eGov monitor explores the Norwegian eProcurement programme in conversation with Andre Hoddevik covering various issues including take-up, comparative analysis with other countries and impact on efficiency.
Q1 Could you give us a high level view of Norwegian public e-procurement?
Electronic public procurement is a tool for renewal of the public sector and realisation of benefits both in administrations and businesses. Renewal of the public sector is necessary in order to ensure future welfare for the citizens.
The Norwegian electronic public procurement portal ehandel.no was established in 2002 in order to attain a critical user mass of electronic public procurement. Participation in ehandel.no activities is open for central, regional and local authorities and their suppliers.
The purpose of ehandel.no is to give public sector entities and their suppliers easy access to a user friendly and affordable tool for operational e-procurement with each other. The operational e-procurement solutions available through ehandel.no can be accessed by the users via web-based services or through internal procurement or order handling systems. Integration with legacy systems is available both for the public sector buyers and their suppliers. As part of the agreement with the operator of the ehandel.no services, the available functionality is updated frequently on basis of user input and availability of new software.
The concept has proven itself viable: The current public sector user organisations on ehandel.no, represent more than 30 % of the total Norwegian public sector operations related procurement expenditures (€14 billions). There is a huge growth potential in actual use, but the general perception is that critical mass of users has been reached. In a study initiated by the European Commission ehandel.no is recognised as a leading solution for electronic public procurement in Europe.
Q2 What reactions have you had from business to e-procurement and is business shown itself to be ready to adapt to an e-procurement environment?
Implementing e-procurement effectively is not possible without the suppliers taking part. In the Norwegian electronic public procurement portal ehandel.no the suppliers are invited to participate by their public sector customers. The ehandel.no business model is based on both public sector entities and the suppliers paying for their active use of the e-procurement system. The suppliers have no cost for just receiving orders via e-mail or fax without having an eCatalouge present on ehandel.no. However, most public sector users of ehandel.no require the supplier to present their products in eCatalouges and many also require that the suppliers are able to respond to their orders via ehandel.no. In order to comply with these customer needs, the supplier must enter into an agreement with the operator of ehandel.no. Initially, there where some negative reactions from the suppliers on the business model and the price level. Now, the vast majority of suppliers are positive when invited to join ehandel.no as long as they can see that their public sector customer(s) are serious in their efforts to implement electronic procurement.
The results among the suppliers so far are that:
An increasing number of suppliers acknowledge the importance of ehandel.no as a sales improving tool and are increasingly aware of the need for correct, sufficient and updated information in their eCatalouges.
- Most of the suppliers (also one-man companies) requested to join ehandel.no by their public sector customers now manage to produce eCatalogues with acceptable quality.
- Many suppliers have integrated ehandel.no with their internal order handling systems to improve their own back-office processes. Many more are in the process of doing so.
- The number of errors have dropped rapidly (in ordering and invoicing), improving the profitability in the relations with their public sector customers.
- The loyalty towards the agreements is improving and the suppliers get more business out of their agreements with their public sector customers.
Q3 Are you seeing the expected level of savings from e-procurement and what challenges are there to further savings?
The use of electronic public procurement where expected to have benefits both for administrations and businesses. The first evaluation reports have now been produced, and they shows that expectations are met and that benefits can be realised through:
- Fiscal savings through increased loyalty towards procurement procedures and existing agreements. Better basis for entering into new contracts.
- Improvement of procurement process quality, less bureaucracy.
- Less error handling and increased basis for control through electronic traceability.
For administrations, the use of electronic public procurement makes more time and money available for improved public service production. Experiences from Norwegian public sector entities indicate a potential for 20-40 % time reductions on handling of orders, goods receipt and invoices, and between 2-10 % price reductions in operations related procurement expenditures.
The biggest challenges to further savings are that leaders in public sector entities fail to engage themselves in their procurement activities. Consequently they fail to investigate the potential savings from handling their procurement related processes electronically, and they never come out of their start blocks.
Q4 How does you think the Norwegian model of e-procurement compares with others that you have looked at and what advantages do you think it has?
The key innovations of ehandel.no lies in the flexible Internet based service provision concept and the business model for co-operation with a private company as service provider. The concept and business model has made it easier for public sector entities to take e-procurement into use and led to a considerable reduction of cost and risk in implementation projects. The result is easy access to a user friendly and affordable tool for operational e-procurement both for public sector entities and their suppliers.
This has been achieved with a small centralised budget; the total budget for centralised coordination, facilitation and support activities has been €2.9 millions from 1999. Other countries that have achieved more have spent a lot more money, but there are also countries that have spent a lot and achieved less. In the forthcoming years Norway will invest more in public electronic procurement based on the ehandel.no experiences, knowing that we have a viable concept and the necessary knowledge on how to implement and realise benefits at hand.
Q5 How significant has interoperability been as a factor in releasing savings?
The key focus for the ehandel.no solution is not technical but service oriented. Interoperability is an important feature that must be catered for but it should not be something the end user organisations should need to focus on initially. Better understanding of their procurement needs and streamlining of their procurement processes have so far been the most important factor in releasing savings. However, it is important that standardisation bodies and public sector authorities work together with industry on establishing process descriptions and defining information content/formats that supports the public procurement processes. Together with the Nordic countries and UK, Norwegian authorities participate in the ongoing work on UBL 2.0 and the creation of a North European subset of this standard.
Andre Hoddevik is speaker at t-Government World Europe in Amsterdam on the 9-11 October in Amsterdam. Details are available at: http://www.intelligentgovernmentworld.com/2006/tgov/
