April 26, 2013Doug Hadden
Isaac Maya, Business Development Manager
I have always been intrigued by government purchasing processes and decision-making. When governments decide to take the initiative to modernize their financial system and enhance their countries Public Financial Management (PFM) system, the common objective is to create accountability, transparency and ultimately increase country revenues and provide economic growth.
e-GP systems can be a major tool to meet those objectives. Yet there are few systems in operation. What are governments waiting for? And, why are multilateral banks setting e-GP project separate from PFM initiatives?
Proven Results not Prompting Action?
According to the Update of Multi-Lateral Development Banks e-GP Toolkit published in 2011: The governments of Chile and Andhra Pradesh reported savings ranging from 3%-20%, and Andhra Pradesh reported reduction in tender cycle time from 130 days to 32 days. The Government of Kazakhstan also reported significant savings from its partly developed system [Kazakhstan Centre for E-Commerce, April 2011].
Shouldn’t multilateral banks be prompted to expedite e-GP funding given these results?
Interconnectivity is of the Essence
Ever been in a situation where you purchase a model helicopter at the beginning of the week and you been waiting for the weekend to assemble, fuel it, take it to a field and fly it around, to later find out it’s missing the ruder? An essential interconnecting piece that makes the whole thing work! Well having a stand alone e-GP system that does not connect to the budget and communicates in real time with the Integrated Financial Management Information System (IFMIS) is as rudderless.
A solid e-GP system allows governments increase competition to achieve lower prices while reducing supplier bidding costs.
To quote the handy e-GP Tool kit once more: An e-GP solution must allow government procurement to be a commercial incentive that encourages productivity and competition, increases anti-trust mechanisms, facilitates the development of SMEs (less entry barriers to government markets), and promotes local and regional trade. The e-GP system provides a business development tool for both governments and supplier communities by providing access to information and opportunities locally, regionally and internationally.
IFMIS systems that have been designed for the private sector such as Enterprise Resource Planning (ERP), require a great deal of development and customization to meet government needs. This becomes doubly difficult if IFMIS and e-GP systems are bought separately.
Advantage of integrated Government Resource Planning (GRP)
The governments of Timor-Leste and Suriname have taken the initiative to modernize their public financial systems. Timor enjoy of a full financial suite that is web-based and can be seenin real time. The GRP approach ensures that all purchases are linked to the budget and that all financial procedures such as internal approvals and length of tendering process are integrated. There is no manual intervention to disconnect procurement from financial procedures. This has increased productivity, revenue growth and the increased of transparency and fair competition in a natural resource exporting country.
Suriname has recently taken on a PFM modernization endeavour, and is in the proper path to further reduce investment risk and promote foreign investments in the multiple sectors of developments, such as tourism, mining and agriculture.
Now that I have briefly showed you some of the good things a proper government focused e-GP system can provide. Why are multilateral banks keeping IFMIS and e-GP projects separately, when they can and should go together? If one provider has the IFMIS and another the e-GP, this just adds a layer of unnecessary difficulty and creates opportunity for corruption and inconsistent fiscal practices. Some governments realize to late that they have overspent budgets because of the lack of integration