e-Government Procurement in Korea

1. e-Government Procurement in Korea April 2013 MyeongkiBaek| Director General, e-Procurement Service Bureau Public Procurement Service (PPS), the Republic of Korea

2. Ⅰ Public Procurement in Korea

3. The Korean Model Korea’s Public Procurement Model Central Public Procurement Agency • Public Procurement Service (PPS) under Ministry of Strategy and Finance • Provides procurement services for all public entities • Operates government-wide single e-Procurement portal (KONEPS) Centralized & Decentralized Procurement • Central government entities are required to use PPS services for procurement above the threshold value • Local govt. entities and public enterprises may procure either autonomously or use PPS services • All public entities should purchase from PPS’s MAS contracts* whenever applicable * MAS contract : unit-price framework contracts for commercial products established by PPS. All public entities may place orders against MAS contracts.

4. The Korean Model Centralized & Decentralized Procurement in Korea • In 2012, centralized procurement through PPS was 36% (USD 36 billion) of Korea’s total public procurement (101 billion) • Of PPS’s procurement, 53% was upon mandatory procurement request and 47% • was upon non-mandatory procurement request

5. Korea Online e-Procurement System (KONEPS) II

6. e-Procurement in Korea KONEPS (Korea On-line E-Procurement System) • Single public e-Procurement Portal • KONEPS processes the entire procurement cycle • Interconnected with 140 database systems for minimal paperwork “KONEPS” Korea ON-line E-Procurement System e-Bidding e-Contracting e-Payment e-Ordering Online Shopping Mall

7. KONEPS at a Glance Certification -Related Agencies PPS Operation Ministry of Security and Public Administration Public Organizations (Buyers) Linkage Use Linkage Korea Financial Telecommunications &Clearings Institute Private Businesses (Suppliers) Constructaion -Related Associations Ministry of Strategy and Finance Construction CALS Surety Insurance

8. e-Transformation – Before & After 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 Bid Public Buyer Ministry of Strategy and Finance Industry Associations Supplier Surety Companies National Tax Office Credit Rating Companies Construction Authorities Certification- Related agencies

9. e-Transformation – Before & After 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

10. Framework Contracts Saving budget through MAS Contracts Multiple Award Schedule (MAS) Contracts • Framework contracts (unit-price based) for frequently purchased commercial products • Contracted by PPS, available for all public entities for e-ordering • Favorable price terms due to opportunities for to sell to all public entities • (economy of scale)

11. Online Shopping Mall KONEPS Online Shopping Mall Excellent Government Supply Products Green Products Technology Certified Products

12. Online Shopping Mall Online Shopping Mall in 2012 340,000 Products Registered 5,213 Suppliers Registered 860,000 Orders 12.5 billion USD • Products on Comprehensive Online Shopping Mall

13. III Impact of KONEPS

14. Facts and Figures In 2012, Over 66% of Korea’s total public procurement ($101 billion) was conducted through KONEPS User Registration • 45,000 government agencies • 244,000 registered businesses e-Bidding • 93% of all bids are conducted online • 24M bidders participated e-Contracting & e-Payment • 657T contracts are electronic • 100% of all payments are electronic Online Sopping mall • 860T Purchase Orders issued online(99% of all POs) • Total e-Mall transaction value : $12.5 billion

15. 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 during the process

16. Transaction Cost Savings • KONEPS is saving transaction costs • of USD 8 billion annually • Private Sector : USD 6.6 billion • Public Sector : USD 1.4 billion Transaction Cost Savings $ 6.6 billion • Increased efficiency • Receiving bids, validating related docs. • and selecting the winning bid • Reduction of 7.8 million pages of paper documents per year - Reduced visits - Reduced labor costs $ 1.4 billion - Reduced lead-time - Streamlined Process Public Sector Private Sector

17. International Recognition International Recognition Implementations in Partner Countries • UN Public UN Public Service Award (2003), Global IT Excellence Award (2006), e-Asia Award (2007) Uzbekistan Mongolia e-GP Feasibility Study (2009) Mongolian e-GP System (2012) Jordan e-GP Feasibility Study (2012) KONEPS Vietnam e-GP Pilot System (2010) Costa Rican e-GP System (MER-LINK, 2010) Algeria Tunisia Vietnam Tunisian e-GP System (began in 2013) Costa Rica e-GP Feasibility Study (2012)

18. IV Implementation Experiences

19. Main Pillars of e-GP Implementation

20. Leadership Intra-governmental cooperation • Operated the Presidential Committee for e-Govt.(2001) • * legal framework, integration with external systems, • partnership with private sector • PPS as a leading agency played a key role on leading and • managing the transition to e-GP Development of legal framework • Enacted e-government legislation : Digital Signature • Act (1999), Framework Act on e-Commerce (1999), etc • Amended Procurement law and regulations to eliminate • barrier to the implementation of e-procurement • * e-Procurement Act (2013)

21. Change Management Obstacles • solutions • Lack of awareness and capacity building • Inertia of traditional manual procurement process • Fear of loss of discretionary power and reduced role of PPS • Intensifying the delivery of training of procurement officers and suppliers (5,100 trainees in FY 2011) • Promoting the benefits of the e-GP and the necessity of procurement reform • Continuous user support through call-center • (4,585 consultations daily)

22. Business Process Reengineering (BPR) Integration of Entire Procurement Process • 80% of the total 565 processes in three categories (goods, services, construction works) were revised • 152 processes were removed, and over 300 processes were streamlined through integration and digitalization Revision of Legal and Institutional Basis • Provisions for the registration of information and mandatory reporting for e-Procurement services • Revisions for the streamlining of procurement procedures

23. Technology • Authentication & Data integrity : PKI based digital signature & encryption • System security : firewall, intrusion detection system, etc Security • Adopted UNSPSC as a standard for commodity classification (2.2M items) • Based on the global standards of e-document (XML, SOAP, EBMS, etc) Standard • Dual structure for servers and networks • Back-up system for disaster recovery • Funding 10% of development cost /year for ongoing operation Service Stability

24. Lesson Learned • Simplification and clarification of procurement regulations for process transition through BPR • A single e-procurement system for all public organizations • Take the step-by-step approach from integrated bid notice, e-bidding and e-Shopping Mall • Government leadership and establishment of a lead agency • Long-term planning & risk management for the on-going operation including funding resources, capacity building for operational staff & clear system management protocol.

25. THANK YOU