1. Reducing Transaction Costs through e-Procurement Joint Cooperative Committee Sept. 2011 Kyungsoon Chang PPS South Korea

2. Contents Quantitative Research Ⅰ System Integration Ⅱ Legislative Support Ⅲ Conclusion Ⅳ

3. 1. Background Ⅰ. Quantitative Research(’09) Review the Effectiveness of e-Procurement Fully implemented KONEPS since 2000 One of the best practices for developing countries Contribution to Low Carbon & Green Growth New horizon towards sustainable procurement Future vision of Korean Government Feedback as Reference to Promote e-Procurement Features: Centralized System/Single Window/One Stop Service Legislative support for more stable operation

4. Ⅰ. Quantitative Research(’09) 2. Methodology Outsourcing to Research Academics Factors for Analysis in Process Carbon issue… Visiting & Paper Reduction As-Was vs As-Is End user/PPS/Supplier Goods/Services/Constructions

5. As-Was vs As-Is Ex) Selection of contract method, tender notice Savings in 8 processes Ⅰ. Quantitative Research(’09) 3. Analysis in Process Ex) Tender inquiry, propose to bid, bidding Savings in 5 processes Ex) Tender inquiry, document submission, bidding Savings in 6 processes Services/Constructions Goods Services/Constructions Goods End User & PPS (Public) Supplier (Private)

6. Ⅰ. Quantitative Research(’09) 4. Cost Reduction Survey from Users Focusing on Each Specific Factor Statistics from DB of 2008 KONEPS Provide Analysis in Terms of Goods and Services, and Construction Provide Analysis in Terms of Public vs Private, Agencies, and Processes Effect by Exempting Stamp Duty Analysis on Shopping Mall

7. Ⅰ. Quantitative Research(’09) 4. Cost Reduction Public vs Private ● Total amount of reduction is about $8bn Due to - Sharp increase in the number of bidders (’05)16m -> (’08)20m - Significant increase in use of the Online Shopping Mall - Increase in number of procurement - Decrease in costs of visit and officer in charge $6bn&611m from Private Sector $1bn&440m from Pubic Sector $ 8bn & 52m

8. Ⅰ. Quantitative Research 4. Cost Reduction Goods vs Services and Constructions Due to - The number of biddings inc onstruction works/service is 156,651 which is one sixth of purchasing (897,240) - The number of bidders in construction or service is 22 mil which is 44 times greater than that of goods $6bn & 688m from Private Sector $1bn & 364m from Pubic Sector $ 8bn & 52m

9. Ⅰ. Quantitative Research 4.Cost Reduction Low Carbon Green Growth Annual volume of carbon reduction through KONEPS is approx. 615,000ton/yr ● Reduction from decreased visit : 592,000ton/yr ● Reduction from paper savings : 23,000ton/yr ● Economic effect is $26m/yr applying trading price for Certified Emission Reduction of EU 615,000 = 50,000,000 30-year old pines absorb annually 615,000 = Emitted when producing 1 million tons of gasoline = = 5 folds of LG Chemical Ulsan factory 5,000,000,000 pine trees aged 30

10. Wasted Budget Due to Independent e-Procurement Systems Single systems’ maintenance cost is $6.3 mil Initial investment is $31mil Independent Systems Use Information from KONEPS The volume of contents in an individual system is only 28% comparing to KONEPS KONEPS is Mandatory in Special Purchasing Suppliers have difficulties in accessing individual procurement system and using them 1. The Problems Ⅱ. System Integration

11. 2. Centralizing Ⅱ. System Integration Centralize to KONEPS Survey from system operators - Investigate characteristics of each systems KONEPS updates are centralized On-going research project to check the feasibility of centralized system Others Identify system operators who support centralized system Upgrade system that covers specific needs from different agencies Provide contents to independent operators - supplier information, fingerprint recognition, etc.

12. 1. Necessity Ⅲ. Legislative Support National Contract Law and Local Contract Law Stipulate Use of KONEPS e-Procurement is stipulated in PPS notifications (12 in total) Need Verification of Safety, Fairness, and Reliability Groundwork for stable operation of the representative system - Annual contract volume is $76bn More stable platform for expanding e-Procurement Expansion to the Public Not only public sector but also private sector Initiate e-Procurement support center

13. 2. Main Contents for Legislation Ⅲ. Legislative Support Procedures and Methods Stipulate procedures and methods of e-Procurement by public agencies Specify time limit of e-Documents sending and receiving - effectiveness of e-Documents Allow administrator of PPS to establish and operation KONEPS, and to request information from heads of related organizations Open to the Public Private users can use the system upon permission Expansion towards Other Countries PPS can provide support for international cooperation of e-Procurement and the system’s expansion PPS can establish e-Procurement support center

14. Ⅳ. Conclusion Prerequisites Single Window Integrity One Stop Service Legislative Support Expand the base of e-Procurement - Clarify rights and obligations of parties Verify Stable operation and constant improvement - Ten years of experience with KONEPS New Horizon Expand verified confidence and know-how to private sector Cost reduction and value-added creation

15. 15 Thank You