e-Procurement Experience in Korea : Implementation and Impact

1. e-Procurement Experience in Korea : Implementation and Impact June 2012 Ho In Kang | Administrator Public Procurement Service (PPS), the Republic of Korea

2. Contents Public Procurement in Korea e-Procurement in Korea Impact of e-Procurement Future Goals Ⅰ. Ⅱ. Ⅲ. Ⅳ.

3. Ⅰ Public Procurement in Korea

4. Public Procurement in Korea Public Procurement Size Public Procurement Total (2011) : USD 100 billion (10% of GDP) Public Procurement Service (PPS) The government’s central purchasing agency Covers central govt. procurement above threshold Goods & Services above $100,000 Construction Works above $3,000,000 PPS $34 bn Local govt. and public enterprises may use PPS’s procurement services by request Individual Agencies $66 bn 4

5. II e-Procurement in Korea

6. Korea ON-line E-Procurement System KONEPS (Korea On-line E-Procurement System) Govt. e-Procurement system operated by PPS Transactions via KONEPS $92 bn Used by 44,000public entities* and 228,000suppliers $104 bn $77 bn $56 bn $76 bn $65.7 bn $43 bn One of the largest e-Commerce systems in the world 73% 60% 55% e-Bay(2010) e-Bay(2010) Total Public Procurement 2004 2007 2010 Public Procurement via KONEPS e-Bay * Figure accounts for most public entities, except 20 public enterprises that operate independent e-Procurement systems 6

7. e-Procurement in Korea Single Window to Public Procurement All tender notices are published through KONEPS End-to-end Functional Coverage KONEPS processes the entire procurement procedures through sub-systems: e-bidding, e-contracting, e-ordering from online shopping mall and e-payment “KONEPS” Korea ON-line E-Procurement System e-Bidding e-Bidding e-Contracting e-Contracting e-Payment e-Ordering e-Ordering Online Shopping Mall Online Shopping Mall 7

8. e-Procurement in Korea One Stop Service through Data Integration KONEPS exchanges data with 140 external info systems for supplier information, bid evaluation, bonds and payment, minimizing paper document submissions Before Public Buyer Bid Ministry of Strategy and Finance Industry Associations Supplier Surety Companies National Tax Office Credit Rating Companies Construction Authorities Certification- Related agencies 8

9. e-Procurement in Korea One Stop Service through Data Integration KONEPS exchanges data with 140 external info systems for supplier information, bid evaluation, bonds and payment, minimizing paper document submissions After Contract Delivery Industry Associations Public Buyer Ministry of Strategy and Finance KONEPS Credit Rating Company National Tax Office Surety Companies e-Bid Korea Financial Telecommunications & Clearings Institute Construction Authorities Certification- Related agencies Supplier 8

10. KONEPS - Implementation and Evolution Phased Transition to e-Procurement Online Shopping Mall Mobile Bidding KONEPS Single Portal e-Contracting e-Bidding e-Payment EDI (e-Document Interchange) [2000] [2001] [2002] [2003~present] 9

11. Ⅲ Impact of e-Procurement

12. Impact of e-Procurement Increased Opportunities for SMEs SMEs’ Share in PPS-conducted procurement SMEs’ registration for bid participation doubled since KONEPS (2002) - 70,864 SMEs (2001) 147,186 SMEs(2003) $17.9 bn $13.9 bn (75%) Increased participation by SMEs $8.2 bn 20%p $4.5 bn (55%) SMEs share in Online Shopping Mall Sales • 26.6% (2006) 61.5% (2008) 74.9% (2010) 2003 2010 PPS contracts for goods * Foreign procurement, construction mgt. and superintendence not included Contracts awarded to SMEs 11

13. Impact of e-Procurement Transition to e-Business Growth of e-Commerce in Korea Early e-GP promoted the growth of e-Certification industry $999.6 bn e-Certificates in Use 8.4 times 1.1 m (2001) 8.7m (2003) 24.4m (2010) Catalyst for the growth of e-Commerce $413.6 bn • Strong full through effect in e-Commerce $119 bn • Internet banking, online stock trading and e-Shopping 2001 2006 2011 12

14. Impact of e-Procurement Increased Transparency Real-time information disclosure • Bidding results and contract details disclosed to the public on-line • Peer monitoring on fair results Objectivity in bid evaluation • Bid evaluation based on objective, validated data Informed decision-making • Traceable prices and specifications • Reduced risks of biased decisions from information asymmetry 13

15. Impact of e-Procurement Transaction Cost Savings KONEPS is saving transaction costs ofUSD 8 billion annually Transaction Cost Savings • Private Sector : USD 6.6 billion • Public Sector : USD 1.4 billion - Reduced visits - Reduced labor costs $ 6.6 bn Increased efficiency • Receiving bids, validating related docs. • and selecting the winning bid - Reduced lead-time - Streamlined Process over 30 hrs less than 2 hrs $ 1.4 bn • Reduction of 7.8 million pages of paper documents per year Public Sector Private Sector After Before 14

16. Impact of e-Procurement International Recognitions UN Public Service Award (2003), Global IT Excellence Award (2006), e-Asia Award (2007) Adoption of KONEPS-based e-Procurement systems in developing countries Uzbekistan Mongolia e-GP Feasibility Study (2009) Mongolian e-GP System (2012) Jordan e-GP Feasibility Study (2012) Vietnam e-GP Pilot System (2010) KONEPS Costa Rican e-GP System (MER-LINK, 2010) Vietnam Algeria Tunisia Costa Rica Tunisian e-GP System (began in 2012) e-GP Feasibility Study (2012) 15

17. Ⅳ Future Goals

18. Future Directions World Best Procurement Agency e-Commerce Act State Contract Act Total solution and platform for public procurement e-Government Act Continuing development of best practice models e-ProcurementAct Digital Signature Act Exchange of expertise and best practices with the World 17

19. THANK YOU