Government could save €1bn on e-procurement

24 Sep 2003

Although the Government has projected potential savings of €175m in its National E-Procurement Strategy, the Information Society Commission has recommended that the Government could instead save up to €1bn on public procurement if it adopts alternative delivery models like public private partnerships.

Having studied international studies and best practice models, the Information Society Commission (ISC) said that the €175m estimated in 2002 by the Government is “conservative” and could be increased “by as much as six-fold through the deployment of self-funding public private partnership arrangements”.

In a statement this afternoon, the ISC said: “The public service as a purchaser spends approximately €9bn annually and the ISC feels it is essential to get the best value for taxpayers through the use of the most modern procurement methods available.”

If the Government aims to realise potential savings of €1bn, it should study alternative methods like public private partnerships. Just as importantly, the ISC said, the Government must fund the National E-Procurement Strategy adequately as well as enhancing the existing e-tenders website.

In addition the Government must support increased SME participation in line with procurement reform, it has recommended.

Commenting on the ISC report, the Minister for State for the Information Society, Mary Hanafin TD said: “As a purchaser, Government spends around €9bn annually on goods and services. This report is timely in capturing clearly the significant savings on this amount that modern procurement practices can deliver for Government – savings that can in turn be harnessed to deliver better quality public services to the citizen.”

The authors of the ISC report, the E-business Working Group within the ISC, drew inspiration from a number of international e-procurement models. These included savings of 12.6pc on public procurement being achieved in the US by the State of North Carolina. The working group cited a recent global procurement report that surveyed 150 of the largest and best performing companies in the US, UK and Germany and found that 60pc of high performing companies saved between 10-12pc in procurement budgets by adopting e-procurement practices.

The working group also cited a survey of 168 companies carried out by Stanford University that revealed average savings of 42pc in purchasing transaction costs.

The chairperson of the ISC E-business Working Group, Clodagh O’Donnell, explained the urgency of the issue. She said: “Progress to date on procurement reform is disappointing and has clearly been inhibited by budgetary constraints. Annual funding allocations for 2002-2003 have been in the region of €5m – a little over one third of the annual investment of up to €14m envisaged by the strategy.

“Ireland is losing ground in terms of e-business adoption with a recent Forfás report putting Ireland seventh out of nine countries case studied. The public procurement sector is a strong mechanism to ensure healthy adoption of e-business in our economy. The Government needs to lead in terms of its interaction with businesses in order to promote an overall e-business environment.

“Promoting SME engagement with e-business will be crucial to the successful implementation of the Government’s E-Procurement Strategy. Ongoing communication, collaboration, advice, assistance and training will be vital in ensuring SMEs are in a position to avail of the opportunities provided by e-procurement throughout the public sector and the ISC advise that Government should consider setting a target of 20pc of public procurement needs being sourced from the SME sector,” O’Donnell concluded.

By John Kennedy