Innovating Public Procurement through Korea ON-line E-Procurement System

Innovating Public Procurement through Korea ON-line E-Procurement System March 2010

Contents 1. Foreword: Korea’s e-Government Project 2. Korea ON-line E-Procurement System (KOPNES) 3. Impacts of KONEPS 4. Global Recognition and International Cooperation

1. Foreword: 2. Korea’s e-Government Project

Foreword: Korea’s e-Government Project The Korean Government initiated 11 e-Government projects to enhance national competitiveness utilizing information technology e-Government Innovation in Services 1 2 3 4 Administrative Productivity Single Window for Civil Services 5 National Finance system 6 Government-wide e-Procurement System Integrated Administration System for Local Governments Nation-wide Educational Administration System Standardized HR Management System 7 Integrated Social Security Information System 8 Internet-based National Taxation System 9 Consolidation of e-Document Exchange and e-Reporting INFRASTRUCTURE 10 e-Authentication and e-Signature System 11 Government-wide IT-governance Environment

Foreword: Korea’s e-Government Project The Korean Government initiated 11 e-Government projects to enhance national competitiveness utilizing information technology. Government e-Procurement system aims to achieve efficiency and transparency, to save costs in administration and transactions, and provide optimal business environment for the private sector. Productivity Transparency ▶ ▶ National Finance System Integrated Local Administration System Nation-wide Educational Administration System Standardized HR Management System Korea e-Government Best Civil Services ▶ Single Window for • Single Window for Civil. Services Civil Services ▶ • Internet-based National Taxation System G 2 C G 2 B Optimal Business Environment ▶ Government-wide e. Procurement System ▶ Integrated Social Security Information System G 2 G Efficient Procurement Administration Transparent Transactions Administrative Cost Savings Transaction Cost Savings for Businesses

2. Korea ON-line E-Procurement System (KONEPS)

Public Procurement System in Korea Combination of Centralized and Decentralized Procurement Medium to Increasing large scale procurement for central government SME’s Market Opportunities agencies : handled by Public Procurement Service (PPS) Small scale procurement: handled by each government agency Local governments and public enterprises: autonomous procurement Public Procurement Service (PPS) PPS is the central government procurement agency of Korea under the Ministry of Strategy and Finance Total procurement volume of 45 billion USD in 2009

Korea ON-line E-Procurement System (KONEPS) KONEPS Government-wide e. Procurement System Developed and operated by PPS Commonly used by all public agencies for procuring goods and construction works International standards to ensure interoperability

Problems Prior to KONEPS

Innovation through e-Procurement

Characteristics of KONEPS Single Window for Public Procurement Publication of all public tender notices and related information at a single website Bidders can participate in all public biddings after onetime registration

Characteristics of KONEPS Integration of Entire Procurement Work Entire procurement processes from supplier registration, bidding through to payment are conducted via the internet One-click purchase at the Online Shopping Mall One-stop Service 160 types of documents handled online through the data exchange linkage with 100 other public sector & private sector information systems

Functions of KONEPS processes the entire procurement procedures through the 4 major sub-systems: e-bidding, e-contracting, e-payment and the online shopping mall e-Contracting e-Bidding Contract Registration Tender notice Composition and Price Assessment sealing of Contracts Evaluation / Analysis Contract Review KONEPS e-Payment Expenditure Mgmt. Fee Management Online Shopping Mall Product Registration E-Catalogue Product Search Online Order

KONEPS Processes Certificate Authorities Other Bidding Systems PG System Certificate Related Associations Certificate Authorities D-Brain System G 4 C System Authentication Certificate Integrated Notice Commission for Bid Participation Supplier Data Authentication Certificate Contract Information Certificate for Tex Payment Supplier Registration Integrated For Bidding Bid Opening/ Evaluation G 4 C System Public Org. (36, 000) Surety Company Encryption Key Issuance System Surety Company Supplier Registration Integrated Notice Bid Bond Encryption/ Time Stamp Performance Bond, etc Contracting Delivery/ Inspection/ Acceptance D-Brain System Payment Banks Electronic Funds Transfer All procurement processes are digitalized Online Transaction KONEPS electronically obtains information on the bidders (business registration, credit rating, past performances, etc) from other public and private information systems (no need for submitting paper documents and certificates)

Transactions through KONEPS 41, 000 Public Entities $86 bn 191, 000 Registered Suppliers In 2009, over 70% of Korea’s total public procurement (122 billion USD) was conducted through KONEPS $63 bn $56 bn 2007 2008 2009 Total Volume of Transactions Conducted via KONEPS

e-Biddings through KONEPS 235, 178 207, 633 207, 960 213, 539 20. 8 2006 Number of e-Biddings 20. 9 2007 23. 2 20. 5 2008 2009 Total number of bid participants (unit: million)

3. Impacts of KONEPS

e-Bidding The transparency & efficiency of the public procurement in Korea has been dramatically increased due to e-bidding system of KONEPS e-Bidding 서비스 제공 형태 Before e-Contract e-Payment e-Shop After Subscription of government gazette & papers for bid information Free and easy access to all public bidding information Frequent visits to each public org. , for registration and submission of bids No need to visit procuring entities Possible risk of bid rigging & irregular activities - one time registration to KONEPS enables to participate in all bids in Korea Drastic decrease of irregular practices in public biddings

e-Contracting has decreased the irregularities which have possibly resulted from direct visits to the government offices It also simplified the contract documents and saved of transaction cost. e-Bidding 서비스 제공 형태 Before Need to visit procuring entities to sign/seal the contract documents Need to visit surety companies for bonds and guarantees Risks of irregular practices from face-to-face contacts in bidding and contracting e-Contract e-Payment e-Shop After Electronic contracting anyplace, anytime Electronic archives for keeping the contract documents No need for face-to-face contacts: minimized risks of irregular practices Time and cost savings

e-Payment enhanced business efficiency by reducing the time for banking and tax verifications e-Bidding 서비스 제공 형태 Before e-Contract e-Payment e-Shop After Frequent Visit to a Bank Conduct business-banking online Massive paper documents for inspection, acceptance and payment Time and cost savings time consuming till receipt of payment Simplification of document submission for payment

e-Shopping Mall The e-Shopping Mall provides easy on-line ordering for commonly and repetitively used products for all public organizations, without individual contracting procedures e-Bidding 서비스 제공 형태 Before Limited number of suppliers Lack of advertisement / marketing tools for suppliers in the public procurement market Complication in product search and long ordering time e-Contract e-Payment e-Shop After Access to a broader public procurement market Active support for advertisement and marketing Simple product search and instant ordering

Transparency and Cost Efficiency Enhanced efficiency and transparency Saves US$8. 1 B worth of transaction costs annually Reduction of visits and contract-related papers, time-saving, etc Improves transparency in doing business with the government Minimized face-to-face contacts All the information are published on-line on a real time basis The number of bid participants increased three-fold

Work Productivity has risen 5 fold

Contribution to the Growth of SMEs Benefits for SMEs participation Minimal cost for marketing and promotion in the public sector 99. 5% of the total 190, 000 registered bidders are SMEs Easy access to tender information and broader bidding opportunities Market opportunities for new technology products 97% of the suppliers of the On-line Shopping mall are SMEs

International Cooperation e-Procurement Workshops E-Procurement Workshops with UN, the World Bank Training Program for countries interested in e-Procurement implementation Feasibility Studies for e-Procurement Implementation Vietnam, Pakistan (2005) Mongol, Georgia (2007) Costa Rica, Uzbekistan, Tunisia (2008, 2009) Support for System Implementation Support for system implementation in Vietnam (pilot system) and Costa Rica (full implementation) using KONEPS modules

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5. Appendices

Focal points in the implementation of KONEPS Gateway to Government Procurement Integrated Information & Shared Use E-Procurement Portal Comprehensive Information Contents Integrated Information Search Customer Service Comprehensive information on public bids and bid awarding Access to integrated data from public authorities and industry associations Shared use of information Standardized Procurement Process ASP for public institutions Services for suppliers System development for the System Operation Authority Efficient Procurement Process One-time registration for participating in all public bids Reducing the paper document submissions by bidders Korea ON-line E-Procurement System (KONEPS) Standardization of Fundamental data Standardizing Product Catalog and consolidating the database Creation of e-Catalog Standardizing 149 e-Document forms Reliable e-Document Exchange Conformity to W 3 C/eb. XML international standards End-To-End security measures Security assurance

Features of KONEPS Solution Features of each solution of KONEPS are as follows Features of Each Solution All bidding notices of public organizations such as governmental bodies, local autonomies and educational institutions are published thru KONEPS. e-Bidding It serves as the single windows for e-Procurement and the information herb which provides bidding information to relevant institution. It enhances transparency and fairness thru conducting all bidding processes online. It secures stability and confidentiality via digital-signature, encryption and e-Data. Unnecessary suspicion and corruptive factors during mutual contracts became solved. e-Contract e-Payment e-Shopping Mall The contract info is stored in the system, which upgrades the efficiency of procurement business and reduces the administration costs. The real-time money transfer via linkage to the d. Brain after payment request. Unnecessary documents for inspection/tally and off-line payment request were removed. Businesses can take impartial opportunities, and public organizations can have multiple choices, which satisfies various demands. Repetitive purchase and vexatious bidding process have been simplified via registration of the unit-price contract product and ordering function.

Continuous Efforts for the Innovation of KONEPS Provision of ubiquitous service & semantic web Customized services Expansion of use Development of CRM* Establishment of KONEPS and expansion of use [ 2002 ~ 2003 ] [ 2004 ] ※ CRM: Customer Relationship Management System Mobile e-bidding (PDA) Building up the Ontology-based e-catalogue [ 2005 ~ 2006 ] Mobile bidding Mobile e-bidding (mobile phone bidding) [ 2008 ]

Recommendations Integrate and share all information about public procurement Make a single e-procurement system for all public organizations Standardize procurement process and electronic document (XML) with digital signature Take the step-by-step approach from integrated bid information and e-bidding Need to make more clear rules and regulations according to the reforming the process 31