procurement, training of government officials, infrastructure, addressing the grievances of stakeholder and their participation in the government projects. Passage of IT Act 2000 by Indian Parliament is a positive step in this direction. Central to the growth of e-commerce and e-governance is the issue of trust in electronic environment. The future of e-commerce depends on the trust that the transacting parties place in the security of transmission and the content of communication. Creating trust in electronic environment involves assuring the transacting parties about the integrity and confidentiality of the content of documents along with authentication of the sending and receiving parties in a manner that ensures that both the parties cannot repudiate the transaction. The paper based concepts of identification; declaration and proof are carried through the use of digital signatures in electronic environment. The Information Technology Act, 2000 provides the required legal sanctity to the digital signatures based on asymmetric cryptosystems. The digital signatures are now accepted at par with handwritten signatures and the electronic documents that have been digitally signed are treated at par with paper documents. With this, electronic transactions in the country are legalized (CCA India). Some of the government industries have initiated e-procurement immediate after the passage of IT Act. Some of the organizations are procuring through electronic route part of their procurement. Department of information technology, government of India, in has taken initiative to make all government services accessible to the common man in his locality, through common service delivery outlets and ensure efficiency, transparency & reliability of such services at affordable costs to realize the basic needs of the common man. Under this program, all provincial governments have taken initiative for implementation of e-governance. SAIL has been one of the first PSUs to introduce e-procurement and has been stepping up both procurement and sales through this mode year-by-year. During 2006-07, e-purchases got doubled at Rs.802crore ($200.5million) and e-sales increased to Rs.1,900 crore ($475million), a growth of 34% over previous year (SAIL annual report 2006-2007). PSU and government departments also taken initiative for e-procurement and some of them have started e-procurement namely Director general of supply and disposal, Oil and Natural Gas Corporation Limited (ONGC e-tender), Northern Railways (NR e-procurement system), Visakhapatnam Steel Plant(vizagsteel.com), Indian Oil Corporation Limited(IOCL e-procurement), National Thermal Power Corporation Limited (NTPC e-tender) etc. If one studies the tender system of government industries, it can be seen that it takes normally 60 days to float a tender from the date of initiation of demand by user departments. Here again validity of the offer is ranging from 120 days to 180 days. So it takes almost 180 days on an average to finalize a tender.

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Unlike the dot-com boom, e-Procurement has a compelling business proposition, which is cost savings and this affects the bottom line directly. Hence, it is a sustainable business model and the trend is expected to be on the rise in the future. Trend is catching up within the industry, as requirements for transparency, be it in the Government or the PSU sector, are catching up. In the past, traditional methods of procurement offered little transparency and lesser satisfaction of negotiation with suppliers. E-procurement offers the benefits of greater transparency, wider geographical reach and lesser time of transaction and better pricing. Also sustained savings can be achieved through automated, easy-to-use purchasing, invoice management, and supplier enablement capabilities. E Procurement Solution would help Government capture and settle all spend and readily obtain global user and supplier adoption. This improves process efficiency, increases compliance, and garners sustainable savings across the enterprise. E-procurement, a new avenue for buying direct and indirect goods and services, is an effective procurement system, making waves in purchasing circles. The service provider plays a crucial role in offering sourcing and procuring solutions that satisfy customer needs and provide ample value addition to the service provided.

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4 RESEARCH METHODOLOGY

4.1 Introduction

In this chapter, the author will discuss the research methodology and will propose the suitable types that match our thesis best. The suitable methodology in this study gives us the guidelines for information gathering and processing. 4.2 Research Purpose The purpose with research is to state what is to be accomplished by conducting research and how the results of the research can be used. According to Yin (2003) the purpose of research study can be distinguished in three categories: exploratory, descriptive, or explanatory. Exploratory research: This research can be conducted during the initial stage of research, it helps the researcher to clarify and understand the problem (Zikmund, 2000). Sekaran (2000) stated that an exploratory research is carrying out when no information is available or accessible and not known much about the situations. An exploratory study should be designed by describing a purpose and stating the criteria to evaluate the exploration successful here, research is designed to permit a researcher to just look around, with respect to some fact, with the aim being to enlarge symptomatic ideas. The use is to collect information as possible regarding a precise problem. Exploratory research is frequently used when a problem is not recognized, or the available information is not complete. The procedure that is appropriate for information gathering when implementing an exploratory research is interviews (Yin, 2003). Descriptive research: According to Zikmund (2000), good researchers strive for descriptive precision. Descriptive research help to find out the answer of who, what, when, where, and how and also to determine the difference, in need, features of subgroups and characteristics. Furthermore, descriptive research helps to understand the characteristics of individuals, organizations and allow thinking systematically about aspects. Explanatory research: Explanatory Research is conducted to identify causal relationships, among variables. In this research, relationships between variable will be explained (Zikmund, 2000). According to Yin (1994) an explanatory research approach could also be used when the study aims to explain certain procedures from different perspectives or situations with given set of events. The research purpose and research questions show that this study is mainly descriptive. Somewhat, research purpose is partially explanatory, since it has been trying to review and justify the findings in the study by answering research questions and drawing conclusions. However, the study is descriptive therefore, objective is to describe the area of research and strive to explain the collected data in order to find out the differences and similarities against theories and frame of reference.

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4.3 Study Design The research approach can be either qualitative or quantitative. Both approaches have their strength and weakness and best research method to use for a study depends on research purpose and the accompanying research question. Qualitative is the search for information that is supposed to examine, understand, and considering the phenomena by the means of an inside perspective. Qualitative methods are often related to case studies, where the aim is to receive thorough information and thereby obtain a deeper understanding of the research problem (Yin, 2003). According to Amaratunga et al., (2002) it is difficult to make accountable speech on qualitative research in business economics. Qualitative research carried out through strong and or prolonged contact with a situation. These situations can be seen in everyday life of individual, groups, societies, and organization. He further argued that qualitative approach has three claims of power to collect data and they have been used as the best strategy for discovery, exploring a new area, developing hypotheses. Further qualitative data are useful when researcher needs to supplement, validate, explain, or re-interpret. The qualitative approach will be used in this study to gain a better understanding of the research area. The quantitative approach is also characterized by studying few variables on a large number of entities. To find answers to its research problem, this is normally done in a broad sense by using surveys with already set answering alternatives. Furthermore, this approach is considered especially useful when conducting a wide investigation that contains many units. 4.4 Research Strategy According to (Yin, 1994) there are five major research strategies in the social science: experiments, surveys, archival analysis, histories, and case studies. Each strategy has its own advantages and disadvantages on three conditions: (a) the type of research question posed, (b) the extent of control an investigator has over actual behavioral events, and (c) the degree of focus on contemporary, as opposed to historical, events. Yin (1994) stated case studies strategy when “how” or “why” questions are being posed, when researcher has little control over events, and when the focus is on current happening within some real life perspective. In case study, the aim of research is to search for conformity between the result and the theory. This means that the theory helps to identify other similar events to the result. A researcher can conduct research on a single case or to conduct multiple case studies. Case studies involve in-depth, contextual analyses of similar situations in other organizations, where the nature of the problem and the problem definition happen to be the same as the one experienced in the current situation (Sekaran, 2000). The purpose of this study is to find information to answer the research problems. The author wants to collect and analyze new data, compare it to existing theories and get the opportunity to make comparisons between cases to detect possible similarities or differences. Therefore, i have chosen case studies as our research strategy. This choice is also determined by research

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approach, which is qualitative. Characteristics of qualitative studies are that they are based largely on the researcher's own description, emotions, and reactions (Yin, 2003). The qualitative approach also includes a great closeness to the respondents or to the source that the data is being collected from. It is characterized by gathering abundant information and to investigate several variables from a few numbers of entities. To make use of the possibility to gather high quality data, the most common way to do this is with the use of case studies and interviews where no set answering alternatives are being offered. The qualitative approach was found to be more suitable for the purpose of this thesis, as the purpose is to gain better understanding of how e-procurement is used in a B2B setting more specifically government business to private business. For doing so, we need close contact with the subjects, instead of generalization. Finally, as the intention with this thesis is to describe, and find as complete and detailed information as possible, the qualitative approach is the most suitable method. 4.5 Data Collection Method There are many techniques and methods of data collection. According to Yin (2003), there are five primary research strategies in the social sciences: experiments, surveys, archival analysis, histories, and case studies. Each strategy has its own advantages and disadvantages depending on three conditions:

• The type of research question posed. • The extent of control an investigator has over actual behavioural events. • The degree of focus on contemporary, as opposed to historical, events.

For case studies data collection can be relied on six important sources: Documentation, archival records, interviews, direct observation, participant-observation, and physical relic. (Yin, 2003) More specifically, a case study is an empirical research that investigates a contemporary phenomenon within its real-life context, when the boundaries between phenomenon and context are not clearly evident and in which multiple sources of evidence are used. This definition not only helps us to understand case studies, but also distinguishes them from the other research strategies (Yin, 2003). Two types of data can be collected, primary, and secondary data. Primary data is recognized as data is assembled and collected particularly for the research at hand with interviews, questionnaires, survey, or observations. While secondary data can be collected from various documents such as, books, periodical, articles, on the Internet. Secondary data can be assembled faster then primary data (Zikmund, 2000). In order to answer the research question and reach the research purpose we would like to use primary source as data collection method. We will collect primary data through questionnaire because we believe that this method will provide relevant literature, which would fit to our

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area of study. Secondary data also will be used and will be collected mainly from annual report of the organizations and from the respective websites. According to Saunders, 2003 questionnaire can be used for descriptive and explanatory research. Descriptive research helps to identify and describe the variability in different phenomena through attitude, opinion and questionnaire of organizational practices. He further explains that there are two types of questionnaires, self-administered and interviewer administered. Self-administered questionnaires cab be sent and returned by using the email or Internet. Interviewer administered questionnaires are recorded by the interviewer. For this research we are using self -administered questionnaires and we will send questionnaire through electronic mail. According to (Zikmund, 2000) e-mail is a new way to communicate. The benefits of Email-questionnaire of are cheaper, faster, and flexible. Email-questionnaires are successful in two ways: they create interest because Email questionnaire are like story and they reach to respondents when they open their email and ready for interact. 4.6 Sample Selection By using a small number of units of a given populations as a basis to make conclusions about the whole population is called sampling (Zikmund, 2000). According to Graziano and Raulin (1997), it is not possible to collect and gain data from all the available sources to solve the research problems and to find the solutions. Therefore, it is recommended that from the available population, smaller units should be taken to gather data. These smaller units are referred as samples. They represents the under questioned features of that population from which they are selected. Sampling techniques give us methods that help to reduce the amount of data needed to collect by considering only data from a sub-group rather than all possible cases or elements (Saunders et al., 2003). There are a number of ways to choose a sample for case studies. Judgmental sampling facilitates to use judgment to select cases that will enable to answer research questions and meeting objectives (Saunders et al., 2003). To work with small samples, as in case study, where cases are selected being informative, judgmental sampling is often used. For this thesis, the author will use multiple-case sampling, because multiple cases could add confidence to findings. By looking at a range of similar and contrasting cases, one can understand the case finding, grounding it by specifying how and where and, possible, why it carries on. The sample selection will include criteria that companies should have implemented an e-procurement solution in the company or helps to provide an e-procurement solution to other companies. The reason for taking these two perspectives is that, when a company is implementing e-procurement, it is easy to get in depth information. When a company is providing e-procurement solutions, it is easer to get wider information about its customers (companies) and adoption of e-procurement.

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The sample selection criteria case studies will be based on convenience sampling for this thesis. The author has chosen three specific companies for case studies. They are Coal India Ltd, SAIL-Bhilai Steel Plant and Visakhapatnam Steel Plant. These are big government industries and trying to convert their traditional purchase into e-procurement. On could find out the difference and similarities existing in the organizations and can make the relationship based on our thesis point of view. The author has also chosen MSTC Limited, another Government of India company, which is in the field of e-procurement and e-sale for detailed study of their procedures. MSTC Limited is a leading service provider. While selecting the e-procurement solution, providers it was considered to study an established company (a company that is using e-procurement or providing e-procurement service for few years). The reason for this choice is due to the recent e-procurements evolution in the business community. The companies approached regarding the study were first contacted through email. Another reason for selecting these companies was due to their involvement in the B2B sector. Finally, the persons approached in each company were connected to e-procurement. 4.7 Analysis of Data Data analysis consists of three concurrent flows of activities. These three are data reduction, data display, and conclusion drawing and verification. Data reduction should not be considered to be separated from analysis, but as a part of it. This reduction of the data is analysis that helps to sharpen sort, focus, discard, and organize the data in a way that allows conclusion to be drawn and verified. Data can be reduced and transformed through such means as selection, summary, paraphrasing, or through being subsumed in a large pattern. (Miles & Huberman, 1994) Data display is the second major activity which the research should go through, and this means taking the reduced data and displaying it in an organized, compressed way so that conclusions can be more easily drawn. Miles and Huberman (1994) explain that, humans are not powerful processors of large amounts of information and that extended text can overload humans’ information-processing capabilities. It is further explained that good display are a major avenue to valid qualitative analysis Conclusion drawing and verification is the final analytical activity for the qualitative researcher. It is here that the researcher begins to decide what things mean. They do this by noting regularities, patterns, explanations, possible configurations, causal flows, and propositions. However, Miles and Huberman (1994) also add that competent researcher should hold such conclusions lightly, while maintaining both openness and degree of skepticism.

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4.8 Quality Standards There are two important concepts while discussing the quality of research work, reliability, and validity. These are explained below: Validity and reliability helps to measure the research and add strength to the findings. Validity is the most important requirement on a measurement instrument. Three sorts of validity need to be considered (Yin, 2003). There are three forms of validity: construct validity, internal validity, and external validity.

• Construct validity: establishing correct operational measures for the concepts being studied.

• Internal validity: establishes a causal relationship, whereby certain conditions are shown to lead to other conditions, as distinguished from spurious relationships.

• External validity: establishing the domain to which a study’s findings can be generalized.

To increase the validity the author sent e-mail in advance containing the issues to avoid misunderstandings. As the study was conducted in India, it became necessary to make the purpose of the study clear to the respondent before sending the questionnaire. Validity of the research increased by constructing a questionnaire and got it proof read by our colleagues here and got feedback on it (Parida, 2005). This increased the external validity and replication logic in multiple-case studies. Theories must be tested through replication of the findings in similar surroundings meaning that a specified theory has to come up with the same result. The data collected was not verified or any feedback was taken from the respondent after receipt of email with responses, which can reduce the validity. This was due to the limitation of time. Reliability is the extent to which research results would be stable or consistent if the same techniques were used repeatedly. Also the role of reliability is to minimize the errors and biases in a study. According to Sekaran (2000), reliability of a research work indicates the extent to which the research work is without bias and hence offers consistent measurement across time and across the various items in the instrument. Two things can increase reliability: the use of a case study protocol and the development of a case study database Yin (2003). Copies of the same questionnaire were sent to all the respondents. The reliability is influenced by the fact that peoples’ perceptions vary over time, which makes it difficult for another researcher to achieve the same results even if the same sample were to be used. Hereby the author progresses on to the next chapter where empirical data will be presented.

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5 ANALYSIS OF RESPONSES 5.1 Introduction This chapter contains the data collected from the survey on selected case studies, observed findings from the empirical data collected. Each case is analyzed against within case analysis and cross-case analysis where the cases will be compared to each other. The data presentation follows the frame of reference and the questioner. To have a better understanding of the data author has compared the data across the table for all cases according to the frame of reference. In order to make this data display as clear and concise as possible, the opinions of the companies are presented in a table. 5.2 Survey results Case 1 Bhilai Steel Plant (BSP), an unit of SAIL (Steel Authority of India Limited) is India’s sole producer of rails and heavy steel plates and major producer of structural. The plant is the sole supplier of the country's longest rail tracks. With an annual production capacity of 3.153 million ton of saleable steel, the plant also specializes in other products such as wire rods and merchant products. All major production units and marketable products in Bhilai Steel Plant are covered under ISO 9001:2000 quality management systems. This includes manufacture of blast furnace coke and coal chemicals, production of hot metal and pig iron, steel making through twin hearth and basic oxygen processes, manufacture of steel slabs and blooms by continuous casting, and production of hot rolled steel blooms, billets and rails, structural, plates, steel sections and wire rods. Bhilai's products come with a complete assurance of quality. Steel authority of India limited (SAIL) is a Government of India enterprise, is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defense industries and for sale in export markets. Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL manufactures and sells a broad range of steel products, including hot and cold rolled sheets and coils, galvanized sheets, electrical sheets, structural, railway products, plates, bars and rods, stainless steel and other alloy steels. SAIL produces iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India and situated close to domestic sources of raw materials, including the Company's iron ore, limestone and dolomite mines. The company has the distinction of being India’s largest producer of iron ore and of having the country’s second largest mines network. This gives SAIL a competitive edge in terms of captive availability of iron ore, limestone, and dolomite which are inputs for steel making. SAIL's wide range of long and flat steel products are much

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in demand in the domestic as well as the international market. This vital responsibility is carried out by SAIL's own Central Marketing Organization (CMO) and the International Trade Division. CMO encompasses a wide network of 34 branch offices and 54 stockyards located in major cities and towns throughout India. With technical and managerial expertise and know-how in steel making gained over four decades, SAIL's consultancy division at New Delhi offers services and consultancy to clients world-wide. SAIL has a well equipped research and development center for Iron and Steel at Ranchi which helps to produce quality steel and develop new technologies for the steel industry. Besides, SAIL has its own in-house Center for Engineering and Technology, Management Training Institute and Safety Organization at Ranchi. The Environment Management Division and Growth Division of SAIL operate from their headquarters in Kolkata. SAIL today is one of the largest industrial entities in India. Its strength has been the diversified range of quality steel products catering to the domestic, as well as the export markets and a large pool of technical and professional expertise. Today, the accent in SAIL is to continuously adapt to the competitive business environment, excel as a business organization, both within, and outside India (SAIL website). Case 2 Coal India Limited (CIL) is a Government of India company. It contributes around 85% of coal production in India. CIL is the largest company in the World in terms of coal production. CIL employs nearly 425,000 persons and is the largest corporate employer in the country. CIL is one of the largest Companies in the country, turnover being around INR 386.31billion ($9.6 billion) in 2007-08. The company is wholly owned by the Government of India (GOI). Engaged in the mining of coal, coal based products and mining consultancy. Established in 1975, the holding company operates through eight subsidiaries (CIL website). Wholly owned subsidiaries are:

• Eastern Coalfields Ltd. • Bharat Coking Coal Ltd. • Central Coalfields Ltd. • Northern Coalfields Ltd. • Western Coalfields Ltd. • South Eastern Coalfields Ltd. • Mahanadi Coalfields Ltd. and • Central Mine Planning & Design Institute Ltd. • North Eastern Coalfields is directly under Coal India Ltd.

Case 3 Visakhapatnam Steel Plant (VSP), the first coast based integrated steel plant. It is a government of India enterprise. Bestowed with modern technologies, VSP has an installed capacity of 3 million tonnes per annum of liquid steel. At VSP there is emphasis on total automation, seamless integration and efficient up gradation, which result in wide range of long

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and structural products to meet stringent demands of discerning customers within India and abroad. VSP products meet exacting International Quality Standards such as DIN, BIS, BS etc. VSP has become the first integrated Steel Plant in the country to be certified to all the three international standards for quality (ISO-9001), for Environment Management and for Occupational Health & Safety. The certificate covers quality systems of all Operational, Maintenance and Service units besides Purchase systems, Training. Marketing functions spreading over 4 Regional Marketing Offices, 24 branch offices and stock yards located all over the country. It has manpower of 16,600. VSP exports Quality Pig Iron & Steel products' to Sri Lanka, Myanmar, Nepal, Middle East, USA, China, and South-east Asia (VSP website). 5.2.1 Analysis of Company profile Out of the responses received, it is seen that Bhilai Steel Plant is one of the biggest steel plant under SAIL. It has substantial big production with work force. During financial year 2007-2008 SAIL turnover was INR 46,000 crore ($ 11.5 billion). Coal India Limited is the largest coal company in the world with turn over of INR 36,000 crore ($ 9 billion). It is the biggest mining company in India. It is engaged in mining of coal. As a mining company with its mines and offices across the country it has a huge work force. Visakhapatnam Steel Plant (VSP), under RINL is a very big steel producing company with big work force. Located in eastern coast of India it has potential for export. Profiles of companies are in summarized Table 5.1

Table 5.1: Analysis of Company profile

Company

profile Case 1

SAIL, Bhilai Steel Plant

Case 2 COAL INDIA

LIMITED

Case 3 RINL,

Visakhapatnam Steel Plant

No. of employees

37,000 580,000 16,500

Annual turnover.

SAIL turnover $ 11.5 billion (2007-08)

$ 9 billion $ 2.6 billion

Products / services

Carbon steel in long and flat, alloy steels, stainless steel.

Coal Steel wire rods, rounds, rebars, angles, channels, beams, squares, billets and blooms,

Source: Own analysis of survey conducted by author.

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5.2.2 Analysis of Introduction to E-procurement Case 1 Bhilai Steel Plant (BSP) states that efficient, fast, and transparent procurement system to reduce lead-time are leading issues behind introduction of e-procurement during 2005. In their opinion e-procurement promotes healthy competition, reduces inventory because of fast process, and cost of procurement is reduced. It brings transparency in system by increase in operational efficiency and reduced cost of procurement, productivity and profitability is improved. BSP is utilizing service provider as well as by company own net for e-procurement. Their system covers almost all functions except final decision regarding price finalization. They are procuring through electronic route items, which are not bulk raw material for production, proprietary items, items reserved for ancillaries, and OEM. It also mentioned that SAIL procured materials worth INR1508 crores ($377milion) in 2007-08. They also stated that service provider uses reverse auction while company own net utilizes e-tendering.

Case 2 Coal India Limited (CIL) informed that they preferred to procure through electronic route the items earmarked vendor community, and urgently required. They have introduced e- procurement during financial year 2007-08. They state that it is very useful. They also state that CIL used e-procurement in a truncated form and only reverse auction was conducted. All concerned recognized the transparency of the process. CIL stated that they preferred e-reverse auction for procurement as well as combination of e-tender and e-reverse auction. During financial year 2007-08, CIL head quarter procured about 80% through electronic route. Case 3 VSP stated access to intranet and bandwidth is an issue. There is a limitation on the part of supplier readiness for implementation. They implemented in 2004. Transformation and re-engineering of the entire gamut of procurement activity are issue in VSP. In their opinion e-procurement helps in significant reduction of ordering lead-time. Substantial savings achieved by reducing price-hedging factor. VSP indicated e-procurement leads to greater transparency in buying decisions. Their preferred model is Online indenting, Reverse auction. The web-based reverse e- auction application used for procurement of raw material. In last financial year, procurement through electronic route was INR 360 crores ($90million). Responses on introduction to e-procurement can be seen in table 5.2. 5.2.3 Benefits from E-procurement

Case 1 Bhilai Steel Plant (BSP) states that e-procurement improves operational efficiency, reduces requirement of manpower in Materials Management organization. In short term, financial benefits may accrue but over long term there is not much financial advantage. However, it helps in procuring at market-determined prices. It saves costs saving towards the process of procurement and also in towards procurement price.

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Table 5.2: Introduction to E-procurement

Source: Own analysis of survey conducted by author.

E-procurement Case 1 Case 2 Case 3

2.1 What are the issues involved in adopting e-commerce.

Efficient, fast, and transparent procurement system to reduce lead time.

Nature of item procured, vendor community, urgency of requirement.

Access to intranet, with limitation of bandwidth. Limitation on the part of suppliers’ readiness for implementation.

2.2 Started e-Commerce

2005 2007-08 2004

2.3 About e-procurement with regards to company perspective

Promotes healthy competition, reduces inventory and cost of procurement because of fast process. Brings transparency by increase in operational efficiency and reduced cost of procurement, productivity and profitability is improved.

Very useful, used in a truncated form. Only reverse auction was conducted. All concerned recognized transparency of the process.

Transformation and re-engineering of the entire gamut of procurement activity. Helps in significant reduction of ordering lead time. Substantial savings by reducing the price hedging factor. greater transparency in buying decisions.

2.4 Current e-procurement solution used in the company

It is done through metal junction (joint venture of SAIL and Tata steel) as well as by company own net.

Reverse auction Online indenting, Reverse auction

2.5 What functions are supported by the current e-procurement solution

Most all functions except final decision regarding price finalization.

Reverse auction The web-based reverse e- auction application

2.6 What are the major materials / services procured through e-procurement

Items which are not bulk raw material for production, proprietary items, items reserved for ancillaries, OEM etc

Explosives and accessories

Raw materials

2.7 What is the percentage (approx.) of the total purchase

Procurement of 1,508 crores in 07-08.

80% of CIL head quarter procurement.

INR 360 crores

2.8 What is the preferred model of e-procurement

Service provider uses reverse auction while companies own net utilizes e tendering.

A combination of both

reverse auction

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BSP indicated that e-procurement improves efficiency because of transparency and easy access of data and fast decision-making. The purchase cycle time is reduced, which reduces inventory requirement and working capital need. E-procurement has potential to become a paperless transaction. However, being a PSU, it won’t be possible in SAIL, though paperwork will reduce considerably. It is also stated that manpower requirement is reduced and people can be deployed at some other places. Transparency is one of the prime objectives of implementing e-procurement in government sector. With reduction in processing time, cycle time reduces. Regarding widening of supplier base BSP stated that contrary to popular belief, the recent trend is to procure from reliable suppliers. They also believe better level of inventory control. Most important benefits associated with the e-procurement in their opinion are transparency, faster and better decision making, information sharing with all concerned, low inventory levels, improved efficiency and positive effect on bottom line transparency, faster and better decision making, information sharing with all concerned, low inventory levels, improved efficiency and positive effect on bottom line.

Case 2 Coal India Limited (CIL) stated the benefits associated with the implementation of e-procurement in CIL are better control over the procurement process, absolute transparency, meets all statutory norms, speed.

Cost saving etc. associated with e-procurement not accessed as they have started e-procurement recently. They feel that cost saving towards procurement price is substantial. They feel that it improves efficiency, it reduces time taken for tendering process, it reduces paper work. They have opined reduction in manpower requirement is not at present. CIL stated that it is most transparent. CIL also stated that reduction in sourcing cycle time not applicable. Widening of supplier base is also not at present. They perceive better inventory level associated with e-procurement surely in future. In their opinion the most important benefits associated with the e-procurement are transparency, better control over the process. Case 3 VSP stated that the benefits associated with the implementation of e-procurement are reduction in lead time, greater transparency, easy to track the status and know current position, which enables to maintain optimum level of inventory. It enables to take necessary action in case of emergency. E-procurement helps in maintaining optimum level of inventory, reduction in procurement process expenditure, purchasing at competitive prices and also mentioned about substantial cost saving. Due to healthy competition among suppliers there is saving procurement price, operational efficiency and enhanced capacity utilization. Their comment is that absolutely nil paper work related to e-procurement except statutory supporting documents submitted by the suppliers. Manual redundant work is reduced, needs less manpower as compared to traditional procurement process. It improves transparency. They also mentioned that there wouldn’t be difference in cycle time. They strongly feel that though there is a abundant scope for widening the supplier base, practically there is a constraint in evaluating the supplier and their supply capability due to geographical distance and eventually lead to placing the order for an incompetent supplier and causing delay or

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interruptions in smooth supply of material to process. Responses on Benefits from e-procurement can be seen in table 5.3

Table 5.3: Benefits from E-procurement

Benefits e-procurement

Case 1 Case 2 Case 3

3.1 kindly describe the benefits associated with the implementation of e-procurement in your organization.

it improves operational efficiency, reduces requirement of manpower in MM organization

Better control over the procurement process, absolute transparency, meets all statutory norms, speed.

Reduction in lead-time, greater transparency, easy to track the status and know current position, enables to maintain optimum level of inventory. Enables to take necessary action in case of emergency.

3.2 What do you feel about cost saving associated with e-procurement?

In short term, financial benefits may accrue but over long term may not However, it helps in procuring at market determined prices.

Not accessed as only once it has been practiced

Optimum level of inventory, reduction in procurement process expenditure, purchasing at competitive prices, substantial cost saving.

3.3 Costs saving towards the process of procurement (approx. %).

Yes Not accessed as only once it has been practiced

Reduction in process expenditure

3.4 Cost saving towards procurement price (approx. %).

Saving is there but difficult to quantify.

Substantial Due to healthy competition among suppliers there is saving procurement price,

3.5 Do you feel if there is any improvement in efficiency.

Yes, because of transparency and easy access of data and fast decision making

Yes Operational efficiency and enhanced capacity utilization of equipment.

3.6 In terms of time taken for tendering process.

The purchase cycle time is reduced, which reduces inventory requirement and working capital need.

Yes Considerable reduction in process.

3.7 In terms of reduced paper work.

Yes, it has potential to become a paperless transaction. However, being a PSU, it wont be possible in SAIL, though paperwork will reduce considerably

Yes Absolutely nil except statutory supporting documents submitted by the suppliers.

To be continued….

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Continued from previous page Table 5.3: Benefits from E-procurement

Benefits e-

procurement Case 1 Case 2 Case 3

3.8 In terms of manpower requirement.

Manpower requirement is reduced and redeployment is possible

Not at present Manual redundant work is reduced, needs less manpower as compared to traditional procurement process

3.9 In terms of transparency.

Transparency is one of the prime objectives of implementing e-procurement in public sector.

Most Improved transparency

3.10 Reduction in sourcing cycle time

With reduction in processing time, cycle time reduces

Not applicable Won’t be difference in cycle time.

3.11 Widening of supplier base.

Contrary to popular belief, the recent trend is to procure from reliable suppliers.

Not at present Though there is a abundant scope for widening the supplier base, practically there is a constraint in evaluating the supplier and their supply capability due to geographical distance and eventually lead to placing the order for an incompetent supplier and causing delay or interruptions in smooth supply of material to process.

3.12 Do you perceive better inventory level associated with e-procurement?

Yes Surely in future Optimum level of inventory levels

3.13 In your opinion what are the most important benefits associated with the e-procurement

Transparency, faster and better decision making, information sharing with all concerned, low inventory levels, improved efficiency and positive effect on bottom line

Transparency, better control over the process

Reduction in procurement process time. Ensures availability of raw material, spares and consumables. Indent tracking and knowing the status. Maintaining optimum level of inventory. Availability of data base masters like equipment, spares, consumables, critical items etc., which helps the indenter to retrieve and review. Greater Transparency

Source: Own analysis of survey conducted by author.

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5.2.4 Risk with E-procurement Case 1 Regarding risks with e-procurement Bhilai Steel Plant (BSP) intimated that with ever changing technology in this field, if system is not upgraded there are chances of loosing benefits. In developing country like India infrastructure is not same everywhere, especially big industries are located in relatively remote areas where best telecommunication network is mostly not available. Similarly suppliers are also located at remote areas may miss the opportunity to participate in process thereby reducing competition in certain cases. Regarding Security and control issues their opinion is that process should be secured. It should be changed from time to time to avoid misuse of the system. This is an area, which is difficult for SAIL as it lacks expertise in this field because of IT not being its core concern. However service providers like Metal junction should do it. Sufficient backup of server should be there and it should have a disaster recovery mechanism in place.

Table 5.4: Responses on Risk with E-procurement

Risk with e-procurement

Case 1 Case 2 Case 3

4.1 How do you feel about risks associated with e-procurement process?

With ever changing technology, if system is not upgraded there are chances of loosing benefits. In developing country like India infrastructure is not same everywhere, especially big industries are located in relatively remote areas where best telecom network is mostly not available. Similarly suppliers are also located at remote areas may miss the opportunity to participate in process thereby reducing competition in certain cases.

Vendor community should be able to adapt to the process

There is a threat to the security of data. Mal utilization by the competitors. Due to availability of past data to the supplier, takes advantage of price enhancement.

4.2 Security and control issues.

Process should be secured. It should be changed from time to time to avoid misuse of the system. This is an area, which is difficult for SAIL as it lacks expertise in this field because of IT not being its core concern. However, service providers like Metal junction should do it. Sufficient backup of server should be there and it should have a disaster recovery mechanism in place.

Very much important and to be ensured by the service provider

Hence the system will have supervisory control mechanism. Which enables control over budget, expenditure, prices, stock levels , etc.,

Source: Own analysis of survey conducted by author.

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Case 2 Coal India Limited (CIL) indicated that feel that vendor community should be able to adapt to the process. CIL also stated that security and control issues are very much important and to be ensured by the service provider. Case 3 VSP stated that there is a threat to the security of data. Mis-utilisation of data by the competitors is possible. Due to availability of past data to the supplier, they may take advantage of price enhancement. So their opinion system should have supervisory control mechanism. Which enables control over budget, expenditure, prices, stock levels, etc., Responses on risk with e-procurement can be seen in table 5.4. 5.3 Interpretation of Data 5.3.1 Company Profile Case 1 BSP is a large steel plant in manufacturing sector with big work force. Case 2 CIL is a mining company with huge work force with a spread across the country. Case 3 VSP is a large coast based steel plant in manufacturing sector with moderate work force. 5.3.2 Introduction to E-procurement Case 1 BSP identified process efficiency, transparency, fast process and reduced lead time. They also related process efficiency with reduction in lead-time, they stressed on the value of visibility and transparency across the entire process and with cost benefits. They also correlated increase in operational efficiency and reduced cost of procurement, productivity and profitability is improved. In a way it is found that process efficiency enables better business control, professionalism in work. It can be identified in a cautious way BSP is utilizing both own net and service provider. Professionally they have retained the decision regarding the final order. E-procurement being a new field it is quite innovative idea for a government sector to implement e-procurement in a balanced way. It is also seen that they have introduced e-procurement recently but progressed quite a lot in electronic procurement. They are yet to procure raw materials for production through electronic channel. Case 2 Coal India Limited (CIL) preferred orthodox approach. They have identified earmarked items for e-procurement. May be they are in wait and watch approach. From the data available CIL has gone for truncated approach. Probably they would go for a backward integration of systems towards total e-procurement. From the primary data it is seen that they have introduced e-procurement recently but progressed quite a lot in electronic procurement. They are yet to start operation for subsidiary companies. Case 3 VSP correlated process efficiency and transparency throughout the company and reduction in the overall purchasing cost. It appears that bandwidth and better

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telecommunication facility for the suppliers is given thought for successful implementation of e-procurement. Being a government company their effort for transformation and re-engineering of the entire gamut of procurement activity is a very good example for successful venture in this regard. It is also seen that their preference on online reverse e-auction. They are using e-procurement and procured material worth INR 360 crores ($90milion). They are also procuring raw materials. 5.3.3 Benefits of E-procurement Case 1 BSP supports that process efficiency leads to substantial reduction in lead-time for purchasing of materials, simplifying paper work and procedures. It is seen that data support that important benefits associated with the e-procurement are transparency, faster and better decision making, information sharing with all concerned, low inventory levels, improved efficiency and positive effect on bottom line transparency, faster and better decision making, information sharing with all concerned, low inventory levels, improved efficiency and positive effect on bottom line. This we found to be in correlation to the data collected from BSP e-procurement connects employees with a single process making it smoother, information flow is effortless, easier to handle and the whole process has been streamlined. Contrary to popular belief it is seen that stress is given on reliable supplier instead of wide supplier base. Case 2 From the data CIL appears to be in nascent stage of implementation of e-procurement. From the it shows that they feel the benefits associated with the implementation of e-procurement in CIL are better control over the procurement process, absolute transparency, meets all statutory norms, speed. Case 3 VSP related process efficiency with reduction of redundant work, reduction of manpower, which enables better business control, professionalism in work and clears up other processes within the company. According to them process efficiency leads to substantial reduction in lead-time for purchasing of materials, simplifying paper work and procedures. As e-procurement connects employees with a single process making it smoother, information flow is effortless, easier to handle and the whole process has been streamlined. This also leads to lower purchase prices, lower purchasing process cost and better inventory control. It is also seen that VSP clearly stated reduction of paper work in e-procurement. From the survey is seen that they are worried about incompetent supplier. In other way they are in favor of reliable suppliers than widening supplier base. 5.3.4 Risk with E-procurement Case 1 from data it clearly visible that BSP is worried of continuous up gradation of their system in accordance to the market position in a way with technological improvement. They are conscious that they should not loose any benefit. It is also seen they prefer disaster recovery server in another location for backup.

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Case 2 CIL data very clearly indicates that whatever be the technology vendors. Suppliers should be able to adapt the technology so that competitiveness of the system does not decrease. As a result CIL is constantly benefited with better participation in their e-procurement. They are very much vocal that service provider should upgrade their system and should implement whatever necessary. Case 3 VSP is one of the early bird stared e-procurement in government sector. From the survey it appears data security is an issue in VSP. From their data it transpired that en electronic route data could be misutilised by competitors and also suppliers in a way that may affect the interest of VSP.

5.4 Cross Case analysis

The cross case will be done based on the within-case analysis and in the order of survey questions. Both, similarities and differences will be detected by comparing the cases with one another. The similarities and differences that will be found from comparing the cases will be presented discussed in details. 5.4.1 Company profile It is interesting to notice that BSP and VSP are big steel plant with similar capacity. VSP being newer plant implementation of IT is prior to other units of the industry. Manpower in VSP is also almost half. CIL is a traditional organization, where e-procurement is implemented recently.

5.4.2 Introduction to E-procurement BSP and VSP identified process efficiency, transparency, fast process and reduced lead time. They also correlated increase in operational efficiency and reduced cost of procurement, productivity and profitability is improved. In a way it is found that process efficiency enables better business control, professionalism in work. But it can be identified that BSP cautious abut new technology and utilizing both their own net and service provider. Professionally they have retained the decision regarding the final order. CIL preferred orthodox approach. They have earmarked some items for e-procurement. CIL has gone for truncated approach. Probably they would go for a backward integration of systems towards total e-procurement. As a government company approach of VSP for transformation and re-engineering of the entire gamut of procurement activity is a positive approach.

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5.4.3 Benefits from E-procurement

BSP and VSP support that process efficiency leads to substantial reduction in lead time for purchasing of materials, simplifying paper work and procedures, reduction of work and reduction of manpower. Both agree on improved efficiency and positive effect on bottom line transparency, faster and better decision making, information sharing with all concerned, low inventory levels, improved efficiency and positive effect on bottom line. Contrary to popular belief it is seen that stress is given on reliable supplier instead of wide supplier base by BSP and VSP. Better control over the procurement process, absolute transparency, meets all statutory norms, speed are the features stressed by CIL.

5.4.4 Risks with E-procurement

IT being non-core activity for BSP continuous up gradation of their system is a concern. They are conscious that they should not loose any benefit due to technological progress. It is also seen they prefer disaster recovery server in another location for backup. For VSP their concern is that data can be mis-utilised by competitors and data can be used by suppliers in a way that may affect the interest of VSP. CIL expressed clearly that service provider should upgrade their system and should implement whatever necessary so that CIL gets a state of art service. CIL and VSP expressed that suppliers should be able to adapt the technology so that competitiveness of the system does not decrease, s that as a purchaser they are constantly benefited with better participation in their e-procurement.

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6 MODELS OF E-PROCUREMENT AND ROADMAP 6.1 Introduction As a part of the case studies the author conducted a detailed case study on MSTC Limited (a Government of India Enterprise) regarding their e-procurement system. MSTC Limited is in e-business since 2002. They are providing e-procurement services. Author is not repeating details of MSTC Limited as it is presented in chapter 1. From the responses received executives of MSTC details procedure and concept are briefly presented below. 6.2 Case Study on MSTC Limited and analysis E-procurement practices of MSTC Limited are categorized into four groups, presenting innovative ideas and concepts for all aspects of an eProcurement program. E-procurement Practices concerning Organizational Aspects are related to the organization. E-procurement Practices concerning Procedural Aspects refer to the procedures/workflows followed during the eProcurement lifecycle. E-procurement Practices concerning Technical Aspects are associated to solutions on technical implementation issues. E-procurement Practices concerning Operational Aspects can enhance the services offered to the public and private sector, through the adoption of operations that enforce compliance with the legislation. 6.3 E-procurement Practices Concerning Organizational aspects Among the main activities undertaken is establishment of a e-procurement framework which sets out the operation and the related hosting activities and services in the corporation. Also, the operation of eProcurement systems is a major activity. MSTC Limited acts an Application Service Provider and provides e-procurement solutions to different corporate clients. Typically, it can be seen that two different types of agreements are executed, one with corporate clients, who are buyer/purchaser and other with the suppliers, sometimes referred to as vendor also. When a new buyer wants to avail the services of MSTC an agreement is executed. It is considered very beneficial to have a transparent contracting relation plan. It has to be clear for a Buyer what benefits and obligations will arise from such an agreement. The contract must clearly define the roles and responsibilities of each party, providing the necessary confidence to administrations joining the eProcurement program. There are numerous Buyers of different types of industries. They can be large government purchasing organizations or small Public Sector Undertakings. A main obstacle that buyer face, is to understand the full potential of e-procurement and how it can be realized through the use of e-procurement solutions operating. Buyers are free from payment of subscription fees and training they are not required to investment in IT equipment.

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The following sections provide two identified eProcurement Practices related to organizational issues, which can help public authorities overcome the aforementioned difficulties. The agreement with buyer/purchaser is a detailed agreement and salient features are as below: Agreement is in two stages. First one is general in nature. This is regarding use of e-procurement portal. The points covered are: 6.3.1 The User Registration Obligations These states, in consideration of use of the Service, the User agree to: (a) provide true, accurate, current, and complete information about themselves as prompted by the Service’s Registration Form (such information being the “Registration Data”) and (b) maintain and promptly update the Registration Data to keep it true, accurate, current and complete. If the User provides any information that is untrue, inaccurate, not current or incomplete, or MSTC has apparent / reasonable grounds to suspect that such information is untrue, inaccurate, not current or incomplete, MSTC has the right to suspend or terminate his account and refuse any and all current or future use of the Service (or any portion thereof). MSTC is concerned about the safety and privacy of all its users. Security features, conduct by user. 6.3.2 Special Admonitions for International Use Recognizing the global nature of the internet, the users are to agree to comply with all local rules regarding online conduct and acceptable norms. Specifically, users are to agree to comply with all applicable laws regarding the transmission of technical data exported from India or the country in which user reside. Disclaimer is also provided. 6.3.3 Integrity Pact This is a special drive by government companies, with agreement to Transparency International to increase transparency in the contracts. Salient features are:

• MSTC may appoint competent and credible External Independent Monitor for this Pact. In such case the task of the Monitor is to review independently and objectively, whether and to what extent the parties comply with the obligations under this agreement.

• The Monitor is not subject to instructions by the representatives of the parties and performs his functions neutrally and independently. He reports to the Chairperson of the Board of MSTC.

• The Monitor has the right of access without restriction to all Project documentation of MSTC. The Vendor will also grant the Monitor, upon his request and demonstration of a valid interest, unlimited access to his project documentation. The Monitor is under contractual obligation to treat the information and documents of the Buyer/Vendor with confidentiality.

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• MSTC will provide to the Monitor sufficient information about all meetings among the parties related to the project provided as meetings could have an impact on the contractual relations between MSTC and the Vendor. The parties offer to the Monitor the option to participate in such meetings.

• As soon as the Monitor notices, or believes to notice, a violation of this agreement, he will so inform the Management of MSTC and request the Management to discontinue or heal the violation, or to take other relevant action. The Monitor can in this regard subject non-binding recommendations. Beyond this, the Monitor has no right to demand from the parties that they act in a specific manner, refrain from action or tolerate action.

• The Monitor will regularly submit a written report to the Chairperson of the Board of MSTC and, should the occasion arise, submit proposals for correcting problematic situations.

• If the Monitor has reported to the Chairperson of the Board a substantiated suspicion of an offence under relevant Anti-Corruption Laws of India, and the Chairperson has not within reasonable time, taken visible action to proceed against such offence or reported it to the Vigilance Office, the Monitor may also transmit this information directly to the Central Vigilance Commissioner, Government of India.

• This Pact begins when both parties have legally signed it. It expires for the Vendor 12 months after the last payment under the respective contract, and for all other Buyers' 6 months after the contract has been awarded.

• This agreement is subject to Indian Law. Place of performance and jurisdiction is the Corporate Office of MSTC.

Concerned authorities may report any violations of the GTC to the dealing department. 6.3.4 Buyer Specific Terms and Conditions Buyer has to agree these general terms and conditions electronically. Additionally buyer has to agree another set of terms and conditions namely Buyer Specific Terms and Conditions. Salient features:

• This Agreement covers procurement of any type of goods, raw materials, plant, machinery, equipments, spares, the Principal may assign finished/semi-finished product etc and any type of services as from time to time. In addition to the above, any other item may be added so as to be covered by the Agreement as may be mutually agreed upon.

• Duration of the agreement. • Only those Suppliers/Vendors will qualify for bidding who fulfill the Eligibility

Criteria relating to the Technical Aspects/Specifications of the goods/services as prescribed by the Principal. However, for items which do not require inspection/testing of quality/process etc and the Suppliers/Vendors have to be qualified only on the basis of documents/information to be furnished by them as per the Eligibility Criteria prescribed by the Principal.

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• The Principal may like to choose any of e-Procurement models depending upon the needs and the nature of item/services to be procured in mutual consultation with MSTC.

• MSTC shall conduct the e-Procurement directly without subletting the contract and MSTC shall do so primarily through its own Website. However, MSTC may also undertake other modes of e-Procurement as mutually agreed between MSTC and Principal.

• On receipt of the list of items/services from the principal relating to the procurement with detailed specifications and descriptions, quantity, quality and special terms, if any, MSTC will prepare the e-Procurement Catalogue along with all the Commercial Terms and Conditions of purchase. These Commercial Terms and Conditions of purchase will be displayed as "Special Terms and Conditions" on the Website and this will include a clause stipulating that if any qualifying Bidder/Supplier/Vendor participates by bidding in the e-Procurement Event, then it will be deemed that he has accepted the Special Terms and Conditions of purchase in toto without any deviation.

• MSTC shall arrange publicity for the procurement enquiry through its Website as well as by email to the eligible/registered Suppliers/Vendors. In case the Principal desires publicity through newspaper publication or any other media. MSTC shall, after observing the formalities, forward the Comparative Statement to the Principal for their approval or otherwise.

• The item wise/ lot wise Maximum Bid Price (if desired by the Principal) will be fixed by Principal and informed to MSTC for posting and display on the Website.

• Normally the Principal shall issue the Purchase Order/Work Order to the successful Bidder/Supplier. However, if desired by the Principal, MSTC shall issue Letter of Intent to the successful Bidders/ Suppliers on behalf of the Principal as per approval of the Principal.

• Force majeure clause: If, any time during the continuance of this Agreement, the performance, in whole or in part by either Party, of any obligation under this Agreement be prevented or delayed by reason of any war, hostility, act of public enemy, civil commotion, sabotage, fires, floods, explosions, epidemics, quarantine restrictions, strikes, lock-outs, Technical and / or Connectivity failure which is entirely beyond the control of MSTC etc. or acts of God (hereinafter referred to as 'events') provided notice of happening of any such eventuality is given by the affected party to the other within 21 days from the date of occurrence thereof, neither Party shall be reason of such event have any claim for damages against the other in respect of such non-performance or delay in performance, provided further that if the performance in whole or part of any obligation under this Agreement is prevented or delayed by reasons of any such event for a period exceeding sixty days, the Parties shall try to arrive at an amicable settlement, failing such settlement the Principal may terminate this agreement at its sole discretion.

• Termination provision for the agreement.

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• Arbitration Clause: For PSU/Government. Department: In the event of any dispute or difference relating to the interpretation and/or application of the provisions of this Agreement, such dispute or difference shall be referred by either party to the Arbitration of one of the Arbitrators in the Department of Public Enterprises to be nominated by the Secretary to the Government of India, In Charge of the Dept. of Public Enterprises. Jurisdictions of legal courts in case of disputes. •

6.3.5 Seller Specific Terms and Conditions Similarly, for the supplier/vendor a separate agreement is executed. Supplier has to agree the general user agreement, as mentioned above, terms electronically. They’re to agree seller specific terms and conditions electronically. Salient features of seller specific terms and conditions are as below:

• Mode of E-procurement is informed like E-Tender, E-Tender with multiple bids, Reverse e-Auction, Reverse e-Auction with Quantity cum Price bid or any other mode.

• All the bids submitted on the site are firm commitment by the seller/supplier/vendor to supply or to deliver as per the terms and conditions. A bid once given cannot be retracted.

• Vendors are to register with MSTC portal online as per proforma and by submission of documents at the office of MSTC. The vendors would generate their own ID and password. Such vendors will be listed as registered vendors. No vendors without registration with MSTC portal will be able to bid for E-procurement. E-procurement intimation will be mailed to registered eligible vendors through e-mail. Vendors may check the e-procurement documents on website.

• Mere registration will not confer any right to participate in the E-procurement. For each and every program, vendors are to submit pre-qualification/parameters either to buyer or MSTC , as the case may be , and only on confirmation of buyer, eligible vendors will be activated to participate for that particular event and such vendors only will be able to bid in that E-procurement event.

• The details of the E-procurement catalogue will be hyper linked to the site and registered vendors can see the detailed terms and conditions including date of opening and closing time, name and location of the buyer and other details. E-procurement catalogues may be down loaded also.

• Automatic/Proxy Bidding: If this facility is available for any particular E-procurement event then each vendor will have the option to declare his minimum value of bids (which cannot be viewed by any other bidders/anybody else) up to which his automatic bidding will continue. In brief, computer will bid on behalf of him in case there is any other bid, which is higher than his minimum bid. Auto-bid facility cannot be initiated during auto-extension period.

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• Auto-extension: The closing time of the e-procurement will be indicated in the auction floor against each lot. However, in case if auto extension facility is available in a particular e-Procurement event, there would be a provision for auto extension of closing time (well specified before start of e-procurement) if bids continued till the vicinity of the scheduled closing time.

• In order to qualify and be identified as a successful bid, the following priority parameter will be followed are: The lower price bid always supercedes higher price bid; amongst the bids of the same price, the bid which was placed earlier shall supersede. If all the parameters as above are same, the bid with higher quantity will supersede.

• In case any seller/vendor fails to fulfill the contractual obligations then the registration will be automatically cancelled and the vendor will not be able to participate further. However, MSTC reserve the rights to review the matter with or without imposing penalty.

• Buyer intimates the item to be procured and the terms and conditions. This is indicated in the E-procurement catalogue. There may be E-procurement event where any registered vendor can participate or in some E-procurement event only limited / eligible vendors will be activated for participation.

• After closing of E-procurement event, buyer reserves right to accept /reject all/one or more bids. The buyer will issue the Purchase Order.

• It is the responsibility of the vendors to protect their ID and Password. It is strongly advised that the vendors should not save the ID and Password on the browser.

• Trademarks And Copyrights: The vendor acknowledges and agrees that wherever applicable, the content, including but not limited to text, software, music, sound photographs, graphics, video, or other material contained in website, including advertisements or information is protected by domestic and international copyrights, trademarks, service marks, patents, or other proprietary rights and laws. The vendor is permitted to utilize this material and information only for intended use, and shall not copy, reproduce, transmit, distribute, or create derivative works of such content or information without express authorization. MSTC shall not be held liable for any misuse or infringement of any trademark or copyright by the vendor, and the vendor shall be solely liable for any damages, claims, actions, etc. for infringement or violation of the same. MSTC reserves the right at its sole discretion to terminate the access of the vendor to the website, if the vendor violates the provisions of this clause.

• Arbitration: Any dispute arising in connection with the interpretation or implementation of these terms and conditions shall be resolved by arbitration under the Arbitration and conciliation Act, 1996. The language of the arbitration shall be English.

• Jurisdictions of legal courts in case of disputes. • Force Majeure: MSTC/Owner or delay in performance due to any reason/cause

beyond their control including fires, floods, go-slow, lockout, closure, pestilence, dispute with staff, dislocation of normal working condition, war, riots, epidemics,

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political upheavals, government action, civil commotion, breakdown of machinery including technical failures, shortage of labor, acts demands or otherwise or any other cause or conditions beyond the control of aforesaid cause or not and the existence of such cause or consequence may operate at the sole discretion MSTC / Owner to extend the time of performance on the part of MSTC/Owner by such period as may be necessary to enable MSTC/Owner to effect performance after the cause of delay will have exist. The provisions aforesaid shall not be limited or abrogated by any other terms of the contract whether printed or written.

• MSTC strongly advises vendors not to test the auction process with false bids, as it will put them at substantial personal legal risk. It is a crime to use a false name, other false personal information, or known invalid credit card to bid. Willfully entering erroneous or fictitious bids may result in prosecution.

Vendors are also required to submit documents towards credentials. Vendors are also to obtain digital signature as per norms of CCA. This completes the registration process wit MSTC portal for participation in e-procurement program. Analyzing the feedback from MSTC as well as its portals it is seen that in the field of organizational aspects MSTC Limited is an Application Service Provider and provides e-Procurement solutions to different. They have started in 2007 with a background of electronic commerce from 2002. The main issues faced in implementing e-Procurement in corporate clients sector are: a) Familiarization with the latest technology. b) Change Management Issues c) Vendor/supplier training. At present e-Procurement they are doing e-tender, receiving Techno-commercial bid & Price Bid on-line in case of e-tender and in case of Reverse e-Auction the Price discovery is done on-line. Preferred mode of price negotiation is dependent on the number of qualified vendors for the respective item. If the numbers of suppliers are less then the preferred mode is e-Tender and if the numbers of Vendors are more, then the preferred mode is reverse e-Auction.

One of the main obstacles that service provider / buyer face is making the vendors / suppliers understand the full potential of e-Procurement and how it can be realized through the use of e-Procurement solutions operating. This obstacle becomes even more crucial when the model of the e-procurement systems requires the payment of subscription fees / registration fees and training. In case of MSTC, the vendors /suppliers do not have to pay anything to get registered as a supplier in e-Procurement portal. Furthermore, extensive vendor training is held before any e-Procurement event. A significant consideration of buyer / service provider is the participation of suppliers in the new type of electronic business. This is a crucial factor for the success of any eProcurement

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program. MSTC solve the hurdles of attracting suppliers by advising the purchasers to follow a particular e-procurement method for a particular Item for a substantial time so that the Vendors are also induced to switch over to e-Procurement method. 6.4 E-procurement Practices Concerning Procedural aspects E-procurement practices followed for all phases during the lifecycle of all e-procurement procedures. Identified practices are grouped along the different phases of the procurement cycle. Agreement with buyer is long term in nature. As in case of MSTC, buyers are corporate clients. Registration process is relatively simple. Registration process requires only trivial details. The online registration process for vendors is quite simple and Digital certificates are required when bids are submitted on-line. Suppliers are to submit their partial or full set of documentation in a non-electronic format. The system modeled in such a way, so that the details of communications using traditional paper-based means can be traced and linked to the e-Procurement system. The system allows the Bidders to upload scanned documents As a part of Corporate Policy, MSTC does not charge any fees from the vendors/Suppliers. However the purchasers have to pay Service charge to MSTC as per agreement.

Use of OSS (Open Source Software) may lower the cost but the OSS application will not be exactly as per the requirement of the buyer and since it is open source any body can use it and customization / security as require like Digital signature & any other requirement may not fulfill. OSS may initially be felt to have a lower cost, but developing a software in-house, when there is already a setup, seems to be more advantageous as customization which may arise due to change of business policy or vendor requirement becomes more easy.

Each buyer can has its own policy with regards to supplier notifications. It is important to notify suppliers. In most of the cases newspaper advertisement is also necessary for procurement. The use of Short Message Service (SMS) alerts offers an efficient solution for supplier notification. However, this mechanism, similarly to email, does not guarantee delivery and is considered as an untrustworthy communication method. Therefore, to safeguard, information about procurement are to make available in government of India site for tender (India government tender site) display. Any vendor can avail information from this site. Moreover procurement informations are displayed in the sites of respective buyers. Any e-procurement events that are conducted by MSTC are displayed in corporate website of MSTC under forthcoming e-procurement events link. The registered vendors are sent e-mail and SMS also. Such notification method can be used only as supplementary to other

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notification mechanisms. Nevertheless, provided that other notification mechanisms are in place, SMS alerting can function as an instrument for further enhancing the automated alerting of suppliers. To ensure the quality of information provided to suppliers the information that are given to the Vendors are the about the actual events. For the restricted procedure, purchaser/MSTC can limit the number of candidates to take part in the competition according to pre-stated criteria. Initially, suppliers submit their expression of interest for a particular procurement. Following the qualification procedure, purchaser/MSTC short-lists the suppliers and eligible vendors are allowed to participate in e-procurement. Competition is restricted within eligible vendors. The qualifying Criteria are pre-decided by the Purchasers. MSTC sends email / SMS & online status link is there on Bidder’s home page. Email notification can be secured by sending it encrypted & with Digital certificate. Regarding issues of non-delivery of emails/SMS it is stated that it is a matter of mutual understanding between Service provider and bidder. In case of non-delivery, it could be resent again, could be contacted over Phone/Fax & even on-line status link can be given to the bidders for any time access. To overcome from any situation arising out of tenderers find the e-Tendering process incomprehensive, especially when complicated procedures (for example electronic signatures) are involved, MSTC conduct extensive training programs for the prospective vendors and also conducts number of demo e-Procurement programs for vendor familiarization. It is stated that a user-friendly Graphical User Interface always helps in a better understanding of any process. To achieve most economically advantageous offer in e-reverse auction with a single criterion (price) all non-price criteria are transformed into monetary values through pre-defined rules. So the vendors can only bid on price in the e-reverse auction. However, necessary Customization is done depending on the requirement of purchaser. It is also seen that e-reverse auctions are conducted with more than one parameter to quote like price and quantity.

Fully automated e-procurement system eliminates the corresponding data entry for financial aspects and repetitive purchase through e-procurement system may decrease or increase the cost of purchase depending on the Market status. Audit trailing mechanism of the system records full activity. But obviously depend on the system designed.

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6.5 Technical aspects Technical modeling of e-procurement systems should be fully compliant with law of the country. The objective is to present all concepts, which offer technical solutions to common issues.

During the development of e-procurement systems, there are variety of security issues that need to be considered, for instance the secure transmission, safe storage, consistency and confidentiality of data. A very sensitive area of security is the methods employed for authenticating users in the system, as information exchanged between buyer/service provider and suppliers is commonly binding. It is proposed that it should be on 128-bit SSL (Secure Socket Layer) with individual Digital Signature conforming IT 2000 Act. In Secured layer also, there are many version like SSL 2.0, SSL 3.0, and TLS 1.0 out of which TLS 1.0 is best. However depends on the implementation. It is also suggested that Data Center should have Hardware Firewall like PIX etc. , IPS (Intrusion Prevention System) should be in place, Data center Monitoring Software like IBM Tivoli should be in place which displays the health all the devices, attacks if any, recommendation for improvement etc. Electronic signatures are used for ensuring the proof of origin of electronically transmitted documents. Advanced electronic certificates are issued by Certification Authorities (CA) and are used for producing electronic signatures by their possessors. An electronically signed document guarantees the identity of the person who signed it. Furthermore, electronically signed documents ensure the consistency of the data of an electronically transmitted document. The drawback in utilizing this technology is the limitations in interoperability. Each CA establishes its own methods for modeling this technology, usually abiding to local or national rules. The various CAs do not necessarily interconnect, and therefore another CA does not necessarily trust suppliers that have a certificate from a CA. This in turn means that a fully interoperable system needs to trust all CA, which is difficult to achieve. It is stated that before actual event, MSTC generally conducts demo on-line events to check the viability of individual bidder’s certificate and in case of any broken chain. MSTC installs all the root certificates at their end so that the server accepts the same during actual event. MSTC suggests limited use of electronic signatures (only for critical activities). Regarding mechanisms for ensuring accurate timing of system events and Time –stamping MSTC suggests that generally, all servers are synchronized with some National/International timeservers. This gives almost accurate time of the server. Also while using certificates in transactions, third party time-stamp can also be stored in the system. The eProcurement software solution needs to be very well implemented in order to manage with the heavy load of transferred data during certain time. The hosting servers have to be powerful enough to handle the increased volume of transactions. The network architecture

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needs to be capable enough to avoid traffic congestions. The complete software and hardware environment needs to be implemented and configured in an optimum way, ensuring no volume capacity faults. MSTC suggests that connectivity from ISP should be high enough depending on the load (could be monitored online), Resource of the Server like No of CPUs, Size of RAM, high speed redundant Network cards and load testing on application software should be done before implementation etc. MSTC uses color-coding, animations, and other visual effects for informing users significance of events. Regarding number of maximum/minimum concurrent user requests to the system and methods for dealing with volume capacity problems during the closing time of the tender/reverse auction MSTC suggests that this could be figured out during load testing. Response time becomes more in case of heavy load. It is therefore recommended to design the hardware & software accordingly as per requirement. To ensure the secure communication of information and its storage in system data repositories (security) MSTC suggests that sensitive data could be stored in encrypted digitally signed manner so that the same could not be even retrieved by the system administrator. Only the certificate holder could retrieve the data with the help of his certificate only – obviously system should be designed in that way. Regarding virus issues and protection from malicious attacks, MSTC suggests: Firewall, IPS System Gateway Anti-virus system protects from malicious attacks. The topic of document standards is related to the equality of treatment and the interoperability needs of e-Procurement systems. Public sector e-Procurement systems need to be openly available and easily accessible by all. This in turn can be translated to suppliers being in a position to use their own computer programs and IT infrastructure in order to use an e-Procurement system. MSTC suggests that all widely used electronic document standards are acceptable. However, the documents should be sent or received with digitally signed (for authenticity). 6.6 Operational aspects E-procurement practices for effective, transparent, and fair competitions, considers operational aspects that services provided to buyers and suppliers effectively and fairly and the service generates competitions, as well as, plans that can set the roles and actions in case of system failures. Mechanisms for ensuring the quality of information provided to suppliers. Issues related to the management of large volumes of exchanged information between all involved parties in eProcurement. Methods for raising complaints and management of disputes should be addressed.

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It is essential that both employees of MSTC and suppliers be trained in using the e-procurement system. MSTC employees are trained as and when required. Suppliers are trained two to three times before each Procurement event and one in the initial phases so that they can get familiarized with the available functionality and participate in competitions with the complete knowledge of the system. All eligible suppliers, prior to e-reverse Auction, are invited to participate in demo auction events, where the exact details of the real e-reverse auction (including auction type, evaluation formula, bidding fields, etc.) are shown. During these training events, the real competition is simulated through the competing suppliers. All participants are given the opportunity to understand the auction details, experiment with the evaluation formula and comprehend its function, and appreciate the full functionality offered by the system. As it is seen MSTC by constant monitoring and systematic checking assured quality of e-catalogues.

MSTC Servers are normally up on a24/7 basis and programs are conducted keeping in view the routine maintenance of the system. It is also seen that MSTC installed disaster recovery server at another location, which can take care of in case of any eventuality in the main server. MSTC ensures that vendors receive equal amount of information at the same time as all e-mail/SMS are sent simultaneously. More over all the information are available in the websites maintained by MSTC. Confidential nature of information is maintained as each vendor/Supplier gets a personalized e-mail/SMS. To ensure that operation of the system improves competition for the users complete anonymity of the bidders ensures Complete Transparency and better competition. As seen in e-reverse auction catalogue that name and identity of bidders are not available to any authority during e-reverse auction and e-tender. Mechanism of receiving complaints and management of disputes MSTC has a facility of receiving on-line complaints and the same are automatically forwarded to the concerned departments so that necessary replies can be given and the matter looked into. To ensure that all suppliers are given equal opportunity and equal treatment MSTC assures that since the system is internet based all the vendors can access the system from their own locations and can bid with out any interference. Further, our Systems department is ISO 27001 & ISO 9001 certified which ensures that all vendors are given equal opportunity to compete.

It appears that there is no move so far in India for implementation of Common Procurement Vocabulary (CPV) as the single classification system in public procurement through out the country.

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6.7 Model of E-procurement Each firm that exploits the Internet should have an Internet business model, i.e., how it plans to earn now and how it plans to do so in the long term using the Internet. A business model is the method of doing business by which a company can generate revenue to sustain itself (Turban et al., 2002). It describes the basic framework of a business. It also tells what market segment is being served (who), the service that is being provided (what), and the means by which the service is produced. A firm’s business model should also spell out how the company is positioned within the business ecosystem. Turban et al. (2002) also identify several types of Internet business model like find the best price, dynamic brokering, affiliate marketing, group purchasing, electronic tendering systems, online auctions, customization and personalization, electronic marketplaces and exchanges, supply chain improvers, and collaborative commerce. In sum, in order to sustain a successful business venture, an Internet business model should address a number of issues which include: what value to offer customers (value proposition), which customers to provide the value to (scope of offerings), how to price the value (pricing), who to charge for it (revenue models), quantity of resources required and the associated costs to provide the value, and what strategies need implementing to offer value. In addition, in order to prosper in e-commerce, a firm’s Internet business model must capitalize on the “disruptive” attributes and characteristics of the Internet or digital economy to enable it to offer innovative solutions and value to customers. 6.8 Roadmap for E-procurement

Before initiating any e-procurement implementation, the company must decide on what is important for the procurement organization to achieve, what type of rents to generate, and what procurement tasks to leverage with e-business value creation mechanisms. The company must simply identify what procurement tasks are most interesting and decisive for successful procurement, and make sure that strategies and applications are aligned. Using a life cycle approach can reveal what procurement tasks are pivotal in the different phases of the product life cycle. The different phases require different procurement skills, and thus the e-procurement applications should leverage the procurement tasks that make a major impact in total life cycle cost. On the basis of the analysis and present scenario following roadmap is suggested for implementation of e-procurement. To establish a transparent e-procurement plan for contracting relation should be well thought of. This should include:

• Define a clear contractual framework between all parties involved. • Provide the necessary confidence to all parties for using e-procurement by clearly

defining roles and responsibilities

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To establish an e-procurement adoption program, following points to be considered: • Set tangible goals for measuring the success of the program. • Consider the exact costs involved in rolling out the e-procurement system. • Estimate necessary fees, IT investment, personnel training investment and any other

set-up related costs. • Educate organization employees relating to e-procurement. • Identify aspects of e-procurement that could achieve the most benefits and have the

most tangible economic gains for the organization. Change Management is one of the key aspects. To develop a plan for Change Management following points should be considered.

• Educate suppliers in the benefits of e-procurement. • Provide initial cost-free period to suppliers, until some benefits of joining the e-

procurement program can be realized. • Notification of suppliers for new business opportunities using email. • Use Short Message Service (SMS) alerts as a supplementary notification mechanism • Utilization of supplier profile to “push” information that might be of interest (new

business opportunities) • Registered suppliers can define their profile s in terms of types of business and

contracts they are interested. • Profiling can be flexible enough in order to allow suppliers to declare their preferences

in several business sectors, as well as, specific types of business opportunities. • Provide multiple user registration processes. Allow users to choose preferred

registration process Registration process should be clearly spelt whether vendors are to go for Simple registration process (requiring only trivial details) or advanced registration process (use of electronic certificates).

• For simple registration process, allow for offline validation of supplier details • For systems utilizing electronic signatures, an alternative simple registration process

can be available for foreign suppliers. Integration of e-procurement system to organization’s back-office systems in order to automatically obtain user profiles requires:

• Integration with a back-office (HR or Financial) system for automatically obtaining all user related information

• Avoid duplication of effort in defining users and user profiles in more than one system • Ensure consistency of information across all systems • Hierarchical structures of the organization automatically applied to the e-procurement

system

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To ensure confidence of the suppliers implement moderated Q&A sessions. The Q&A section of the system can support similar functionality to a typical moderated FAQ section.

• Allow participants to post their questions to a bulletin board. • Answers to posted questions are possible to be provided only by designated executive. • A call center can be used for providing all related information regarding e-

procurement. Short-listing of suppliers should be based on the terms of e-procurement program predefined in the catalogue /qualification published with the tender notice.

• Evaluation criteria can be configurable according to the type and complexity of the contract.

• Following the qualification procedure, purchaser/service provider short-lists the suppliers and eligible vendors are only allowed to participate in e-procurement. Competition is restricted within eligible vendors.

• The qualifying Criteria are pre-decided by the Purchasers. Provide a mechanism to ensure that uploaded tenders are stored in a secure environment and remain inaccessible until the pre-specified bid opening time.

• Encrypt tender before submission. • Submitted tenders remain locked by the system until the designated tender opening

time. • Decryption keys are used for tender opening.

It is advised that use GUIs guide suppliers during the tender submission phase. So following may be implemented.

• A user-friendly GUI can assist users to understand the e-tendering Process. • Always inform users as to their pending tasks and corresponding deadlines.

Automatic processing and evaluation of tenders is possible with electronic forms. Following points may be implemented.

• Allow suppliers to use online system generated electronic forms containing all necessary information to be completed for the submission of tenders.

• Configure different e-auction events depending on the nature of Procurement. • Configurable aspects of an e-auction can cover the following areas: • Electronic forms for bidding • Rules for auto extension (if applicable). • Dynamic Ranking information provided to suppliers. • Call for tender’s specifications.

While arranging e-reverse auction minimum and maximum decrements for the total economic offer may be determined and should be communicated to the bidder before start of e-reverse auction. Minimum and maximum values for each bidding field of the electronic forms also

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should be taken care of. Parameterization according to objectives set by the purchaser. Provide a mechanism for transforming non-price related criteria into monetary values so that. E-reverse auctions can be conducted with price as the only criterion. Transform all other criteria into monetary values and apply them into the initial price of the supplier. Use Secure Socket Layer (SSL) for ensuring a minimum level of communication security:

• It should be on 128-bit SSL (Secure Socket Layer) with individual Digital Signature conforming to law of the land.

Only critical activities should demand strong user authentication (limited use of electronic signatures):

• Suppliers electronically sign tender documents before submission. • Contracting Authorities validate electronic signatures of submitted tenders. • For e-reverse auctions, suppliers use electronic signatures for confirming their bids or

at the time of entering electronic bidding floor. • Define activities that are considered as critical events.

Match event logs from different e-procurement modules and create a unified event log. Logs created by different e-procurement system modules can provide complimentary information, which can assist a reviewer to follow the exact trail of a procurement process. Generate reports detailing activities that have taken place during competitions using system event logs. Automatic virus checking mechanism should be implemented for submitted tenders. Firewall, IPS System Gateway Anti-virus system protects from malicious attacks. Provide multilingual support and an easily parameterized GUI:

• Flexible GUIs to allow parameterization based on user preferences. • Back-end systems to support multiple languages.

Integrate repetitive purchasing systems with supplier and purchaser’s financial back-office systems for:

• Order status monitoring. • Electronic invoicing by suppliers. • Electronic payment. • Real-time checking of supplier stock by purchaser.

It very much necessary to organize training sessions that simulate the real competition Conditions:

• Invite all eligible suppliers, prior to e-reverse auction, to participate in demo auction events, where the exact details of the real e-reverse auction (including auction type, evaluation formula, bidding fields, etc.) are shown. During these training events, the real competition is simulated through the competing suppliers. Give all participants

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the opportunity to understand the auction details, experiment with the evaluation formula, and comprehend its function, and appreciate the full functionality offered by the system to involved parties.

E-procurement system should be built on the principle of Equal Treatment, Transparency, Effectiveness, General Availability, Security, and Confidentiality employing matching technology, supported by professional dedicated manpower. 6.9 Contemporary Studies E-business is the execution by electronic means of interactive, inter-organizational processes. E-business represents a shift in business doctrine that is changing the traditional organizational models, business processes, relationships and operational models that have been dominant for the past 20 years. The new doctrine of e-business requires an enterprise to integrate and synchronize the strategic vision and tactical delivery of products to its customers with the IT and service infrastructure needed to meet that vision and process execution. In the next few years, successful enterprises will restructure their organization, process and technology infrastructure to ensure successful e-business execution (Trkman, 2007). Analysis of contemporary approach for implementation of e-procurement in USA and EU reveals that approaches are different in different economic zones. In the American perspective, a number of benefits or drivers for e-procurement identified. These are:

• Cost savings • Improved contract compliance • Timesaving • Reduced administration costs • Enhanced market data • Improved responsiveness to changes in customer demand • Improved collaboration / visibility with / of the supply chain • Reduced operating and inventory costs • On-Line negotiated cost reduction • Increased accuracy of production capacity • Enhanced skill and standardized strategies.

Davila et al (2003) were the first to rank six drivers in their study of US e-procurement. These, arranged in rank order with the most important first were; purchasing transaction costs, purchasing order fulfillment time, increased number of suppliers, purchasing cycle time, price paid for goods decrease and headcount to support purchase transactions. Barriers to e-procurement identified as supplier relationships, technology and control, cost/benefit concern, organizational skill and lastly organizational culture.

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Aberdeen’s research reveals that the keys to success of e-procurement include, early process reengineering. Best performing enterprises examined and fixed business processes before applying automated solutions. Slapping an e-procurement solution on an inefficient process will not fix that process. Cross-functional teams examine and reengineer business processes before implementing e-procurement technologies. Only then are these processes automated using e-procurement solutions. Strong focus on user adoption is necessary. End users may resist change, especially a change that may remove some of their buying power and prevent them from doing business with their pet suppliers. Involvement of all affected stakeholders in system implementation is required. Getting input from all internal groups and all affected suppliers typically speeds system acceptance and minimizes implementation problems. Though tremendous progress has been made in supplier enablement, all involved parties – end users, suppliers, and solution providers – continue to work to make enablement as simple and cost effective as possible. Top management support and a level of investment needed to gain cost savings, process efficiencies, and the other benefits of e-procurement. In other way, top management support to help drive system compliance and ensure sufficient funding and resources are made available. Enterprises would like to see more investment and support of their e-procurement systems. Where as in Europe the eEurope Action Plans 2002 and 2005 have set ambitious goals concerning the Government online: electronic access to public services, requiring efforts by public administrations at all levels to exploit new technologies. The realization of these goals would make information as accessible as possible and would improve services and interaction with citizens and businesses. One of the primary objectives of eEurope is to enable the use of electronic procurement across Europe, creating common principles and technical suggestions for all member states. These principles and suggestions would facilitate an operational environment where public administrations could achieve better results through fairer and more effective competitions, while suppliers would be enabled to compete in an open and transparent framework, which ensures equal treatment and non-discrimination. In late 2003, the Interchange of Data between Administrations (IDA) launched this specific project, whose purpose is twofold. The first objective was to establish functional requirements and produce guidelines for technical specifications in compliance with the new EU public procurement legislative framework, using input from reports on case studies on European electronic public procurement projects and using input from analysis of electronic public procurement status and systems in non-European countries. The second objective of the project was to model the new procurement workflows, as described in the new EU legislation, and develop static and dynamic Demonstrators. The Demonstrators are to be made available to member states for educational and experimentation purposes, assisting in the definition of

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eProcurement system requirements and elaboration of functional requirements for systems that are fully compliant with the EU public procurement legislation. E-procurement has been identified in the e-Europe action plan as one of the key domains where the information society can make a major impact. Member States are setting ambitious objectives, and have already launched a number of initiatives. IDA is also undertaking a trans-border public e-procurement study to analyze the drivers for, and barriers to, a single e-procurement market (IDAEC). In April 2004, as part of the legislative package of procurement Directives, the European Commission adopted a coherent framework to conduct procurement electronically in an open, transparent, and non-discriminatory way, to establish rules for tendering electronically and to fix the conditions for modern purchasing techniques based on electronic means of communication. This package entered into force in 2006. E-procurement will help enterprises to identify contract opportunities and to supply their goods and services across Europe's internal market, contributing to Europe's competitiveness and economic growth. But computerizing public procurement practices influences the way in which national public purchasing practices are organized. Successful implementation of e-procurement requires changing administrative practices, not only those directly linked to the procurement process, but also those that are indirectly linked. A transition to public sector procurement online requires legal, institutional, and organizational changes at many levels (European Institute of Public Administration). In this context, the Commission adopted the first IDABC work program for the period 2005 to 2009 on 8 November 2005. This was the green light for work to start on the different program actions. The successful completion of this work program will represent one more step towards the delivery of European e-government services for administrations, businesses and citizens. Furthermore, on 30th January this year, the Commission launched the e-practice forum, which will be presented during the second day of the Seminar. This seminar is included as an e-Procurement dissemination activity being promoted by the e-practice forum. The first phase of the IDA program was launched in 1995. Its aim was to promote the electronic exchange of information between administrations and to support the functioning of the internal market and the implementation of a wide range of Community decisions. The second phase of the IDA program (IDA II) was adopted by the European Parliament and the Council in their Decisions No 1719/1999/EC (the guidelines decision) and No 1720/1999/EC (the interoperability decision) of 12 July 1999. Recognizing the need for European administrations to take full advantage of the new technological opportunities, IDA was re-oriented with much greater emphasis on market demand and interoperability issues. (IDAEC) IDA is gathering case studies that illustrate best practices in e-procurement, and organizing meetings of national experts working in the field. This working group provides the framework

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for the exchange of experiences among public administrations, as well as input and feedback about the work undertaken in the e-procurement study. More than 30 experts from Member States, EFTA, the Commission and the team undertaking the transborder study participated in the first such meeting, held in Brussels on 4 December 2001. However, access to transborder public e-procurement in the EU will only be possible if barriers ('e-borders') are avoided by ensuring a high degree of interoperability. The Internal Market DG has already been addressing this need in projects such as SIMAP (Systeme d'Information pour les Marches Publics) and TED (Tenders Electronic Daily), which are already operational on the web. Transborder issues will be explored further in the IDA study, which has already identified a number of problem areas, in particular lack of:

• Interoperability of different electronic signatures • Interoperability of smart cards and smart card readers used as signing devices • Standards for electronic catalogues and • Standards to interpret the content of XML documents.

Thus it is seen that implementation of e-procurement in USA by the driving force or benefits on a commercial consideration. In European Union, it is a part of the implementation e-government. It is also seen that the commendable efforts taken by EU to make policy pertaining to e-procurement considering different procedures of member states and the concerted steps for emerging into one solution which will benefit trans-border interoperability. India government departments are progressing under national e-governance plan. In India transition from manual to electronic procurement means not merely implementing off-the-shelf software. It involved change in perceptions, attitudes and processes. First of all, it involved convincing all stake holders that it is safe and secure to use e-Procurement. Creating IT awareness among bidders was another challenge. Reliable Internet connectivity in remote office locations and similar facility for bidders to participate in e-Procurement platform was another challenge. Constitution of high-level coordination committees, training, workshops and help-desk modes were used to meet change management issues. Government industries are dependent on e-government implementation in the matters related infrastructure namely broadband internet connectivity, legal environment and government policy. It is not unlikely, the coexistence of traditional and modern business approaches. It also accepts the issues like integrating the new and old technology. Technological risks may be obsolete in European countries but it’s still visible in India due to the absence of any technological standard among different suppliers. It’s easier to optimize technological efficiency and operational flexibility across the organization with few training sessions for the employees. It helps the company in its efforts to achieve high technical efficiency and plans to run in tandem with its business-restructuring plan. However leadership of top management of individual industries played a great role in implementation of e-procurement in government industries.

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7 RECOMMENDATIONS AND CONCLUSION This research aims at explaining e-procurement applications in a sound way and implementation in government of India industries. The purpose of the research was to provide an in-depth understanding of e-procurement, identify organization’s objectives for adopting e-commerce, understand technical issues, security features, growth of e-procurement, benefits specially cost reduction in government of India industries. Extensive analysis is done in the thesis. The findings show cost benefit is the main driver for implementation of e-procurement followed by transparency. Process efficiency leads to reduction in time for purchase process and cleans up unwanted processes, brings visibility and transparency across processes. The process efficiency is not just about less paper work and less mistakes, e-procurement leads to professionalism in work, better business control and cleans up, other processes within the company through visibility and transparency across the entire process. Integration of new technology to the existing process avoids duplication of work and better Contract compliance. These are some of the most important benefits of e-procurement. Some companies mentioned importance of reliable suppliers than more number of customers. Technological and security related risks are still significant in the perception of managers of India. 7.1 Recommendations Reengineering of administrative process and procedures are necessary to make implementation of e-procurement successful. Use of proper technology and knowledge management would to overcome the risk factors. Another important aspect is retaining trained/skilled people who play great role in e-procurement project successful. In developing country like India use of ICT in procurement is important because it improves efficiency and it helps to reduce corruptions. E-procurement is reducing required time of transaction and helps for faster and more informed decision-making. Proper planning needed for infrastructure developments in government ICT sector to facilitate implementation of e-procurement in government industries. Service providers may be utilized for successful implementation. Law of the land should be modified to suit the requirement of electronic business. Comprehensive approach is important for successful design and implementation of E-government initiatives, which will help in implementation of e-procurement in government of India industries. Management should try to create clear vision and strategy to overcome the barriers and challenges, which might complicate the process of faster implementation of e-procurement. 7.2 Conclusion E-procurement is a powerful enabler that can generate tremendous value for the firm in terms of higher revenue, reduced costs, and better utilization of assets. E-procurement has the power

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to improve procurement performance in many ways. In order to reap the benefits of e-procurement, managers need to deploy e-procurement applications with great care so that the e-procurement applications reinforce the underlying procurement logic. By this, it is meant that there has to be a solid understanding of what procurement practice is wanted under the present industrial as well as global scenario, so that the right e-procurement application can be selected. Additionally, there are true materials management issues to address, including complex component and ingredient procurement, as well at the creation of seamless relationships with valued suppliers. Before initiating any e-procurement program, individual company must decide on what is important for the organization to achieve. E-procurement is to be applied on existing procurement practice in order to reinforce procurement performance. In a developing country like India it requires implementation of e-procurement by government industries in terms of formulation of national e-strategies, according to standards set by internationally agreed principles and then implementation of the very strategies with modifications according to requirements of the industry so that it can be integrated with national e-governance project in future. The implementation phase would require translating commitment into action at both national and regional levels. A successful transparent e-procurement system requires policies, legislation and a legal framework conducive to electronic commerce. Training manpower is one of the essential factors for implementation of e-procurement in government industries. At the same time it may not be possible to train large number of people. It would be prudent to treat procurement issues with a portfolio approach so that only handful of people who will be dealing and coordinating will be trained and updated. E-procurement has many opportunities and one of those is the easy retrieval and storage of trading data. The analyzed data can then be a useful supplement for making better decisions. A special group may be formed within the organization for data interpretation and support decision-making. Technology is constantly developing; the models and approaches are getting outdated. Organizations need to be aware of the technological development on global basis to attract international suppliers and customers. Despite the apparent difficulties of justifying marketplaces in the procurement area for government industries, there are still possibilities to pursue for third party actors. Considering the fact that e-procurement involves considerable investment. Secondly, technology is ever changing considerable recurring investment is required. Thirdly, in this age of outsourcing it is prudent to concentrate on core competency for the industry and out source whatever possible. This would reduce investment, working capital, production cost and burden of manpower. In India now service providers are available who are providing tailor made services, however decision making remains with the industry.

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After conducting this study several issues have been found that could be of interest for further research. One interesting aspect could be how corruption can be reduced by using ICT or by implementing e-procurement. Another topic may be the main challenges of e-procurement implementation in a developing country. E-procurement has just embarked in the market and still expanding. It will be fascinating to investigate the same variables in future setting. The findings from the thesis could serve as base for constructing hypotheses, which can be tested and used to produce generalized results. While almost all the literature and case studies indicate cost benefit is the main driver for a company to implement e-procurement indirect and non-cost benefits are quite considerable for government industries. E-procurement helps in observing set of rules and procedures, which is very essential for government industries. Increased transparency also makes an impact. Sharing information in close supplier relationships and integrating more closely with selected suppliers will result in the development of idiosyncratic and hard-to-copy relationships. These relationships can be a source of competitive advantage for India government industries.

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REFERENCES AND SOURCES

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and Implementation Barriers. Lulea, Sweden: Lulea University of Technology. Amaratunga.D, Baldry, D., Sarshar, M., & Newton, R. (2002). Quantitative and qualitative

research in the built environment: application of mixed research approach. Work Study, 51(1), 17-31.

Anandalingam, G. R., Day, W., & Raghavan, S. (2005). The landscape of electronic market design. Management Science, 51(3), 316-327.

Anderson, J., & Frohlich, M. ( YEAR). Free markets and online auctions. Business Strategy Review, 12(2), 59-68.

Basu, S. (2004). e-Government and developing countries: An overview. International Review of Law, Computers & Technology, 18(1), 109-132.

Central Vigilance Commission, Government of India. (2006). Shortcomings/ Lapses Observed In Stores /Purchase Contracts Placed By Public Sector Banks For Computers And It Related Products And Guidelines For Improvement In The Procurement System. Retrieved July 15, 2008, from http://www.cvc.nic.in/guidlinesforbanks.pdf

Chanda, S. (2008, July 5). Harnessing the Potential of IT for Public procurement. Retrieved August 25, 2008, from http://www.egovonline.net/interview/interview-details.asp?Title=Harnessing-the-Potential-of-IT-for-Public- Procurement&interviewid=456

Coal India Limited. (n.d.). Purchase Manual. Retrieved July 14, 2008, from http://www.coalindia.nic.in/purchase.pdf

Coal India Limited. (n.d.). Tenders. Retrieved August 10, 2008, from http://www.coalindia.nic.in/tender.htm

Controller of Certifying authorities, Government of India. (n.d.). IT Act 2000, Retrieved August 15, 2008, from http://www.cca.gov.in/it_act.jsp

Croom, S., & Brandon-Jones, A. (2004). e-Procurement: Key issues in e-Procurement implementation and operation in the public sector. In 13th International Purchasing & Supply Education & Research Association (IPSERA) Conference, April 4-7, Catania, Italy.

Dai, Q., & Kauffman, R. J. (2001, January). Business Models for Internet-Based E Procurement Systems and B2B Electronic Markets: An Exploratory Assessment. In Thirty-Fourth Annual Hawaii International Conference on Systems Sciences.

Davila A., Gupta, M., & Palmer, R. (2003). Moving procurement systems to the internet: the adoption and use of e-procurement technology models. European Management Journal. 21(1), 11-23.

Department of Information Resources (2001). Assessment of the General Services Commission's Electronic Procurement Project. Austin, Texas: Author.

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Department of Information Technology. Government of India. (n.d.). e-Governance. Retrieved July 18, 2008, from http://www.mit.gov.in/default.aspx?id=837

DGS&D. (n.d.). e-Procurement in DGS&D. Retrieved July 14, 2008, from http://www.eindia.net.in/egov/presentation/Day_3/Session_2/SN_Srivastav.pdf

Eadie, R., parera, S., Heaney, G., & Carlisle, J. (2007). Drivers and barriers to public sector e-procurement within Northern Ireland’s construction industry. Retrieved August 20, 2008, from http://itcon.org/2007/6/

European eGovernment Services, IDABC. (n.d.). Public e-Procurement: Best Practices and Transborder Dimension. Retrieved August 31, 2008, from http://ec.europa.eu/idabc/en/document/465

European Institute of Public Administration. (n.d.). Learning to Build Europe. Retrieved August 28, 2008, from http://www.eipa.eu/en/activities/show/&tid=2737

Government of India. (n.d.). India Government Tenders. Retrieved August 14, 2008, from http://tenders.gov.in/innerpage.asp?choice=tc5&tid=wesb148953&work=1

Grackin, A. (2001). e-Procurement, and is it ready for you? MSI. Oak Brook, 19(1), 26. Graziano. A.M. & Raulin. M. L. (1997). Research Methods – A Process of Enquiry. (3rd ed.).

New York: Addison- Wesley Educational Publisher Inc. Gulati, A.G. (2008). An Introduction to e- procurement. Retrieved August 29, 2008, from

http://ccaharyana.gov.in/e-procurement.htm#_ftn3 Kao, D., & Decou, J. (2001). Applicability of Selected e-Commerce Models to an e-

Commerce Planning Process Model. Retrieved August 10, 2008, from http://www.iacis.org/iis/2001_iis/pdf%20files/KAO172.PDF

Knudsen, D. (2003). Improving Procurement Performance with E-business Mechanisms. Lund, Sweden: Lund Institute of Technology, Lund University.

Koorn, R., Smith, D. & Mueller, C. (2001). e-Procurement and Online Marketplaces. Amsterdam, the Netherlands: Compact.

Kouvelis, P., Chambers, C., & Wang, H. (2006). Supply chain management research, production and operations management: Review, trends, and opportunities. Production and Operations Management, 15(4), 449-469.

MacManus, S. A. (2002). Understanding the incremental nature of e-procurement implementation at the state and local levels. Journal of Public Procurement, 2(1), 5-28.

Manganese Ore (India) Limited. (n.d.). Purchase Procedure Relating to Purchase of Equipments, Spare Parts and Stores Items. Retrieved July 14, 2008, from http://moil.nic.in/purch_link.htm

McLean, V. A. (2005, January). Online reverse bid auctions for construction contractors and subcontractors. Construction Management Association of America. Retrieved July 14, 2008, from http://www.necanet.org/pdf/ASC_News/Phase%20I%20Final%20Report.pdf

Menon, R. (2004). e-Procurement for Government: opportunities and challenges. Materials Management Review. Retrieved July 14, 2008, from http://www.iimm.org/knowledge_bank/2_e-procurement-of-govt-opportunities-challenges.htm

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Miles, M. B. and Huberman, M. A. (1994). Qualitative Data Analysis. (2nd ed.) London: Sage publications.

Ministry of Steel, Government of India. (2008). Annual Report 2007-08. Retrieved August 15, 2008, from http://www.steel.nic.in/Annual%20Report%20(2007-08)/English/Annual%20Report%20(2007-08).pdf

MSTC Limited. (n.d.). Historical Background. Retrieved July 12, 2008, from http://www.mstcindia.co.in/MSTC_Static_Pages/frontpage/about.htm

Narayana, P. (2004). Transparency in public dealing through e-ERA. Materials Management Review. Retrieved July 14, 2008, from http://www.iimm.org/knowledge_bank/2_transparency-in-public-dealing-through-e-era.htm

National Thermal Power Corporation Limited. (n.d.). e-Procurement activities. Retrieved August 27, 2008, from http://greenbusinesscentre.com/images/Photos/20_6.pdf

Parida, U., & Parida, V. (2005). e-Procurement: An Indian and Swedish Perspective. Retrieved August 14, 2008, from http://epubl.ltu.se/1404-5508/2005/010/LTU-SHU-EX-05010-SE.pdf

Presutti, W. D. (2003). Supply management and e-procurement: creating value added in the supply chain. Industrial Marketing Management. 32(3), 219-226.

Rothkopf, M. H., & Whinston, A. B. (2007). e-Auctions for procurement operations. Production and Operations Management, 16(4), 404-408.

Saunders, M., Lewis, P., & Thornhill, A. (2003). Research Methods for Business Students. (3rd ed.). Essex: Pearson Education.

Sekaran, U. (2000). Research Methods for Business: A skill Building Approach. (3rd ed.). New York: John Wiley& Sons, Inc.

Steel Authority of India Limited. (2007). Annual Report 2006-2007. Retrieved August 19, 2008, from http://www.sail.co.in/SAIL-Annual%20Report-06-07.pdf

Tavi, J. (2008, April). Learning from global world-class eProcurement practices. Remodeling Online. Retrieved, July 12, 2008, from http://www.remodeling.hw.net/industry-news.asp?sectionID=150&articleID=694799

The Asian Development Bank. (2004, July). e- GP Readiness Assessment. Retrieved August 19, 2008, from http://www.rswan.gov.in/resources/Implementation/e-Procurement/Readiness%20Assessment%20Questionnaire.pdf

Trkman, P., IndiharŠtemberger, M., Jaklič, J., & Groznik, A. (2007). Process approach to supply chain integration. Supply Chain Management. 12(2), 116-128.

Turban, E., King, D., Lee, J., Warkentin, M., & Chung, H.M. (2004). Electronic Commerce: A Managerial Perspective. Upper Saddle River, NJ: Prentice Hall.

United Nations Economic and Social Commission for Asia and the Pacific. (2006). Public Procurement Service of the Republic of Korea: e-Procurement. Retrieved August 14, 2008, from http://www.unescap.org/icstd/Pubs/st_escap_2406.pdf

Vaidya, K., Sajeev, A. S. M., & Callender, G. (2006). Critical factors that influence e-Procurement implementation success in the Public sector. Journal of Public Procurement, 6(1/2), 70-99.

Various definitions of electronic commerce. (1998). Business America, 119(1), 44.

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Vickrey Auction. (n.d.). In BusinessDictionary.com. Retrieved July 22, 2008, from http://www.businessdictionary.com/definition/business-to-business-auction.html

Visakhapatnam Steel Plant. (n.d.). Infrastructure. Retrieved August 14, 2008, from http://www.vizagsteel.com

Visakhapatnam Steel Plant. (n.d.). Integrity Pact. Retrieved August 14, 2008, from http://www.vizagsteel.com/insiderinl/INTEGRITY%20PACT%20OF%20VSP.pdf

Watts, S. (2008, June). Corporate strategy: Best practice- online shopping. Foreign Direct Investment, London.

Yin, R. K. (1994). Case Study Research: Design and Methods. (2nd ed.). Thousand Oaks: Sage Publications Inc.

Yin, R. K. (2003). Case Study Research: Design and Methods. (3rd ed.). Thousand Oaks: Sage Publications Inc.

Zikmund, W.G. (2000). Business Research Methods. Florida.: Harcourt Inc. Sources ONGC Limited. (n.d.). E-procurement tenders (E-Tenders). Retrieved August 29, 2008, from

http://tenders.ongc.co.in/ Indian Oil Corporation Limited. (n.d.). E- procurement portal. Retrieved August 29, 2008,

from http://iocl.etenders.in/iocl/index.asp Northern Railways. (n.d.). E-tenders system. Retrieved August 29, 2008, from

http://www.nreps.com/cgi-bin/nreps.dll/nreps/demand/home.do MSTC Limited. (n.d.). E-commerce. Retrieved August 17, 2008, from

https://mstcecommerce.com/eproc/

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APPENDIX I Letter to PSU (Public Sector Undertaking)

Date : 31.7.2008 FROM : BHASKAR MAJUMDAR, ICPE, 104, Dunajaska, Ljubljana, Slovenia. TO, Dear Sir ,

Sub: Questionnaire for master thesis: e-procurement in India with a case study.

I am pleased to introduce myself as a MBA participant at International Center for Promotion of Enterprises (ICPE), which is conducted in association with Faculty of Economics, University of Ljubljana, Ljubljana, Slovenia. I have been sponsored by MSTC Ltd. (A Government of India Enterprise) for this programme. As a part of my international MBA program I am doing a master thesis on the abovementioned subject. The objective of this survey is to gather information about existing e-procurement systems and supporting tools that can help fulfil the vision of seamless, standard-based electronic public procurement, for an academic research. These data will be kept confidential and used for this master thesis only. No individual or organization will be identified in any manner. With this aim I am approaching you to answer the questions freely about your initiatives on this domain, including the usage or development of IT applications. Please answer the questions in the space provided. If you have any queries or would like further information about this project, please mail me on mk53@rediffmail.com. Electronic Procurement (e-Procurement), in this study, refers to the use of web-based information and communication technologies (especially the Internet) in order to support all stages of the operational and strategic procurement activities, such as item requisition request, request for quote, price obtaining process, approval, purchase order, payment, identifying sourcing opportunities, supplier negotiation and contract. Please answer all the questions. If any of the item in the questionnaires is irrelevant or not applicable to your organizational context, please write N/A. The attached questionnaire is designed to know the following:

i

• Organization’s objectives for adopting E-procurement. • Technical issues related to E-procurement. • Benefits of e-procurement in Indian context. • Precautionary measures necessary.

I shall be grateful if you kindly share your rich experience in the subject and help me in my endeavour. The completed document may please be e-mailed to me at the earliest in my email address.

Thanking you, Yours faithfully,

BHASKAR MAJUMDAR,

AGM, MSTC LTD.

( A GOVT.OF INDIA ENTERPRISE) CAMP SLOVENIA

I9TH MBA BATCH, INTERNATIONAL CENTER FOR PROMOTION OF ENTERPRISES,

SLOVENIA.

MOBILE 00386 40 384214 Email

mk53@rediffmail.combmajumdar@mstcindia.com

ATTACHMENT: ONE QUESTIONNAIRE.

ii

APPENDIX II Questionnaire for PSU

Date : 31.7.2008 Questionnaire for master thesis: e-procurement in India with a case study. I am doing MBA at International Center for Promotion of Enterprises (ICPE), which is conducted in association with Faculty of Economics, University of Ljubljana, Ljubljana, Slovenia. I have been sponsored by MSTC Ltd. (A Government of India Enterprise) for this program. As a part of my international MBA program I am doing a master thesis on the abovementioned subject. The objective of this survey is to gather information about existing e-procurement systems and supporting tools that can help fulfil the vision of seamless, standard-based electronic public procurement, for an academic research. These data will be kept confidential and used for this master thesis only. No individual or organization will be identified in any manner. With this aim I am approaching you to answer the questions freely about your initiatives on this domain, including the usage or development of IT applications. Please answer the questions in the space provided. If you have any queries or would like further information about this project, please mail me on mk53@rediffmail.com. If any of the items in the questionnaires is irrelevant or not applicable to your organizational context, please write N/A. Instruction for filling questionnaire: Please type in the space provided after each questions.

1. Company Profile 1.1 Name of the organization. 1.2 Name of the respondent and position.

1.3 No. of employees. Approximately how many employees work in your organization?

1.4 Annual turnover. What is the annual volume of purchase (in Indian Rupees) ?

iii

1.5 Products / services. What are the products of your organization?

Comments:

2. Introduction to e-procurement. 2.1 What are the issues involved in adopting e-Commerce in your organization?

Comments:

2.2 When your august organization started e-Commerce / e-procurement (year). Comments:

2.3 In your way would you please write about e-procurement with regards to company perspective? (3/4 sentences).

Comments:

2.4 What is the current e-procurement solution used in the company? Comments:

2.5 What functions are supported by the current e-procurement solution (EDI,

MRO, E- tendering, E-auctions, Reverse E-auction etc.)? Comments:

2.6 What are the major materials / services procured through e-procurement?

Comments:

2.7 What is the percentage (approx.) of the total purchase (in Indian Rupees) procured through e-procurement?

Comments:

2.8 What is the preferred model of e-procurement? (e-tender / reverse auction) Comments:

iv

3. Benefits from e-procurement 3.1 In your way would you kindly describe the benefits associated with the

implementation of e-procurement in your organization. Comments:

3.2 What do you feel about cost saving associated with e-procurement?

Comments:

3.3 Costs saving towards the process of procurement (approx. %). Comments:

3.4 Cost saving towards procurement price(approx. %). Comments:

3.5 Do you feel if there is any improvement in efficiency. Comments:

3.6 In terms of time taken for tendering process. Comments:

3.7 In terms of reduced paper work. Comments:

3.8 In terms of manpower requirement. Comments:

3.9 In terms of transparency. Comments:

3.10 Reduction in sourcing cycle time (products get to market faster and firms gain higher market share).

Comments:

3.11 Widening of supplier base. Comments:

v

3.12 Do you perceive better inventory level associated with e-procurement implementation?

Comments: 3.13 In your opinion what are the most important benefits associated with the

e-procurement ? Comments:

4. Risks with e-procurement. 4.1 How do you feel about risks associated with e-procurement process?

Comments:

4.2 Security and control issues. Comments:

It is hereby once again assured that the data will be used for this master thesis only and shall be kept confidential. No individual or organization will be identified in any manner.

Please forward the filled questionnaire to Email mk53@rediffmail.com

bmajumdar@mstcindia.com

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APPENDIX III Letter to MSTC Limited

Date : 16.8.2008 FROM : BHASKAR MAJUMDAR, ICPE, 104, Dunajaska, Ljubljana, Slovenia. TO, Dear Sir, Sub: Questionnaire for master thesis : E-procurement in India with a case study on MSTC Limited (A Government of India Enterprise) I am doing MBA at International Center for Promotion of Enterprises (ICPE), which is conducted in association with Faculty of Economics, University of Ljubljana, Ljubljana, Slovenia. I have been sponsored by MSTC Ltd. (A Government of India Enterprise) for this program. As a part of my international MBA program I am doing a master thesis on the abovementioned subject. The objective of this survey is to gather information about existing e-procurement systems and supporting tools that can help fulfill the vision of seamless, standard-based electronic public procurement, for an academic research. These data will be kept confidential and used for this master thesis only. No individual or organization will be identified in any manner. With this aim I am approaching you to answer the questions freely about your initiatives on this domain, including the usage or development of IT applications. Please answer the questions in the space provided. If you have any queries or would like further information about this project, please mail me on mk53@rediffmail.com.

vii

Electronic Procurement (e-Procurement), in this study, refers to the use of web-based information and communication technologies (especially the Internet) in order to support all stages of the operational and strategic procurement activities, such as item requisition request, request for quote, price obtaining process, approval, purchase order, payment, identifying sourcing opportunities, supplier negotiation and contract. Please answer all the questions. If any of the items in the questionnaire is irrelevant or not applicable to your organizational context, please write N/A. The enclosed questionnaire is grouped into four broad groups for convenience.

1. Organizational Aspects: E-procurement practices for assisting administrations to conduct competitions, as well as, helping towards the development of eProcurement.

2. Procedural Aspects: E-procurement practices to be followed for all phases during the

lifecycle of all foreseen eProcurement procedures.

3. Technical Aspects: E-procurement practices for the technical modelling of eProcurement systems fully compliant with law of the country.

4. Operational Aspects: E-procurement practices for helping Contracting Authorities to

conduct effective, fair and transparent competitions You are also welcome to forward your comments, if any, on the subject. I hereby assure once again that the data will be used for academic purposes only and shall be kept confidential. I shall be grateful if you kindly spare few minutes of your valuable time and help me in my endeavor. The completed document may please be e-mailed to me at the earliest in my email address. Thanking you, Yours faithfully, BHASKAR MAJUMDAR, AGM, MSTC LTD. ( A GOVT.OF INDIA ENTERPRISE) CAMP SLOVENIA I9TH MBA BATCH, INTERNATIONAL CENTER FOR PROMOTION OF ENTERPRISES, SLOVENIA. MOBILE 00386 40 384214 Email mk53@rediffmail.com bmajumdar@mstcindia.co.in

viii

ENCLO: ONE QUESTIONNAIRE.

APPENDIX IV Questionnaire for MSTC Limited

Date : 16.8.2008 Questionnaire for master thesis: E-procurement in India with a case study on MSTC Limited (A Government of India Enterprise) Company Profile Name of the Organization: MSTC Limited (A Government of India Enterprise) Name of the respondent and position:

1 Organizational Aspects: E-procurement practices for establishing and development of e-Procurement.

Introduction to e-procurement

1.1 What are the issues involved in adopting E-Commerce in your organization?

Comments: 1.2 When your august organization started e-procurement (year).

Comments: 1.3 In your way would you please write about e-procurement with regards to company

perspective? (3/4 sentences). Comments:

1.4 What is the current e-procurement solution used in the company?

ix

Comments: 1.5 What functions are supported by the current e-procurement solution (E- tendering,

E-auctions, Reverse E-auction etc.)? Comments:

1.6 what is the preferred mode of price negotiation?

Comments: 1.7 A main obstacle that service provider / buyer face is making the vendors / suppliers

understand the full potential of e-Procurement and how it can be realized through the use of e-Procurement solutions operating. This obstacle becomes even more crucial when the model of the e-procurement systems requires the payment of subscription fees / registration fees and training. How do you tackle this? Comments:

1.8 A significant consideration of buyer / service provider is the participation of suppliers in the new type of electronic business. This is a crucial factor for the success of any eProcurement program. Attracting suppliers to an eProcurement service can be a significant obstacle. How do you overcome this? Comments:

2 Procedural Aspects: E-procurement practices to be followed for all phases during the lifecycle of all foreseen eProcurement procedures.

Identified practices are grouped along the different phases of the procurement cycle.

2.1 Agreement with buyer. Would you kindly enlighten us?

Comments: 2.2 Registration process: Methods for creating user accounts and profiles with related

roles. Whether it is - Simple registration process (requiring only trivial details) or Advanced registration process (use of electronic certificates)? Comments:

2.3 Suppliers may submit their partial or full set of documentation in a non-electronic

format. Whether the system could be modeled in such a way, so that the details of communications using traditional paper-based means can be traced and linked to the e-Procurement system? Comments:

2.4 The objective is to promote the further development and enhance use of e-

procurement systems in India, achieving a return-on investment from the cost-savings achieved. On the other hand, there are administrations that charge certain fees to Vendors / suppliers for using eProcurement services. How it is achieved?

x

Comments:

2.5 Whether any other charges are applicable? Comments:

2.6 Can the use of OSS (Open source software) lower the overall cost of operating e-Procurement systems, and therefore lowering or even eliminating subscription / annual fees for suppliers and administrations? Comments:

2.7 Publishing Notices: Preparation and publication of notices to official electronic notice

Boards. Would kindly enlighten us? Comments:

2.8 How do you ensure the quality of information provided to suppliers?

Comments:

2.9 Matching supplier profile to business opportunities short-listing of suppliers: do you depend on supplier qualification mechanisms based on the criteria that have been defined in the call for e-tender / reverse e-auction notice? Comments:

2.10 In order to ensure a genuine / legitimate competition, is there any statute for

minimum number of qualified vendors? Comments:

2.11 How to secure notification using email/SMS to the vendors / suppliers?

Comments:

2.12 How do you overcome the issues of non-delivery of emails/SMS? Comments:

2.13 Sometimes tenderers find the e-Tendering process incomprehensive, especially when complicated procedures (for example electronic signatures) are involved. Furthermore, eProcurement system implementers need to always have in mind that tenderers do not use such eProcurement systems on an everyday basis. Therefore, suppliers and especially those with limited IT experience are not necessarily familiarized with the complete functionality of the available system. How do you tackle this issue? Comments:

2.14 Do you feel that a user-friendly Graphical User Interface can assist users to understand the e-Tendering / reverse e-auction process? Comments:

2.15 The definition of a reverse auction can be flexible enough to accept various

rules, depending on the goods/services being procured. Therefore, parameterized methods for setting up a reverse auction may be necessary. Do you configure e-reverse auction according to nature of procurement?

xi

Comments:

2.16 A simplistic mechanism for achieving the Most Economically Advantageous

Offer in e-reverse auctions with a single criterion (price). All non-price criteria may be transformed into monetary values through pre-defined rules. Do you encourage this? Comments:

2.17 Significant benefits can be achieved by integrating an e-Procurement

repetitive purchasing system to the financial systems. Would you kindly enlighten us? Comments:

2.18 Does the audit trailing mechanism of the system record full activity?

Comments:

3. Technical Aspects: E-procurement practices for the technical modelling of e-procurement systems fully compliant with law of the country.

3.1 During the development of eProcurement systems, there are variety of security issues

that need to be considered, for instance the secure transmission, safe storage, consistency and confidentiality of data. A very sensitive area of security is the methods employed for authenticating users in the system, as information exchanged between buyer/service provider and suppliers is commonly binding. Do you suggest Secure Socket Layer (SSL) by using the Secure HyperText Transport Protocol (HTTPS) and latest widely-used SSL standard of 128-bit encryption? Comments:

3.2 Do you suggest any other security system?

Comments:

3.3 Electronic signatures are used for ensuring the proof of origin of electronically transmitted documents. Advanced electronic certificates are issued by Certification Authorities (CA) and are used for producing electronic signatures by their possessors. An electronically signed document guarantees the identity of the person who signed it. Furthermore, electronically signed documents ensure the consistency of the data of an electronically transmitted document. The drawback in utilizing this technology is the limitations in interoperability. Each CA establishes its own methods for modeling this technology, usually abiding to local or national rules. The various CAs do not necessarily interconnect, and therefore another CA does not necessarily trust suppliers that have a certificate from a CA. This in turn means that a fully interoperable system needs to trust all CA, which is difficult to achieve. How do you tackle this? Comments:

3.4 Do you suggest limited use of electronic signatures (only for critical activities)?

Comments:

3.5 Do you suggest mechanisms for ensuring accurate timing of system events Time –stamping? Comments:

xii

3.6 The eProcurement software solution needs to be very well implemented in order to

manage with the heavy load of transferred data during certain time. The hosting servers have to be powerful enough to handle the increased volume of transactions. The network architecture needs to be capable enough to avoid traffic congestions. The complete software and hardware environment needs to be implemented and configured in an optimum way, ensuring no volume capacity faults. Would kindly enlighten us? Comments:

3.7 Do you use color coding, animations and other visual effects for informing users

significance of events? Comments:

3.8 How about number of maximum/minimum concurrent users requests to the system

and methods for dealing with volume capacity problems during the closing time of the tender/reverse auction? Comments:

3.9 How to ensure the secure communication of information and its storage in system

data repositories (security)? Comments:

3.10 How do you ensure virus issues and protection from malicious attacks?

Comments:

3.11 The topic of document standards is related to the equality of treatment and the interoperability needs of e-Procurement systems. Public sector e-Procurement systems need to be openly available and easily accessible by all. This in turn can be translated to suppliers being in a position to use their own computer programs and IT infrastructure in order to use an e-Procurement system. Whether all widely used electronic document standards are acceptable? Comments:

4. Operational Aspects: E-procurement practices to conduct effective, transparent and fair competitions.

4.1 How frequently training program organized for employees of service provider? Comments: 4.2 How frequently training program organized for suppliers?

Comments:

4.3 How do you assure quality of e-catalogues? Comments:

xiii

4.4 What about downtime in case of system failures, technical hotline, support from the hosting providers? Comments:

4.5 How to ensure that vendors receive an equal amount of information at the same time

(equality of treatment)? Comments:

4.6 How to ensure the confidential nature of information (confidentiality)?

Comments:

4.7 How to ensure that operation of the system improves competition for the users (effectiveness)? Comments:

4.8 How about methods of receiving complaints and management of disputes?

Comments:

4.9 How present practice can ensure that all suppliers are given equal opportunity and equal treatment? Comments:

4.10 Is there any move for implementation of Common Procurement Vocabulary

(CPV) as the single classification system in public procurement through out the country? Comments:

Is there any thing you would like to add to the topic? It is hereby once again assured that the data will be used for academic purposes only and shall be kept confidential.

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