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The Question

compiled by David Newman

Do you think e-procurement will save money?

Neil Sentance, director of Procurement Policy and IT Procurement, Office of the Chief Information Officer, Province of Ontario, believes the real question is: will e-procurement add value in the public procurement process? “In that context, the answer is a definite yes,” he says. “E-procurement gives public sector organizations greater ability to streamline the procurement process, ensure compliance with policy frameworks such as inter-provincial trade agreements and implement innovative procurement models. One of the key arguments has been the savings possible by reducing cycle time. Without question, government procurement processes can be further streamlined through e-procurement functionality, reducing costs for suppliers and time to market for government.

“Many jurisdictions have already implemented elements of e-procurement and e-purchasing but the real breakthrough will be fully electronic, paperless bid solicitation processes and e-enabled contract management processes for complex relationships like volume or performance based vendor compensation models. E-procurement enables implementation of new procurement models, such as continuous refresh of Vendor of Record arrangements or reverse auctions, where requirements can be based primarily on technical specification and price compliance. Full cycle e-procurement means effective integration of the front-end selection processes with the back-end ordering and payment processes through financial systems as well as proprietary vendor systems including catalogues and product lists.”

Sentance observes, “Procurement opportunities must remain open to all qualified suppliers and that should mean better processes, not fewer suppliers. A robust e-procurement application will foster greater participation by suppliers, not only by streamlining process but by enabling ease of navigation and a common ‘look and feel’ for opportunities throughout the public sector.”

Bill Michalopulos, general manager, Procurement-to-Pay Process for Canada Post Corporation, found that e-procurement has substantial cost-saving potential. “Our pilot last year demonstrated the expected advantages: significant time reduction in the order-to-fulfillment cycle, elimination of redundant unnecessary hand-offs and an information-rich view of corporate spending,” he says. “As a result, a national rollout of Canada Post’s e-procurement is part of the corporation’s Business Transformation project. The combination of these benefits along with procurement professionals, refocusing on high-value sourcing activities instead of transactional activities, can lead to cost savings.

“The inherent transparency of e-procurement presents an opportunity to apply more effective, non-intrusive corporate controls instead of costly paper-based and productivity-stifling bureaucratic controls. Some of the practical keys to harnessing e-procurement’s money-saving potential include electronic content presentation and management, supplier engagement methodology, integration with accounts payable and supplier connections for efficient supplier order transmission. XML transmission technology allows orders to be seamlessly incorporated into the supplier’s order fulfillment system. While dependence on simple email for order transmission can be riddled with problems,” he says, “Canada Post is well-positioned – we can use our own secure web-based transmission service, PosteCS, to ensure transaction security and for automated verification that the supplier has received the order.”

Michalopulos adds that e-procurement itself will not solve all the procurement process challenges, but it is a significant component of an overall procurement transformation strategy. “With respect to purchases of configurable items or certain types of services, frequent requirements for the public and quasi-public world, collaborative e-procurement technology, though still developing, could be ideal. It has single handedly brought the procurement profession to the forefront of the corporate agenda. To thrive, it needs realistic and patient introduction of the right type of products and services, as well as progressive thinking by top management. Indeed, organizational change management is the key.”

Robbie Giles, one of Canada’s foremost organizational change consultants, says, “Remember the introduction of computers to the workplace when systems analysts sat with managers – more likely with clerks – trying to understand work processes so that they could offer hardware and software solutions/improvements? Remember the anxiety of not understanding the vocabulary, let alone the time spent on process improvement rather than selling to or serving clients, customers or citizens?

“System changes, including e-commerce, are inevitable and ongoing,” says Giles. “They result not only in efficiencies in transactions but in yet more systems changes as benefits and weaknesses are identified. End users, operational workers, suppliers and organizational decision makers must all, in their own context, understand the benefit to them of proposed changes, so that they become a habit – a part of normal work. Systems changes, including e-procurement, require the understanding of those affected, their active involvement in piloting and introducing process changes, their participation in the evaluation of pilots, and their support and use of the new system.”

Giles stresses that e-procurement will only truly save money if “its purpose is clear and believed; if the users see a benefit to themselves, their staff and their clients; and if procurement professionals continue to build an understanding of the benefits and encourage habit change. That transactional costs can be reduced through the use of e-procurement seems inevitable. Organizational time and cost should be seen as an ongoing budget requirement, just as are hardware, software, training and staff involvement costs. To realize meaningful process improvement or cost savings in e-procurement, we should not discount or ignore the significance of the organizational costs.”

Do you see value in a code of ethics for public procurement?

Reply to:

David Newman, Contributing Editor
Summit: Canada’s magazine on public sector purchasing
180 Elgin St, Suite 800
Ottawa ON K2P 2K3
Fax: (613) 688-0767

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