e Procurement in Go AP l Govt of

e. Procurement in Go. AP l Govt of Andhra Pradesh

What is e. Procurement l Doing procurement activities electronically over the Internet with vendors/ suppliers. l l l l Online indents & demand aggregation Online Expression of Interest Online Bid submission System supported evaluation Online status publishing Online release of purchase order/ Letter of award Order fulfillment and post-procurement processes

Why e. Procurement …. l l l l Paperless Automatic Work flows Lead time reduction Cost reduction Transparent Single stop shop Remote bidding Secure

Situation before e. Procurement l l Discrimination in issue of tender schedules to suppliers Cartel formation suppresses competition l l l l keeping financial bids close to the maximum permissible Physical threats to bidders Tender boxes at multiple locations Manual movement of tender files from districts to the offices of the Heads of Department Delays in finalisation of tenders Possibility of tampering or loss of records Human interface at every stage Lack of Transparency

Cabinet sub-committee on tender reforms – Year 2000 Simplification of procurement procedures l Achieving greater transparency in procurement l Reducing delays in procurement l Ensuring timely completion of projects l Recommended for electronic Procurement

Initial Steps in 2002 l e. Procurement identified as a core e. Governance project l l with relevance across the government First among governments to implement e. Procurement Recommended for electronic Procurement

Key Objectives l Leverage buying power through demand aggregation l Better value for money for government l Significantly reduced cost and time of doing business for both government and industry l Level playing field, “fair” competitive platform and single registration for the suppliers l Increased transparency, monitoring and control of procurement process

Scope of eprocurement services l l Pre-procurement processes Tender Management system l l l l l Online publication of tender notice Online bid submission Online evaluation Online issue of Letter of award Rate contracts and catalog buying Auctions & reverse auctions Supplier registration Contract monitoring e. Payments, PKI

e. Procurement- Business Models l Total Govt ownership l Govt owned, O&M by Service provider l Public Private Partnership Model

Why PPP ? l l l No Capital cost to the Government State of the art technology High quality resources Low Risk Combining accountability with efficiency Best services to suppliers and departments as services are governed by SLAs

Role of Private Partner (C 1 India) l l l Implementation of the E-Procurement functionality across all departments Customizing software Setup and management of hardware and software for the Portal Training Helpdesk services Operation & Maintenance

Business Terms & conditions… l l l l Agreement period for 3 to 5 years Primary site, Disaster Recovery site Hardware Architecture Data ownership with the Govt Source Code will be kept in an Escrow account Buy out the software & Hardware at the end of contract period at the Residual Value Service levels finalised. Eprocurement fund proposed to sustain the eprocurement initiatives

Security & Authentication l l l l l Secured Hosting facility Web security- SSL technology Two factor authentication with Digital Signatures Bid encryption at data base. Audit trail of each activity Good backup policy Security audit by independent third party Time stamping. Access control systems

Legal frame work l l l IT Act 2000 Digital certificates Executive Orders Process guidelines to be issued Service Level Agreement

Change Management l Stake Holders l l l Departments Contractors/ Suppliers Politicians Press Citizens l Issues l l l Security Concerns Computer awareness Internet connectivity Loss of power by departments Resistance from some bidders

Change Mgmt. . - Departments l l l Identification of Internal Champions Trained as Chief Information Officers (Domain experts), who champion application of ICT in their departments Formation of core groups l l l As Is process To Be process User requirements Software requirements Series of workshops – Regional/ Hqrs Reviews and reporting

Change Mgmt. . - Suppliers l Involvement of Supplier Professional Bodies in FRS l l l l Builders Associations Small scale industries manufacturers associations Federation of Chambers of Commerce Customised screens, prototypes vetted by Supplier bodies User friendly Interface, easy navigation Department vocabulary used in the front end No tender fee on eprocurement(in the pilot)

Training l Training in Application software l l l l Hands on training Supplier registrations Mock bids Training CDs Trainings modules hosted in web site Training of officers Training of suppliers New version trainings

Help Desk l l l Help Desk maintained by Service Provider in shifts On 24 x 7 basis Log of all Help Desk calls Call disposal tracked Based on the severity of problem, call is escalated up to Project Manager level

e. Procurement in AP 8 Govt Departments n Irrigation, Roads&Buildings, Panchayat Raj Engg, Public Health Engg, Animal Husbandry, Horticulture, Tribal Welfare, Fire Dept 13 Public sector Units n APTS, AP Police Housing, APSRTC, APHMHIDC, APSTC, HUDA, HMWS&SB, APGenco, Singareni Colleries, APHB, APSHC, APSIDC, APIIC 57 Municipalities 4 Universities , IEG, TTD Turn over n n 2003 -04: 2004 -05: 2005 -06: 2005 -07: Rs. 1, 982 Cr (564 Nos) Rs 15, 600 Cr(2215 Nos) Rs 15, 808 Cr (9981 Nos) Rs 780 Cr (1080 Nos) 13591 Tenders Rs 33974 Crores Or US$8 Billions

Spectrum of procurements Hardware, software, Office automation Drugs, Medical equipment, Furniture Veterinary drugs, Pesticides Paper, Office stationary Cow ghee, Sugar, gingelley oil Auto spares, Transformers, Pumps Works contracts EPC - Turnkey contracts

EPC - Turnkey: Procurement: Construction contracts Engineering n Expeditious delivery Single agency approach Offshore Construction Majors Competition brings best of Engineering Savings in costs due to competitive designs and best construction practices w Contractor responsible for delivery w Improved quality w Fixed amount contract-No increases possible due to change in soils or quantities or leads etc. w Mile stone based payments Turn key contracts n I&CAD- Major Irrigation Projects n HMWS&SB, MCH - Sewage Treatment plants 180 EPC contracts of value Rs 20, 000 Cr finalised through e. Procurement w w w

Benefits demonstrated l Savings to Government l Total anonymity generated more competition l l l Savings estimated at Rs. 255 Cr in 2003 -04 Savings estimated at over Rs. 1000 Cr & Rs. 801 Cr in 2004 -05 & 2005 -06 respectively. Savings in advertisement costs. Discount quotations even in Single bid tenders Automated work flows shortened tender lead time from 90 to 180 days to 36 days Transparency l Bid documents available free on Net. l Tender evaluation status automatically notified to bidders. l Corrigendums in public domain. l No interface with departments upto tender opening.

Benefits l Reformist outlook to Govt l l l Eliminated cartels, syndicates Avoided fighting among potential bidders Drastic reduction in adverse press reports Project won Golden Icon award for e. Governance Initiative Empowerment of Bidders l l l Remote submission of bids Reduced bidding costs No more dependence on departmental officials

Cost savings- Analysis case: COT Estimated/ Tender Contract Value Year No. of tenders ECV(Cr) TCV (Cr) % 2001 -02 188 755. 29 735. 57 (-)2. 65 2002 -03 125 558. 36 510. 07 (-) 8. 65 2003 -04 160 1101. 69 884. 21 (-) 19. 74 2004 -05 95 755. 56 667. 09 (-) 11. 72 Comparison between two systems Type e. Procurement(2003 -04) Conventional(2003 -04) No. of tenders ECV (Cr) TCV (Cr) % 107 733. 55 549. 93 (-)25 53 368. 14 334. 78 (-) 9 e. Procurement(2004 -05) 90 725. 52 638. 29 (-)12. 02 Conventional(2004 -05) 5 30. 04 28. 80 (-) 4. 12 COT derived Additional savings due to e. Procurement

Cost savings- in Municipalities source- MA&UD Department Comparison of two systems in 2005 -06 (up to Oct’ 05) Type e. Procurement for State Govt funded schemes Conventional for World Bank. Schemes No. of ULBs No of ECV (Cr) Procurem ents % 52 383 60. 33 (-)10. 31 35 173 29. 33 (+) 7. 4 Effective cost savings due to e. Procurement is 17. 71%

e. Procurement declared as Best practice Go. AP e. Procurement presented to Cabinet Secretary Go. I in November 2005 Go. I has addressed all Chief Secretaries to implement e. Procurement as per AP Model All states, Central Govt to migrate to e. Procurement by 1 -4 -2007 All states were advised to seek guidance from Go. AP & NIC, if required. Case study published in World Bank website

“e. Procurement has secured demonstrable benefits to the govt. departments by way of significant cost and time savings. Further more, the transparency in the system has delivered social benefits by eliminating suppliers cartels and the citizens are now assured that procurement transactions are fair and devoid of subjectivity” India Dr. Y. S. Rajasekhara Reddy, Chief Minister, Andhra Pradesh,

Scalability l High volume of transactions l l 800 bids received from suppliers l l 147 tenders closed on a single day More than 10, 000 documents uploaded Caters to all procurements l l High value – Rs 2365 Cr: EPC project for I&CAD Low value – Rs 56, 000: Drains in a Municipality

Transaction Fee l Transaction fee payable to C 1 India: l l l l No tender hosting charges 0. 04% of ECV with a cap of Rs. 10, 000/- per bidder for all works upto ECV of Rs. 50 crores and Rs. 25, 000 (Twenty five thousand) per bidder for works with ECV above Rs. 50 crores. Service charge @10. 2% on above tariff. Go. AP has not given any guarantee to C 1 India on the revenues The bid processing fee to be collected from the bidders electronically at the time of submission of bid. Transaction fee is lower than the manual tender fee

Critical Success Factors l l l l l Top Political leadership support High level Project Implementation committee Right policies, Objectives Significant Process Re-engineering Active involvement of Stakeholders Detailed Project Management Workshops, trainings Public Private Partnership Model CIOs from domain are project leaders 24 X 7 Helpdesk

Thank You For more details Visit www. eprocurement. gov. in Project Manager, e. Procurement, IT&C Department, A- Block, Secretariat, Hyderabad, Andhra Pradesh. Phone 040 -23451055, mobile 98490 93397 Email: pmeprocurement@ap. gov. in,