Overcoming the hurdles of e-procurement

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ePerolehan claims to have saved government RM14 billion says it head of marketing.

Operational since 2000, Malaysia’s e-government procurement system, ePerolehan is a by-product of the government’s efforts to increase efficiency, transparency and accountability in its public procurement process. A key benefit of the system is the 10% to 30% cost savings generated through lower operational costs, overheads and supplier price. In 2011, ePerolehan claims it generated RM14 billion in cost savings, with this figure projected to increase to RM20 billion by 2014.

Even with these encouraging numbers, user adoption and penetration remains critical in ensuring ePerolehan’s success. During the first 5 years of operation, user skepticism and IT literacy had been great challenges hampering the overall uptake, says Ang Li Lian, Vice President of Corporate Communications and Marketing of Commerce Dot Com Sdn Bhd (CDC), which provides the IT solution for ePerolehan.

But that is changing now. “The supplier community now have greater awareness regarding the system. Due to greater competition, many businesses now believe that an Internet presence is a prerequisite for them to gain better business opportunities,” explains Ang.

While increasing the efficiency and transparency of the public procurement system are indeed laudable goals, the issue of human integrity plays a vital role in determining the cohesiveness of these two objectives. For instance, a buyer may be given full autonomy to make purchase decisions for the sake of efficiency. Should the buyer be unethical, it could severely compromise both these goals.

“Unethical behaviour is a norm in traditional procurement practices and electronic procurement. ePerolehan provides an authentication system which ensures that the profile of users are captured and all activities are archived in the system. Should there be any discrepancies, the system will be able to generate a report and the historical usage threads. This inevitably prohibits users from any wrongdoing,” says Ang.

Aside from these human-related hurdles, another issue involves the initial start-up costs. Ang explains that the minimum initial costs breakdown comprises of RM450 for a 3-year registration with the Ministry of Finance, plus RM200 for the user access token which comes in the form of a USB thumb drive or smart card.

 

However, a case study on ePerolehan’s implementation published by the Faculty of Economics and Administration of Universiti Malaya in 2008 estimates the actual overall cost to range between RM1,500 to RM2,000. These figures include the initial costs stated by Ang, as well as training costs, fees for uploading product catalogues and information on the ePerolehan website and others.

Aside from this, the study also states that there is a 0.8% service fee on the total purchase value which is capped at RM9,600 for successful bids. While this may not seem to be a large sum in the grand scheme of things, this fee could potentially affect the adoption decision for small start-up businesses.

“Through various change management programs conducted with the suppliers, we have been able to explain to them regarding the costs. It is important to educate (suppliers) that the system is being maintained by a private company where costs are involved to ensure the system is operational and continuously enhanced,” counters Ang.

Despite the costs involved, ePerolehan has played a role in streamlining the public procurement process and bridging the gap between the government and small businesses. However, the human factor remains a wild card that could threaten the overall success of the e-government procurement system.

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