20 April 2012
Frequently asked questions: A strategy for e-Procurement
1. What is e-Procurement?
E-procurement (electronic public procurement) refers to the use of electronic communication and transaction processing by government institutions and other public sector organisations when buying supplies and services or tendering for public works.
2. How is e-procurement relevant for the European economy?
The EU’s public procurement market is estimated to have been worth in excess of €2 trillion (or just under 20% of the EU's GDP) in 2010. Thus, public procurement is one of the major items of expenditure for Member States and an important element of the European Single Market.
In the current context of fiscal constraints, public authorities face a choice between reducing the level of services they provide to citizens or delivering these services more efficiently. E-procurement can significantly simplify the way procurement is conducted, reduce waste and deliver better procurement outcomes (lower price, better quality) by stimulating greater competition across the Single Market. It can thereby contribute to delivering services more efficiently without introducing more cuts to government outputs to serve citizens.
Contracting authorities and entities that have already made the transition to e-procurement commonly report savings of between 5 and 20% of their procurement expenditure. Given the size of the total procurement market in the EU, each 5% saved could return around €100 billion to the public purse (equivalent to building more than 150 large-sized hospitals).
3. What are the benefits of e-procurement for contracting authorities?
There is a growing body of evidence that e-Procurement can make the procurement process simpler, that contracts can be concluded more quickly and that processing costs for contracting authorities can be lowered. Moreover, the increased transparency and easier access to tender opportunities provided by e-procurement delivers higher participation in tenders, which ultimately leads to lower prices and better outcomes. Some example of savings:
Following the introduction of e-procurement, Portuguese hospitals were able to achieve price reductions of 18% on their procurement contracts. In aggregate, the switch-over to e-procurement in Portugal is estimated to have generated savings of about €650 million in the first year.
XchangeWales – the Welsh e-procurement programme - delivered benefits of £58 million (December 2011), three years after it was launched.
UGAP (Union des groupements d’achats publics) – the French central purchasing body – estimates that the progressive switch to e-procurement reduced the administrative burden for buyers by 10% (e.g. through faster analysis of bids and easy access to documents) and by another 10% for the legal services involved (as less legal control was required when e-procurement is used).
4. What are the benefits of e-procurement for SMEs?
E-procurement makes the life of SMEs easier as the process becomes simpler and cheaper than when using paper. E-procurement reduces the costs of participating in public tenders for SMEs (less printing, no mailing costs etc.) Moreover, SMEs can more easily identify tender opportunities relevant for them (all tender documents can be downloaded directly from the internet) and therefore can expand their business opportunities.
These benefits are being realised in practice. In many countries, the development of an on-line procurement market place has increased SMEs participation in bids, and at the same time fostered the development of electronic commerce, helping to narrow the digital divide for businesses, most of which are SMEs.
In some Member States, e-Procurement has been recognised as a way to facilitate SMEs' participation in public procurement. For instance in Ireland policy makers recommend that contracting authorities use the electronic tendering facility on the national platform (e-Tenders) to facilitate the involvement of SMEs in public procurement.
Most SMEs are already equipped with the necessary tools to carry out e-procurement. According to Eurostat figures published in January 2012, only 1.4% of SMEs did not have access to internet in 2011 and only 5.29% did not have access to broadband
5. What are the costs of implementing e-procurement?
The implementation of e-procurement solutions inevitably incurs some up-front costs, but experience shows that these can be recouped in a relatively short period of time.
In many countries e-procurement solutions already exist. There is no need for a small contracting authority to build its own solution as it can either use the services of a Central Purchasing Body or subscribe to an e-procurement service already available on the market, for a reasonable price.
Even when new infrastructure for e-procurement is set-up, the costs are rapidly recouped. The investment costs of setting up the Welsh e-procurement programme (XchangeWales) were recouped in only one year.
6. Why are we presenting this strategy?
In 2005, ambitious targets for the use of e-procurement were set. According to the Manchester Ministerial Declaration of 24 November 2005 “all public administrations across Europe will have the capability of carrying out 100% of their procurement electronically” and that “at least 50% of public procurement above the EU public procurement threshold will be carried out electronically” by 2010. However, today e -procurement is used in only 5-10% of procurement procedures carried out across the EU.
In order to address the slow level of take-up and to reap the benefits offered by e-procurement, the European Commission identified the need for a comprehensive strategy for e-procurement including both legislative and non-legislative actions.
The strategy presents the strategic importance of e-procurement and sets out the main actions through which the Commission intends to support the transition towards full e-procurement in the EU.
7. Why is the take-up of e-Procurement still lagging behind expectations?
The responses to the 2010 Green Paper on e-procurement identified two main drivers of the slow take-up:
the inertia exhibited by certain stakeholders who need to be persuaded to change their ingrained habits;
market fragmentation that can emerge from the existence of a wide variety of systems, sometimes technically complex, deployed across the EU that can lead to increased costs for suppliers.
The strategy published today aims to address these two barriers.
8. What actions is the Commission proposing under this Strategy?
The Strategy contains both legislative and non-legislative measures.
The legislative measures presented in the strategy refer to the legislative proposals to modernise European public procurement adopted by the European Commission in December 2011 (IP/11/1580). One objective of these proposals is to make e-procurement the rule rather than the exception.
The strategy also describes how the Commission wishes to support Member States, contracting authorities and suppliers in implementing these legislative proposals. Thus it presents several non-legislative flanking measures such as:
Supporting financially and technically the development of e-procurement infrastructure via EU programmes and fund;
Identifying and sharing best practice in the area of e-procurement;
Monitoring the level of take-up and the benefits of e-procurement;
Implementing a wide-ranging dissemination strategy to inform stakeholders about the opportunities and benefits offered by e-procurement .
The Strategy also announced that the European Commission itself will move towards full e-procurement by mid-2015 – a full year ahead of the deadline for Member States – and that the Commission will make its e-procurement solutions available to Member States.
9. Why now? Were there any other proposals in the past?
The Commission has put in place, since 2004, several actions to increase the use of e-procurement. In 2004 the current public procurement directives (2004/17/EC and 2004/18/EC) were adopted, introducing the possibility to use electronic means of communication when conducting public procurement. The same year the Commission also adopted an Action Plan to promote the use of e-procurement. The 2010 evaluation of the Action Plan found out that, despite good progress in implementing e-procurement legislation and in setting-up the infrastructure, the level of up-take of e-procurement was low. Thus, additional actions were needed.
Following the responses to the 2010 Green Paper on e-procurement, the Commission has included ambitious measures on e-procurement in its legislative proposals to modernise European public procurement. These were adopted by the European Commission in December 2011 (IP/11/1580).
The current strategy includes comprehensive measures (both legislative and non-legislative) to support the development of e-procurement. The technologies needed for e-procurement have matured and the necessary infrastructure is being deployed. Thus, the transition towards full e-procurement is not primarily a technical nor a technological challenge anymore. It is above all an economic and political challenge, which cannot be overcome without strong commitment at the highest political level.
10. How does this strategy fit into the broader modernisation of the Public Procurement directives?
One of the main objectives of the Commission's proposal to modernise the Public Procurement directives is to simplify the way procurement is conducted. Several proposals were made to reduce administrative burdens, for example by significantly reducing the number of documents required from economic operators.
The proposals on e-procurement also contribute to fulfilling the goal of simplifying the way procurement is conducted. E-procurement is easier and cheaper to use and it reduces waste and delivers better procurement outcomes (lower price, better quality).
11. How does this strategy relate to other initiatives such e-signatures or e-CERTIS?
The use of e-signatures is not required when using e-procurement. However, those contracting authorities who wish to use e-signatures can do so. The legislative proposals to modernise European public procurement encourage the mutual recognition of electronic signatures with a qualified certificate, based on a similar approach as the one defined in the Services Directive (Trusted List).
The legislative proposal also proposes to make e-CERTIS a mandatory clearing house two years after the transposition deadline. E-CERTIS will list the certificates and statements that may be requested for qualification of a bidder in procurement and will set the equivalence criteria across Member States. This will provide greater clarity and legal certainty, especially in terms of cross-border submission, with regards to certificates and statements that may be required by Member States.
12. What are the next steps?
The Commission intends to organise an annual high-level conference on e-procurement, bringing together a wide-range of stakeholders to debate the latest developments in e-procurement. The first annual conference will take place on the 26th of June 2012 and will be entitled "Electronic Procurement - Challenges and opportunities" (http://ec.europa.eu/internal_market/publicprocurement/e-procurement/conferences/index_en.htm). It invites interested stakeholders to attend.
In order to promote steady progress towards the objective of full e-procurement in the EU, the Commission intends to closely monitor both the take-up of e-procurement and its economic impact and will publish a report on e-procurement by mid-2013. This report will identify both the progress that has been achieved and any outstanding issues which remain, together with recommendations on the next steps to be taken.