eProcurement

in Andhra Pradesh
 Procurement in GoAP
• GoAP annual procurement ~ Rs. 8000 Cr
– Goods, Services, Works and Turnkey contracts
• Procurement Practices
– Centralised Procurement – AP Medical Infrastructure, COT
– Distributed Procurement – APSRTC
• Common Procurement Mechanisms
– Tenders – Open, Limited, Single
– Rate contracts
– Direct Purchase Orders
• Processes governed by the guidelines of AP Govt. and
of external agencies like WB and OECF
 Problems in Conventional
Procurement
• Tender boxes at multiple locations
• Delays in issue of tender schedules to suppliers
• Cartel formation suppresses competition
– keeping financial bids close to the maximum permissible
• Physical threats to bidders
• Manual movement of tender files from districts to the
offices of the Heads of Department
• Delays in finalisation of tenders
• Possibility of tampering or loss of records
• Human interface at every stage
• Difficulty in maintaining confidentiality of evaluation
 Cabinet sub-committee on tender
reforms – Year 2000

• Simplification of procurement procedures

• Achieving greater transparency in procurement
• Reducing delay in procurement
• Improving quality of construction
• Ensuring timely completion of projects
 Initial Steps in 2002
• eProcurement identified as a core
eGovernance project
– with relevance across the government
• First among governments to implement
eProcurement
• Services of PwC utilized to prepare RFP
• Steering Committee initially headed by
Special CS, T,R&B – later headed by CS
• Transparent & meticulous selection process
 e-Procurement Objectives for GoAP
• Leverage buying power through demand aggregation

• Better value for money for government

• Significantly reduced cost and time of doing business

for both government and industry

• Level playing field, “fair” competitive platform and

single registration for the suppliers

• Increased transparency, monitoring and control of

procurement process
 Steering Committee
• Chaired by Spl. Chief Secretary, Transport Roads &
Buildings Dept during pilot phase
• Now chaired by Chief Secretary
• Members include
– Concerned Principal Secretaries/ Secretaries
– Heads of all participating Departments and organizations
– Representative of Service Provider
• Mandate to take decisions on business model, selection of
service provider, process re-engineering & change
management
• Acted as platform for inter agency collaboration
 Business & technology models
Initiate Decision on Decision on Decision on Decision on:
Exchange Model Ownership Model Operational Model Technology

Independent
Exchange

Build Private
Exchange Single Point Leveraged
Govt.-Led
Co-ordination Solution
Exchange

Supplier-Led Ground up
Exchange Development
Implement
e-Procurement

Distributed Package
Exchange#1
Operations Implementn.
Join Existing
Exchange

Exchange#n
 Scope of e-Procurement Services

• Pre-procurement processes
• Tender Management system
– Online publication of tender notice
– Online bid submission
– Online evaluation
– Online issue of Letter of award
• Rate contracts and catalog buying
• Auctions & reverse auctions
• Supplier registration
• Contract monitoring
• ePayments, PKI
 e-Procurement – Business Model
• Public Private Partnership Model selected
• Partner expected to:
– invest upfront in the project based on the ASP model
– build and customize an eProcurement exchange
– recover investment through hosting, transaction fees and
value-added services to suppliers
• Pilot for 9 months with 4 key depts/organizations
– APTS, APSRTC, APHMHIDC & COT ( I&CAD, R&B)
• After success of pilot, option kept to form JV, or to
explore alternate models
 Departments Selected for Pilot
APSRTC
 Deals with big suppliers like MICO,
Ashok Leyland etc.
 Total procurement spend of Rs.946 crores
 Over 2000 suppliers
 Majority of tenders are ‘Limited’.
APHMHIDC
Computerization exists at the store levels.
Supplies drugs to over 1500 hospitals
Procurement spend of over Rs 100 Crores
Over 1000 PO’s per annum
APTS
 Web interface for other department users
exists for inquiring the procurement
status, submitting the tender.
 Procurement spend of over Rs 65 Crores.
COT
 Central cell for Irrigation and R&B
 Total value of tenders accepted in
F.Y.2002-03 , 330Cr
 Procurement of works above 1 Cr
 Selection of Private Partner

• M/s PwC prepared RFP

• Based on market research RFP was issued to 12
leading eProcurement firms in India and abroad

• Ariba • Tejari.com
• Commerce One • Wipro01 markets
• 12 Technologies • Indiamarkets
• Iplanet – SUN • Freemarkets
• Oracle • People soft
• SAP Markets • Broad vision
 e-Procurement project phases
Current
Stage

Phase I Phase II Phase III Phase IV

Analysis and Design Solution Selection Conduct Pilot Roll Out

• Analyse spend • Solution evaluation • Functional • Departmental roll-out
approach requirements for the
• Study business • Additional
pilot
requirements • Solution selection functionality roll-out
• Creation of catalogs
• Assess supplier • Identify select • On-going operations,
readiness • Supplier adoption maintenance,
departments for e-
Procurement pilot • Infrastructure administration
• Identify high level
creation
technical and • Identify necessary
functional third party solution • “Sample”
requirements providers transaction
• Develop business • Training and
model documentation
• Change
management
• Analysis of learnings
• Roll-out plan
 Infrastructure & Training in Pilot
• www.procurement.gov.in hosted on 4 high-end
RAID 5 servers at Tata Data Centre
• Infrastructure made operational in:
• R&B: 20 circles + 5 Chief Engineers + EnC
• Irrigation: 25 circles + 9 Chief Engineers + EnC
• APHMHIDC: 23 stores + HQs
• Commissionerate of Tenders
• APTS & APSRTC (infrastructure upgraded)
• More than 300 contractors/suppliers registered
• 500+ contractors/suppliers trained on eProc
• More than 300 officers trained on eProc
GOAP e-Procurement Architecture Diagram
 E-Procurement Security Features

• Encryption of sensitive information at the database level

• PKI enabled: Supports Digital certificates from any CA
• Digital Notorization services for time stamping
• 128 bit SSL encryption of all transactions
• Admin & transaction log of each event
• Firewall to prevent unauthorised access
• Intrusion detection system
• Antivirus protection
 Executive Orders
& Service Level Agreement
• Government orders issued
– Generic G.O. Ms. No. 2 dt. 15.01.03 by IT&C Dept
– Engineering: G.O. Ms. No. 36 dt. 07.03.03 by I&CAD Dept
_ On line tenders mandatory for transactions above Rs 1 Cr
– Instructions issued to publish all NITs on eProcurement
marketplace
– Model SLA approved by Steering Committee on Jan 24th 2003
– SLA signed by participating departments separately
• eProcurement portal launched on Jan 29th, 2003
• Threshold limit lowered to Rs 50 Lakhs for eprocurement
• Roll out to all depts.: G.O. Ms. No. 20dt. 06.07.2004 by
IT&C Dept
- Threshold limits further lowered to Rs 10 Lakhs
 eProcurement - Benefits demonstrated

• Savings to Government
– Total anonymity generated more competition
– Discounts quotations even in Single bid tenders
– Savings estimated at Rs. 255 Cr in 2003-04
– Significant reduction in newspaper advertising costs
– Automated work flows shortened tender cycle time from 90 to
180 days in the manual process to 45 days in eProcurement

• Transparency
– Bid documents freely available on Net.
– Tender evaluation status automatically published to bidders
– Corrigendums in public domain
– No interface with departments upto tender opening
 eProcurement - Benefits demonstrated

• Reformist outlook to Govt

– Eliminated cartels, syndicates
– Avoided fighting among potential bidders
– Drastic reduction in adverse press reports
– Project won Golden Icon award for eGovernance
Initiative

• Empowerment of Bidders
– Remote submission of bids
– Reduced bidding costs
– No more dependence on departmental officials
 Tender Analysis
source-COT

Year No. of tenders ECV(Cr) TCV (Cr) %

2001-02 188 755.29 735.57 (-)2.65
2002-03 125 558.36 510.07 (-) 8.65
2003-04 160 1101.69 884.21 (-) 19.74
Tender approved during 2003-04
Type No. of ECV (Cr) TCV (Cr) %
tenders
eProcurement 107 733.55 549.93 (-)25
Conventional 53 368.14 334.78 (-) 9
•Additional discount due to eProcurement was 16%
 E-Procurement MIS

http://www.eprocurement.gov.in/
 New Business Model
Recommended by Sub-committee and approved by Steering Committee

• ASP model to be continued

• 7 servers at Primary site and 2 servers at DR site
• Exclusivity to C1 India for e-procurement for tenders
above Rs. 10 lakhs ECV.
• APTS to develop an alternate eprocurement platform
for Rs. 10 lacs and below
• Agreement period for 3 years (from 1-4-2004 to 31-3-
2007)
• Source Code will be kept in an Escrow account
• GoAP would buy the software at the end of three
years at the Residual Value of Software
• Eprocurement fund proposed to sustain the
eprocurement initiatives and for supporting related
projects
 New Business Model
Recommended by Sub-committee and approved by Steering Committee

• Pricing payable to C1 India:

– No tender hosting charges
– 0.04% of ECV with a cap of Rs. 10,000/- per bidder for
all works upto ECV of Rs. 50 crores and Rs.25, 000
(Twenty five thousand) per bidder for works with ECV
above Rs. 50 crores. Service charge @10.2% is extra
over above tariff.
– GoAP would not give any guarantee to C1 India on the
revenues
– The bid processing fee to be collected from the bidders
electronically at the time of submission of bid.
 Current status
• Pilot done successfully & Rolled out
• 15 Departments & Organizations currently participating
– PR Engg, SW Engg, PH Engg, Police Housing, Animal Husbandry dept, APSRTC,
Horticulture, HMWS&SB, HUDA, APSTC, 6 Municipalities joined later apart
from those in pilot phase
• APTransco and Singareni are expected to join in
• Decision taken to extend eProcurement to all Depts.
• WB concurrence to use portal for funded projects sought
• 2003-04: Rs.1982 Cr (564 Nos)
2004-05: Rs. 1308 Cr (1401 Nos - upto Jan 05)
completed & Rs 1124 Cr (2070 Nos) in progress.
• Target volume for 2004-05 is Rs. 5000 cr.
 Change Management
• Key officers of engineering depts trained as CIOs
• “As Is” position documented having multiple rounds of
interaction with each department
• eProcurement processes explained to officers
• Series of workshops with departments and contractors to
capture requirements
• “To Be” models based on feedback from stake holders
• Customized processes validated by departments
• Friendly User interface – departmental terms used
• Intensive training for officers and contractors
• Tender fee pegged at zero in pilot project
• Very active help desk support
 Some lessons …
• Support of Top Leadership is must
• ASP model – innovative & effective, but always under
close scrutiny
• Pricing model – combination of value & no. of
transactions – a new pricing model has emerged
• A significant part of Government’s eProcurement is
through engineering tenders
• Denial of tender ad revenues initially alienates press
• Building support among suppliers essential
• Core policy & implementation team critical for success
• Supplemented by CIOs trained within key depts
 Way Forward …
• Contractors Database Information System
- Validated database of contractors experience
- Drastically reduces tender cycle time to 2 to 3
days
- online updating facility of database
• Auto bid evaluation in eprocurement
• Contract management module
• Online work bills and e-payments to contractors
 Message …
• Think Big – Start Small- Scale up Fast
• Quantum Jump but not Small
• Long term plan with aggressive strategy
• Transparency and Accountability
• Involve stake holders
• Mobilise Top leadership support.
Thank You