Collusion and Corruption in Public Procurement

This note summarises Mexico’s experience in public procurement contracts from a competition policy prospective. Section 1 describes the relevance of public procurement in Mexico. In 2008, the Ministry of Public Administration registered 70,230 federal public procurement contracts adding up to USD59 billion. It is estimated that public procurement within government agencies, municipalities and state governments accounted for 18.4% of the country’s GDP.
 

The study also argues that although the Constitution mandates that public procurement procedures must guarantee that the State obtains the best available terms and conditions, in practice regulations focus too much on transparency and protection of domestic suppliers and too little on assuring a competitive outcome. In general, regulations lack the incentives to promote competition. This situation, in turn, may create extraordinary rents and increase the probability of corruption.
 

Critical Success Factors for E-Tendering Implementation in Construction Collaborative Environments: People and Process Issues

Tendering with traditional methods, using paper and manual processing, represents elevated costs in production and logistics for the construction industry.
 

Information technologies present valuable opportunities to create collaborative environments, where team work generates synergy that enables a efficient, secure and immediate access to resources and information.

Choosing and implementing a system that enables collaborative working environments requires focus in two main factors in order to obtain maximum benefits; processes and people that execute them.

 

Choosing Authentication Techniques in E-procurement System in Serbia

E-Government can provide a citizen with better and/or more convenient services as opposed to the traditional government services. Application of electronic approach in completing an e-Procurement process opens up a lot of issues regarding security.
 

The transparent nature of the process at hand is requiring a sophisticated security system. Unauthorized access or different kinds of intrusion present a legitimate threat. On the other hand, the attempt to develop such a system in developing countries like Serbia may face many difficulties. Some of the difficulties may be caused by legal obstacles, technical weaknesses, or human resistance towards change.

This paper presents a review of authentication techniques used in the European e-Government systems and according to that this paper is focused on the methods we used to overcome those difficulties, as well as on the provision of a strong security system that would guarantee the protection of sensitive data.  

XML Data Integrity Based on Concatenated Hash Function

Data integrity is the fundamental for applications that require data authentication such as e-GP systems. A major problem for XML data authentication is that signed XML data can be copied to another document but still keep signature valid. This could compromise bidding document’s integrity.
 

Through investigation, the paper discovered that besides data content integrity, XML data integrity should also protect element location information, and context referential integrity under fine-grained security situation. The aim of this paper is to propose a model for XML data integrity considering XML data features. The paper presents an XML data integrity model named as CSR (content integrity, structure integrity, context referential integrity) based on a concatenated hash function.

XML data content integrity is ensured using an iterative hash process, structure integrity is protected by hashing an absolute path string from root node, and context referential integrity is ensured by protecting context-related elements. Presented XML data integrity model can satisfy integrity requirements under situation of fine-grained security, and compatible with XML signature.

 

E-Procurement in Hospital Pharmacies: An Exploratory Multi-Case Study from Switzerland

Structural changes and increasing market dynamics in the health care sector intensify the hospitals’ needs for cost-savings and process optimization.
 

The adoption of new information and communication technology (ICT) is thereby seen as opportunity to improve not only efficiency and effectiveness but also the quality of health services. As costs for drugs continuously increase, especially hospital pharmacies will be in need of acquiring expertise and technology in order to enhance the sourcing processes. The diffusion of e-procurement is however slow in this area.

To investigate why hospital pharmacies only have a modest adoption rate of eprocurement, case studies of three distinct Swiss hospitals with differing organizational structure and automation degrees are presented. It will be shown that technological as well as organizational change is needed in order to efficiently use e-procurement in future.

 

Reaching the unreached: A Role of ICT in sustainable Rural development

We have seen in last few decades that the progress of information technology with leaps and bounds, which have completely changed the way of life in the developed nations. While internet has changed the established working practice and opened new vistas and provided a platform to connect, this gives the opportunity for collaborative work space that goes beyond the global boundary.
 

ICT offers an opportunity to introduce new activities, new services and applications into rural areas or to enhance existing services. With more than 70% of the Indian population living in rural areas and earns its live hood by agriculture and allied means of income.
ICTs can play a significant role in combating rural and urban poverty and fostering sustainable development through creating information rich societies and supporting livelihoods. If ICTs are appropriately deployed and realize the differential needs of urban and rural people, they can become powerful tools of economic, social and political empowerment.
 

Operational Efficiency Program: Collaborative Procurement

The study addresses the issue of spending on government procurement in the UK during 2007 – 2008, approximately £175 billion. 63% of the spending is made on goods and services common to all public sector, hence collaboration between entities is an effective strategy to achieve savings and improved purchasing conditions.
 

The document exposes the strategies and implementation steps for collaborative procurement in different areas and focuses on key findings, specially potential savings under this procurement scheme.

The report concludes recommending to improve knowledge and comprehension of collaborative strategies in the public sector, within theis recommendation it is emphasized the need to use extensively available e-GP tools.

 

Implementation of Public e-Procurement in Swedish Government Entities

An increasing number of organizations in the public sector are beginning to adopt e-procurement, which its benefits (e.g., to reduce costs through increased efficiency in the procurement function) are well known by businesses.
 

The purpose of this paper is to assess the implementation of eprocurement concept within Swedish government authorities during 2001 and 2008.

A qualitative research approach was applied, and a longitudinal study was conducted. Data were collected in 2001 and 2008 through structured personal telephone interviews with 15 central government agencies.

 

CONSIP The Electronic Marketplace of the Public Administration (MEPA) - Scenario, Operation and Trends

he Public Administration Electronic Market (MEPA) is a tool managed by CONSIP that supports purchases below the community threshold (137,000 euros for central administrations and 211,000 euros for local authorities) and promotes SME participation in the Program.
It’s a selective electronic market in which authorized suppliers offer their goods and services directly on-line. Registered buyers (Public Administrations) consult its catalogues and can make either a direct purchase order or request for offer.
The MEPA allows for the purchase of goods that would not be efficiently sold through framework contracts on account of their specific characteristics (e.g., non-standardized goods) or of the requirements they are intended to meet (e.g., fractioned, frequent, small and specific service-option purchases).
The MEPA offers both goods that are not offered in the framework contracts (e.g., office supplies, IT and electrical supplies, accessories and clothing), or goods that are similar to those offered in the framework contracts, but with a different purchasing process.
 

E-Tendering Requirements for MDB Financed Procurement

Borrowing countries are increasingly inclined to use electronic procurement systems to process and manage activities funded by the Multilateral Development Banks (MDBs).

Although it is not necessary for an e-GP system to include all procurement functions, for some steps in the government procurement processes, online technology is extremely efficient (such as for advertising of bid opportunities).

This guide was published as reference for MDB units managing projects, to evaluate features, standards, and operations where e-GP systems are intended to be used for bidding for goods, works, services or consulting.

 

E-GP – Implementations: A Review of Business Models and Approaches

The rise in demand for e-Government Procurement (e-GP) systems has created an innovative industry of technical products and business arrangements. To support the development, implementation and operation of e-procurement systems, governments have undertaken several different business approaches, from complete in-house solutions to various types of third-party partnerships.

Each implementation has its own set of benefits and business issues associated with it, which directly affect both the government and the suppliers doing business with the government.

In order to better understand the business arrangements required for an effective eprocurement system and to better support governments looking at different approaches to the implementation of an e-procurement system, the World Bank undertook a study to examine the business approaches and practices used by governments around the world for the execution and operation of their e-procurement systems.

The purpose of the study is to identify the types of business arrangements used by governments; the benefits of these arrangements; how they may or may not affect the procurement process; the types of issues or perceived issues that have resulted from the business approaches applied; the contractual arrangements or policies that have been drafted to mitigate issues and ensure the integrity and security of the procurement process; and, the conditions that have been applied to ensure the long-term sustainability of the e-procurement system, as well as to protect the government and its participating vendors in the case of a failed business operation or a government opting for a different solution in the future.

 

On the determinants of Collusion in Public Procurement: the case of Chile

One of the main objectives of the Chilean Public Procurement and Contracting Bureau – ChileCompra is to provide all the conditions in order to have an efficient and non discriminatory marketplace. Moreover, one of the main strategic objectives of this entity is to provide the means to achieve transparency. Therefore, the question of how provide free competition and non collusive behavior is a crucial one.

Based on ChileCompra daily work, it has been found that collusion can affect the processes in two main central lines. On the one hand, collusion does not allow the necessary competition or free trade to get efficient prices, that is, collusion generates serious economic losses, because of unjustified excessive payments, especially in the case of collusion between suppliers. On the other hand, collusion seriously damages the perception of transparency, especially in the case of collusion between supplier and purchaser.

This paper tackles the explanation of collusion determinants and its economic consequences in public procurement. Employing a wide variety of econometric models for collusion, this document finds that collusion is principally driven by the productive sector, the independency of the purchasing institution, the amount involved, sub-contracting possibility, the number of bids and the combinatorial awarding scheme.

Following this investigation, a standard cross section OLS, probit and logit econometric approach was implemented to get the determinants, their significance and magnitudes. The independent and dependent variables were chosen by doing a deep bibliographic analysis together with the consultation to the experts in the Chilean procurement agency.

Collusion is a serious distortion in any procurement system, because it does not allow competition to get efficient prices. The higher the prices, the more the expenditure the government has to do. The competition in this market generates savings with respect to the situation in which the agents do not have to compete directly, as the standard purchasing processes of an isolated unit without purchasing power. The illicit associations get extra resources from the government, increasing the public expenditure; they also contribute to the inflation, and destroy the confidence in the economy undermining the entire market economy. This study provides an initial framework to detect collusion, applying standard econometric tests to raw data.

Electronic Reverse Auction and its application in public procurement

This study was created in May 2009 by IDB employees. The case is written in Spanish and is available by clicking here…

This study analyzes the experience of the Latin American countries that have adopted electronic reverse auctions in public procurement. It focuses on the context, implementation strategy and regulations used by these countries and the results achieved. The study is also complemented by the literature that was used as reference materials during the investigation. A record of all countries or regions that have adopted the electronic reverse auctions is also available. The research concludes on recommendations regarding the formulation and implementation of policies that would allow the country to fully benefit from the advantages of the electronic auction in improving their procurement policies.

The Section 2 of the case identifies the basic characteristics of the electronic reverse auction as an innovative method in public procurement. It also includes the potential benefits, possible disadvantages of adopting this procedure as well as the factors that impact its operation in the public administration environment. The Section 3 holds information on the international use of the electronic reverse auctions, highlighting the cases of the countries most advanced in using them.

The Section 4 compares the experiences within Latin American countries, stressing the similarities and differences relevant for understanding the variables that affect the auctions’ creation and implementation. The cases of Brazil, Peru, Panama, Paraguay and Ecuador are analyzed based on a reference table that considers the institutional, legal, technological and economical aspects as well as those linked to the public procurement markets. Lastly, the conclusion compiles a series of short to medium term recommendations addressed to policymakers and practitioners on the creation, implementation and consolidation of the electronic reverse auction in the context of policies of public procurement.

Does e-Procurement Saves the State Money?

The following article was written by Marcos Singer, Garo Konstantinidis, Eduardo Roubik and Eduardo Beffermann. It was published in 2009 in the Journal of Public Procurement. The full article can be accessed by clicking here

Abstract: “Scientific literature reports scarce evidence of whether Internet-based procurement systems improve the efficiency of State purchases. We propose a methodology to estimate savings in: (i) the centralization of administrative tasks, and (ii) price differentials due to a larger number of contractors and suppliers bidding on contracts. We test our methods with ChileCompra, the Chilean e-procurement agency. During 2007, 885 Chilean State agencies used this system to purchase US$4.5 billion in products and services. Our preliminary results show price reductions of 2.65% and administrative cost savings of 0.28%-0.38% between 2006 and 2007.”