International Public Procurement Conference Reinventing Government Procurement Through

International Public Procurement Conference Reinventing Government Procurement Through Digitalization October 2004 Gi Su Kim Director Public Procurement Services ROK New York Office

CONTENTS 1. Why did we develop Ge. PS? 2. What is Ge. PS? 3. What are its achievements? 4. What has made Ge. PS a success? 5. Next steps of Ge. PS

1. Why did we develop Ge. PS? 1. 1 Overview of the Public Procurement in Korea 1. 2 Understanding Public Procurement 1. 3 E-Commerce, the Best Way to Innovation 1. 4 Strategic Approach for Adopting E-Commerce

1. Why did we develop Ge. PS ? 1. 1 Overview of the Public Procurement • Combines centralized and decentralized procurement systems - Centralized : Procurement by central and local government agencies over a certain threshold must be assigned to PPS - Decentralized : Procurement under the threshold and state-owned enterprises’ procurement are conducted by themselves Total Volume: US$ 58 billion(’ 02) Centralized (17 billion, 30%) Decentralized (41 billion, 70%) • May use PPS’ Ge. PS for decentralized procurement PPS is a centralized procurement agency with a total of 935 employees, and was created in 1949

1. Why did we develop Ge. PS ? 1. 2 Understanding Public Procurement Importance of public procurement - Eases the burden of taxpayers’ by reducing national budgets Most of public expenditures are distributed by procurement - Sharply increases public confidence through the transparent process Eliminates common suspicions of corruption - Plays the role as a tool for fiscal policy Traditional characteristics of public procurement Paper-oriented procedure - excessive paperwork Labor-intensive work - frequent office visit Complicated process High cost Low transparency Low service quality

1. Why did we develop Ge. PS ? 1. 3 Need for Enhancing Performance of Public Procurement To respond to a changing environment Demand for High Quality - Active participation in public affairs Digitalization Expansion of e-Commerce Low cost High transparency Greater convenience E-Government trend E-Commerce, the Best Way to Innovation – To sharply increase transparency and efficiency by online transactions – To maximize the return on investment by joint use of one system No need to establish another e-procurement system by each agency

1. Why did we develop Ge. PS ? 1. 4 Strategic Approach to Adopting e-Commerce To become a professional organization by differentiating us – Transformed our organization with the use of IT Took initial steps for e-procurement – Started with PPS’ own business (centralized procurement) Exchanged e-documents by using EDI and opened e-mall (1997 -1999) Provided e-bidding and e-payment services (2000) – Facilitated e-Commerce to the entire public sector including decentralized procurement Initial operational capability September 2002 – Ge. PS is a Single Window for public procurement which digitalized the entire processes from order to payment

2. What is Ge. PS ? 2. 1 Single Window for Public Procurement 2. 2 Digitalized the Whole Procurement Cycle 2. 3 Integrated and Shared Service 2. 4 Internal & External System Architecture 2. 5 Technology base of Ge. PS Demo : Sample pages of Ge. PS

2. What is Ge. PS ? 2. 1 Single Window for Public Procurement • Single point-of-entry for public procurement opportunities – All bids are legally required to be announced on Ge. PS – Examples of bid information : end-users, project size, estimate costs, technical specification, and award criteria • Centralized business registration – With just a one-time registration with Ge. PS, businesses can participate in all government business opportunities – Repository of vendor data for the public sector

2. What is Ge. PS? 2. 2 Digitalized the Whole Procurement Cycle Automate end-to-end procurement process from requisition to payment e-Bid documents preparation and posting Invitation for bid Secure submission and storage of bids Opening of bids Posting of award decision e-Mall e-Contract One stop shopping source – search products, compare prices, submit PO to vendor Support electronic contract documents form 25, 000 off-the-shelf products such as office supplies through framework contract Buyers and sellers sign contract documents using digital signature Storage of contract documents Submission of inspection request and inspection certificate e-Payment Submission of invoice Electronic Payment Transfer (EFT) Fast payment within 4 hours after receipt of invoice

2. What is Ge. PS? 2. 3 Integrated and Shared Service l Provides one-stop service by linking Ge. PS with 53 external systems including : – – l Korea Financial Telecommunications & Clearings Institute for internet banking, National Finance Integrated System by Ministry of Finance and Economy for government financing, etc 11 guarantee corporations for warranty of transactions, 6 construction related associations for obtaining business credits, etc Provides e-procurement services for all public organizations – Joint use by all agencies from the central and local governments to state-owned enterprises by logging on to Ge. PS

2. What is Ge. PS? 2. 4 Internal & External System Architecture e-Procurement system e-Procurement ASP Portal PPS Operation Supplier supporting service Contracted products catalog Unit contract system Use End-user Goods classification system User registration Integrated Notice suppliers’ performance e-Guarantee e-payment Commercial Products catalog Documents distribution and outside linkage Linkage Suppliers Surety insurance Ministry of Finance And Economy Certification. Related agencies Linkage. Ministry of Government Administration And Home Affairs Construction-related Associations Korea Financial Telecommunications & Clearings Institute Construction CALS

2. What is Ge. PS? 2. 5 Technology Base of Ge. PS Combination of Information Protection Technology and the new e. Commerce Model Adopting encryption technology based on public key infrastructure and digital signature Based on the world-wide standards of e-document (XML, SOAP, EBMS, etc) TSS (Time stamp service) and authentication

2. What is Ge. PS? Demo : List of invitation for bids & Click on e-bid Click Here for Bid Participation

2. What is Ge. PS? Demo : Detailed information for each bid Deadline for participation, estimated costs, technical specification, award criteria, etc

2. What is Ge. PS? Demo : Bid results on a real-time basis List of participants and price proposed

2. What is Ge. PS? Demo : First screen of e-Mall Lately listed Items on e-Mall

3. What are its Achievements ? 3. 1 Enhanced Efficiency of Public Procurement 3. 2 Improved Transparency of Public Procurement 3. 3 Stimulated E-Commerce in the Private Sector 3. 4 Facts and Figures 3. 5 Received High Appraisal from the International Community

3. What are its achievements? 3. 1 Enhanced Efficiency of Public Procurement • Lower information costs Supplier’s access to business opportunities is timely, complete, and unconstrained by space or time – Reduce market research time and facilitate strategic sourcing – • Lower transaction costs Reduce in business hours by document exchanges online – Supplier is not required to visit to government agencies – Research, ordering, bidding, fulfillment, are all more efficient – • Increased competition The number of bidders has tripled as a result of e-procurement – Electronic bidding allows more dynamic price competition – Reduced US$ 2. 8 billion a year by Ge. PS : US$ 2. 5 billion(90%) in savings by the private sector and 0. 3 billion(10%) by the public sector

3. What are its achievements? Business • “I can reassign the employees’ duty because of Ge. PS from the paper or routine work to management or sales divisions for more productivity…: ” (a CEO of a private enterprise) • “Before Ge. PS, the time for participating in a bidding required at least half day, but now… only 1 minutes is enough for the same work, our company participated in bids 2, 000 times a year…. ” (a clerk of a construction company) • “I used to check the gazette and newspapers at all times for information, but now, I start my day surfing Ge. PS with my morning coffee…” (a businessman in charge of sales) Government • “Before Ge. PS, over 1, 000 participants sometimes arrived for one bid… in that case regardless of their posts, all members of our agency had to support the execution of it from the registration to bid opening for several days… But now I can finish all of my work alone at my PC in ten minutes… A total of 210, 000 participants participated last year…. . : ” (a city-official in charge of procurement)

3. What are its achievements? 3. 2 Improved Transparency of Public Procurement • Increased the disclosure of procurement information - Public, equal announcement and access on a real-time basis - Increase competition of small purchases by using e-Bidding • Diminished the possibility of corruption - Online contact instead of face-to-face contact - Substantially reduce the opportunities and incentives for corrupt practices - Increase the likelihood of detection and positive proof of irregular transactions

3. What are its achievements? Business • “Before Ge. PS, sometimes we formed collusion with our rivals in front of the bidding place for prearranged bidding… But now the chances of such an irregular practices are virtually nonexistent…: ” (a clerk of a construction company) • “I used to visit the agency for the contract process, so I sometimes felt uncomfortable, whether I had to give a gift to my clients or not, but now I don’t need to visit the client, so I am happy with the new situation…: ” (a businessman in charge of sales) Government • “Because of the peculiar characteristics of procurement due to conflicting interests, citizens had doubts about transparency, however hard we may have tried… But now, most of cases are executed by Ge. PS, I feel citizens’ trust improving…: ” (a city-official in charge of procurement)

3. What are its achievements? 3. 3 Driving force of e. Commerce in the Private Sector Promoted an e-Commerce mindset - Accumulated business experiences of online transactions 92, 000 companies are required to use Ge. PS, a common mode of e-Commerce - CEOs have emphasized the importance of the Internet and e-Commerce Built the Infrastructure - Created the computer environment such as PC, Internet connection, etc - Promoted the use of digital signatures as the best way to ensure security First adopted and verified digital signature for e-bid (September 2000) The number of issued signatures rose ten times for first 3 months Finally, government adopted them as mandatory for the private shopping mall (February 2004)

3. What are its achievements? 3. 4 Facts and Figures Registration Electronic Bid • 92 thousand registered businesses • 26 thousand government agencies utilize Ge. PS • More than 80 thousand visits to Ge. PS daily • 92% of all bids are conducted online through Ge. PS • 140 thousand tenders published annually 3500 • 15 million businessmen participated on the web (1. 25 million a month) • Total transaction value a year : $21. 5 billion (FY 2003) Electronic Mall e-Contract & e -Payment • No of purchase orders issued online a year : 0. 5 million (99% of all purchase orders ) • Total e-Mall transaction value : $4. 3 billion (FY 2003) • 23 thousand electronic contracts a year • 99 % of PPS payment transactions are electronic(FY 2003) • 213 thousand electronic payments a year

3. What are its achievements? 3. 5 Received High Appraisal from the International Community l Recipient of the first UN Public Service Award(UNPSA) 2003 - Selected for innovations in the public service for Asia Pacific Region (June, 2003) l International Recognition (presentation) - World Bank Conference on Transparency (Jan. 2003) - 11 th IACC(International Anti-corruption Conference) (May 2003) - UN/CEFACT(United Nations Center for Trade Facilitation and Electronic Business) (Sep. 2003 & Feb. 2004) - 5 th Global Forum on Re-inventing Government (Nov. 2003)

4. What has made Ge. PS a success ? 4. 1 Government-wide steering organization 4. 2 World-class Internet Infrastructure

4. What has made Ge. PS a success ? 4. 1 Establishment Government-wide Steering Organizations l Establishment of “special committee for e-Government” as a supreme taskforce for building e-government (JAN 2001 ~ JAN 2003) - Strong will for pan-government initiative The Committee assumed full management of e-government project - Joint efforts from public sector and private sector Public sector : planning and budgeting Private sector : applied new IT - 11 e-government initiatives under the principle of selection and concentration Ge. PS is one of e-government initiatives ; including government-wide civil service, tax, national finance, education, social insurance, integrated personnel management, etc

4. What has made Ge. PS a success ? 4. 2 World-class IT Infrastructure l Well-developed Internet Infrastructure – Ranked first in internet connectivity 30 million Internet users(65. 5% of the population), 11 million households with broadband Internet subscribers(75%), etc – By solving the Digital Divide in business, e-Commerce was not considered a barrier to public procurement l Demands of the stakeholders – Voluntary use due to profitability No more red tape, no more suspicion of corruption, no more wasted time, etc – Transparency from Public – Accumulated experiences of PPS’ staff, for example, continuous practical training of users (23, 000 customers in 2003)

5. Next Steps of Ge. PS 5. 1 Customer Relationship Management (CRM) 5. 2 leading e. Commerce through standardization 5. 3 Ubiquitous e-Procurement environment

5. Next Steps of Ge. PS 5. 1 Customer Relationship Management (CRM) • Deliver personalized service to each customer – Give the customers what they want, when they want it – Create the optimal channel mix combining new channels (PDA, mobile, web call center) with conventional methods (phone, internet, e- mail) • Real-time access to and use of customer data – Capture complete history of customer activity across channels and products • Offer ongoing customer care across all channels -- with a customer interaction center – IP based call center, Inbound & outbound call, escort browsing, voice chatting

5. Next Steps of Ge. PS 5. 2 Leading e. Commerce through Standardization • To standardize electronic documents in compliance with global standards – Appling IT infrastructure based on global standard – To participate actively in United Nations Center for Trade Facilitation and Electronic Business (UN/CEFACT) • To discuss the Ge. PS standards as the global one of e-document and business process, etc • To expand standardization of e-catalog – Ge. PS adopted United Nations Standard Products and Service Classification (UNSPSC) as a standard for commodity classification (410, 000 items) – Partnership with private industry to ensure e-catalog interoperability between public and private

5. Next Steps of Ge. PS 5. 3 Ubiquitous e-Procurement Environment • Mobile service – Providing Access to procurement information through internet-connected mobile device such as PDA (Personal Digital Assistant) – Presently running Wireless PDA service through WLAN or CDMA – Off-line web browser service will be available in September 2004 • Wireless e-bid pilot project – PPS will pilot e-bid through mobile device such as PDA by wireless digital certificate technology (December 2004) • RFID-based personal property management – Radio Frequency Identification (RFID) allows government to more efficiently manage asset management – Phase 1 : High-value equipment such as computer in PPS (Dec 2004) → Phase 2 : all assets exceeding given amount in government (2005 ~ 2006)

Demo : Mobile Service Main page Search results of bid information Detailed bid information

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