The UK has the most expensive public procurement process in the EU, this is according to a new research carried out at the Centre for Economics and Business Research (CEBR) in London. The CEBR’s research highlights the need for cost reduction measures to be taken in order to make tendering more affordable for the public sector in the UK. The findings are staggering in that public sector procurement processes are 90% more expensive in the UK compared with the rest of Europe. This must be a cause for concern for our largest trading partner.
The European Commission has released a draft directive on e-Invoicing in public procurement that communicates its vision to fully digitalise by 2020.
Digital Agenda for Europe
This directive is part of the Digital Agenda for Europe initiative, which is a pillar of the EU 2020 strategy. EU 2020 is a growth strategy that is trying to ensure the EU remains one of the major players in global sustainable business and make sure that the European economies emerge from recession stronger than ever and more unified. This Digital Agenda initiative is looking to boost the EU economy by harnessing digital technologies and maximising their growth potential within the member state economies. By creating smart economies the EU is looking to take advantage of growth opportunities that technology is offering in a digital age.
In early February, in a further boost to electronic trading across the European Union, the Competitiveness Council created a set of goals designed to promote online trade and electronic invoicing. Meeting in Denmark, various ministers laid out a timeline promoting several web-based trading systems with a view to doubling online sales by 2015.
The push for greater use of business technology is also reflected by attempts to grow online public markets until 2016, and e-Invoicing until at least 2020. The Danish EU presidency presented figures to ministers suggesting that growth of the digital single market would undoubtedly grow European GDP, perhaps by as much as four per cent over the next eight years.
The European Commission recognise that at present digital public procurement markets remain a relatively niche sector of the wider marketplace, but the well documented benefits of switching from manual to digital processing should benefit member states in the long run. Factoring in reductions in manual administration should also help reduce costs and foster a greater degree of competition between suppliers at the point of tender.
During the same meeting, ministers backed the findings of the European Commission publication ‘e-Invoicing: Reaping the benefits of electronic invoicing for Europe’, which suggests increased adoption of the technology for cross-border e-Invoicing for member states. The report suggests that introduction of e-Invoicing between Eurozone members will significantly improve international supply chains across Europe creating working capital gains in excess of £300 million.
The move towards greater use of eProcurement systems and increased online trading comes in the same week that the European Union legislated for the new Single European Payments Area (SEPA), designed to facilitate easier banking across the region. Although the EU still trails behind several South American countries in their use of e-Procurement and invoicing, these recent changes will finally start to see that change.
Since the announcement of the e-Invoicing & PEPPOL project last week by Minister Brian Hayes, the Minister of State with special responsibility for the Office of Public Works there has been much online and offline discussion about the nature and origin of the project itself. In my last post on the subject I stated that e-Invoicing isn’t new to Ireland. Indeed, Celtrino has been helping Irish companies do it for more than 20 years. But PEPPOL is new to Ireland and the purpose of this post is to provide a brief overview of PEPPOL.
So, what is PEPPOL?
PEPPOL stands for the Pan-European Public Procurement Online project.
At a high level, PEPPOL is an EU initiated and funded e-Procurement project to enable seamless cross-border e-Procurement, connecting communities through standards-based solutions.
In particular, PEPPOL will enable any company in any EU member state to respond to any tender across the EU. Therefore, any Irish or EU company will be able to tender for government projects in any EU member state.
Government inefficiency, particularly government procurement inefficiency is the focus of PEPPOL. Less than 5% of total procurement budgets are awarded electronically and only 1.6% of contracts are supplied by an entity in another Member State. It is estimated that if e-Procurement is adopted by all European contracting authorities, annual savings could exceed €50B.
How will PEPPOL work?
PEPPOL will remove the technical and procedural barriers to public procurement by enabling European businesses to deal electronically with any public buyers in their procurement processes.
PEPPOL is a document exchange service enabling e-Delivery of business documents between government agencies and private companies.
Is PEPPOL Live?
The PEPPOL project was set-up in 1998 and is currently in test phase in 12 EU member states.
Ireland is an active participant along with Austria, Denmark, Finland, France, Germany, Italy, Norway, Greece, Portugal, Sweden and the United Kingdom.
Celtrino is a key member of the Irish PEPPOL project and our public sector project partner is the Health Service Executive (HSE).
As with many other European governments, the Scottish Government has decided to replace its current electronic procurement platform with a hosted service. The Government have signed a four year contract worth £18.5 million to provide online purchasing services named eProcurement Scotland Service.
Alex Neil, the Scottish Government’s cabinet secretary for infrastructure and capital investment said, “The award of this contract builds upon Scotland’s successes in the deployment and management of public sector e-procurement technologies.”
The eProcurement Scotland platform will be run across datacentres spread across a number of different locations with centralised management from the Government’s datacentre in Edinburgh. Support services for users will come from an external company based in Aberdeen whilst integration and transition services will be provided from a Glasgow office.
The contract is expected to provide both cost savings and environmental benefits. The eProcurement Scotland project will see 73 servers reduced to just 19 through the use of an outsourced virtual hosting environment. This reduction of physical hardware will result in lowered management costs, 75% less electrical power draw and a smaller carbon footprint. The Scottish Government calculate the carbon savings of the move will be equivalent to taking 200 cars off the road each year. The system will be better for users as well as the environment.
The new eProcurement Scotland platform replaces the existing system which was set up in 2002 and currently processes orders in excess of £8 billion per year. There are more than 50,000 registered public sector users, capturing nearly 33% of the Scottish public sector spend.
The eProcurement Scotland platform is intended to be a flagship development of the Holyrood Administration. In Alex Neill’s words:”It [eProcurement Scotland] also showcases Scotland’s supplier capability to host and manage what is regarded as one of the leading government ecommerce services.”
As with many technological advances, governments frequently lag behind their private sector citizens. However following a 3 month consultation period, the European Commission has reported “considerable support” for the institution of a mandatory standardised EU-wide e-procurement solution.
In a statement outlining the main findings of the consultation, the EC said: “There is broad support for EU-level action, including the use of legislation, to facilitate the use of standardised e-procurement solutions. A small majority of respondents support the imposition of EU-level requirements to use e-procurement.”
Echoing the concerns of private sector implementers of procure-to-pay solutions, 60% of respondents commented that “overcoming inertia and fear” would be the largest barriers to the success of e-procurement deployments, particularly in cross-border situations. Concerns were also raised about the potential for a lack of standards or onerous technical requirements.
The EC is now calling on e-procurement and B2B supply chain management specialists to join an expert group with a view to creating a blueprint for common solutions. The EC is also set to monitor the use of e-purchasing within its member states to observe and promote best practices.
One of the lessons the public sector has learned in the arena of supply chain automation and e-procurement is that implementations of such systems need be neither complex nor onerous. Outsourcing of procurement processes to specialist providers has proven to be both cost effective and extremely efficient, removing much of the administrative burden associated with e-procurement. Using cloud-based Electronic Data Interchange (EDI) systems such as Celtrino’s Smart Admin platform, businesses can take advantage of sophisticated data format conversions to deliver Electronic Invoice Presentment and Payment (EIPP) information directly into a supplier’s accounting system.
The use of outsourced EDI Managed Services have proven to be of great benefit to private sector businesses by transferring the day to day responsibilities for managing complex data sets and transformations to the service providers, generating cost savings as a direct result. It is therefore feasible for governments to reap similar benefits through use of the same platforms and processes.