Innovating Public Procurement throughKorea ON-line E-Procurement System

April 2011

Kang-il SeoInternational Cooperation

DivisionPublic Procurement Service

(PPS)The Republic of Korea

Contents

1. Korea ON-line E-Procurement System

(KONEPS)

2. Impacts of KONEPS

3. Implementation Experiences

4. Recommendations

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

9 Consolidation of e-Document Exchangeand e-Reporting

2

4

Innovation in Services

The Korean Government initiated 11 e-Government projects to enhance national competitiveness utilizing information technology

Foreword: Korea’s e-Government Project

e-Government

Single Window for Civil Services

3 Integrated Social Security Information System

Internet-based National Taxation System

1 Government-wide e-Procurement System

INFRASTRUCTURE

Administrative Productivity

5 National Finance system

6 Integrated Administration System forLocal Governments

7 Nation-wide Educational Administration System

8 Standardized HR Management System

10 e-Authentication and e-Signature System

11 Government-wide IT-governance Environment

Increasing SME’s Market Opportunities

Combination of Centralized and Decentralized Procurement

Medium to large scale procurement for central government

agencies : handled by Public Procurement Service (PPS)

Small scale procurement: handled by each government agency

Local governments and public enterprises: autonomous procurement

Medium to large scale procurement for central government

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 38 billion USD in 2010 (30% of Korea’s

total public procurement)

PPS operates KONEPS, Korea’s public e-Procurement system

PPS is the central government procurement agency of Korea under

the Ministry of Strategy and Finance

Total procurement volume of 38 billion USD in 2010 (30% of Korea’s

total public procurement)

PPS operates KONEPS, Korea’s public e-Procurement system

Public Procurement System in Korea

Korea ON-line E-Procurement System (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 inter-operability

KONEPS

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 one-time registration

Characteristics of KONEPS

One-stop Service

Integration of Entire Procurement ProcessEntire procurement processes from supplier registration, bidding through to payment are conducted via the internet

One-click purchase at the Online Shopping Mall

160 types of documents handled online through the data

exchange linkage with 100 other public sector & private

sector information systems

KONEPS processes the entire procurement procedures through the 4 major sub-systems: e-bidding, e-contracting, e-payment and the online shopping mall

e-Contractinge-ContractingContract Registration

Composition and

sealing of Contracts

Contract Review

e-Biddinge-Bidding

Tender notice

Price Assessment

Evaluation / Analysis

Online Shopping Mall

Online Shopping MallProduct Registration

E-Catalogue

Product Search

Online Order

e-Paymente-PaymentE-Payment

Expenditure Mgmt.

Fee Management

KONEPSKONEPS

Functions of KONEPS

KONEPS at a Glance

Ministry of Public

Administration and Security

Ministry of Public

Administration and Security

Ministry of Strategy and Finance

Ministry of Strategy and Finance

Certification-Related Agencies

Certification-Related Agencies

Construction-Related

Associations

Construction-Related

Associations

Korea Financial Telecommuni-

cations & Clearings Institute

Korea Financial Telecommuni-

cations & Clearings Institute

Construction CALS

Construction CALS

Surety Insurance

Surety Insurance

KONEPS e-Tendering Processes

AuthenticationCertificate

CertificateAuthorities

IntegratedNotice

Other Bidding Systems

Commission for Bid Participation

PG SystemCertificate

Supplier Data

RelatedAssociations

AuthenticationCertificate

CertificateAuthorities

Contract Information

D-Brain System

Certificate forTex Payment

G4C System

OnlineTransaction

SupplierRegistration

IntegratedNotice

Bid Bond Encryption/Time Stamp

Performance Bond, etc

Electronic Funds Transfer

G4C SystemPublic Org.

(40,000)Surety

Company

EncryptionKey Issuance

System

SuretyCompany

D-Brain System

Banks

SupplierRegistration

IntegratedFor Bid

BiddingBid Opening/

EvaluationContracting

Delivery/Inspection/Acceptance

Payment

All procurement processes are digitalized

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)

KONEPS Online Shopping Mall

PPS establishes unit-price contracts for commonly and repetitively purchased products

Products on unit-price contracts are made available at Online Shopping Mall for direct orders from public entities

Electronic Data Interchange System (1997)Online Shopping Mall System (1998)e-Tendering System (2000)e-Guarantee and e-Payment System (2001)

Early

Development

(1997-2001)

Early

Development

(1997-2001)

KONEPSKONEPS

(2002)(2002)

KONEPSKONEPS

(2002)(2002) Establishment of KONEPS for the use of all public organizations (2002)

Phased Establishment

2. Impacts of KONEPS

Transactions through KONEPS

2007 2008 2009

$56 bn

$63 bn$86 bn

In 2009, over 70% of Korea’s total

public procurement (122 billion

USD) was conducted through

KONEPS

41,000 Public Entities

191,000 Registered Suppliers

Total Volume of TransactionsConducted via KONEPS

Total Volume of TransactionsConducted via KONEPS

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

USD 6.6 on the suppliers’ side, USD 1.5 in the public sector

Reduction of visits and contract-related papers, time-saving, etc

Savings of labor and time for searching for tender information

Savings from increased competition (not included in the figure)

Enhanced efficiency and transparencyEnhanced efficiency and transparency

Saves USD 8.1B worth of transaction costs annually Saves USD 8.1B worth of transaction costs annually

Improves transparency in doing business with the government Improves transparency in doing business with the government

Transparency and Cost Efficiency

17

Corruption Prevention through KONEPS

Increase public access to procurement information & decrease contracting officer’s discretion

• Reduce the possibility for corrupt and illegal activities involving abuse of classified information

• Clarify criteria for bid evaluation & disclose evaluation results• Digitalization of successful bidder selection reduces public officers’

discretion at the bid evaluation stage, therefore prevents corruption

Minimize face-to-face contact and increase information exchange between public organizations

• Minimize possible corruption between government officials and suppliers • Discourage defected companies’ participation in biddings & prevent

documents from being forged, consequently preventing corruption

Increased competition as a remedy to bid rigging

• Augmenting the number of bidders curbs collusion between bidders

Contribution to the Growth of SMEs

Benefits for SMEs

Minimal cost for marketing and promotion in the public sector

Easy access to tender information and broader bidding opportunities

Market opportunities for new technology products

SMEs participation

99.5% of the total 191,000 registered bidders are SMEs

97% of the suppliers of the On-line Shopping mall are SMEs

3. Implementation

Dimensions of e-Procurement Implementation

LeadershipLeadership

Business ProcessBusiness ProcessReengineeringReengineering TechnologyTechnology

Change Change ManagementManagement

Business Process Reengineering

• 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

• 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

Redesigning Procurement Work Process for Improvement

• Foundation for standardized product catalogue system (product classification / identification)• Determining standard e-Document forms

(eb-XML based standards with development guidelines)

• Foundation for standardized product catalogue system (product classification / identification)• Determining standard e-Document forms

(eb-XML based standards with development guidelines)

Standardization of e-Document forms and contents

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

• Provisions for the registration of information and mandatory reporting for e-Procurement services

• Revisions for the streamlining of procurement procedures

Revision of Laws and Regulations for e-Procurement

• Ministry of Knowledge & Economy • Established in 1999/ revised in 2002, 2005, 2007• Provides for legally binding effect for digital documents

• Ministry of Public Administration and Security (MOPAS)• Established in 1999/ revised in 2001, 2005 • Legal force clarification for a digital signature

Framework Act on Electronic Commerce

Digital Signature Act

Revision of Relevant Regulations

• Mandatory: tender notice via KONEPS, sanctions against fraudulent bidders,

disclosure of award information• Optional: use of e-Bidding and e-Contracting• Grace period (3 months) and interim measures for smooth transition

Technology (1) – Intl. Standards for Interoperability

Adopting the most up-to-date technology standards to ensure

compatibility for data exchange with other external systems

eb-XML based web applications

Application of public digital signature

e-Documents are generated on and sent from the sender’s PC, and received by

the recipient's PC, to ensure end-to-end security system for e-Documents

PKI-based personal keys are issued for each individual tender and stored in the

responsible contracting official’s PC, so that the system operator may not access

the bid information

Adopting the government’s standard values (business registration information,

standard public institution codes, etc.) to ensure compatibility for data exchange

with other external systems

Technology (2) – Security and AuthenticationDigital signature and encryption technology is used for the security of e-Transactions (PKI method)

International Cooperation for e-Procurement

Costa Rica

MER-LINK

Commenced Full Service

in Dec. 2010

Mongolia

Mongolian e-GP System

Implementation by Aug. 2011

Vietnam

e-GP Pilot System

Operated since Jul. 2010

Cross-governmental expansion in planning

Tunisiae-Procurement F/S in 2009 Iran

e-Procurement F/S in 2008

Uzbekistane-Procurement F/S in 2009

4. Recommendations

27

Recommendations

A single e-procurement system for all public

organizations

Simplification and Clarification of Procurement

Regulations for Process Transition through BPR

Take the step-by-step approach from integrated bid

notice (e-Notice), bidding (e-Submission) and e-

Shopping Mall

Government leadership and establishment of a lead

agency

28

THANK YOU

29

Appendices

30

e-Biddings through KONEPS

2006 2007 2008 2009

207,633 213,539207,960

20.8 20.9 20.523.2

235,178

Number of e-BiddingsNumber of e-Biddings Total number of bid participants (unit: million)Total number of bid participants (unit: million)

31

Korea ON-line

E-Procurement System

(KONEPS)

Korea ON-line

E-Procurement System

(KONEPS)

Focal points in the implementation of KONEPS

Gateway to Government Procurement

E-Procurement PortalComprehensive Information ContentsIntegrated Information SearchCustomer Service

Standardized Procurement Process

ASP for public institutionsServices for suppliersSystem 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

Integrated Information & Shared Use

Comprehensive information on public bids and bid awarding Access to integrated data from public authorities and industry associationsShared use of information

Standardization of Fundamental data

Standardizing Product Catalog and consolidating the databaseCreation of e-CatalogStandardizing 149 e-Document forms

Reliable e-Document Exchange

Conformity to W3C/ebXML international standardsEnd-To-End security measuresSecurity assurance

32

Network Security

Separation of Internet and Extranet, Dual Fire-wall, Intrusion Detection System, Security Solutions, etc

System Operation complying with ITIL

Check and Balance between PPS and outsourced Operator, Programmers and System managers

Access control to system, program and D/B

National Computing & Information Resources Center

Automatic management of log access and program modification history, post-verification system

Service Stability against accidents

Dual operation of servers and networks, Back-up Center(Data mirroring), ITSM

Security and Operation Policies

33

Features of KONEPS Modules

Generation of e-Contact forms and electronic signing of the contract document

The contract info is stored in the systeme-Contract

The real-time fund transfer via data-linkage to the dBrain after payment request.

Unnecessary documents for inspection/tally and off-line payment request were removed.e-Payment

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.

e-ShoppingMall

e-Bidding

All bidding notices of public organizations (central government entities, local autonomies and educational institutions) are published thru KONEPS.

It secures stability and confidentiality via digital-signature, encryption and e-Data.