ICTs for Government Transparency

In the Case Studies section

eTransparency Case Study No.9

E-licitatie: Transparency of Romanian Public Procurement Through ICTs

Case Study Authors

Sebastian Ailioaie (sebastian@edemocratie.ro) & Sorin Kertesz (sorin@edemocratie.ro)

Application

In 2002, the General Inspectorate for Communications and Information Technology (GICIT) (part of the Romanian Ministry of Communications and Information Technology (MCIT)) developed E-licitatie - The Electronic System for Public Acquisitions - an e-procurement system.

Application Description

E-licitatie is a nation-wide governmental Web portal for procurement in Romania where government clients and private sector vendors can interact after being authenticated into the system. More than 80 different categories of goods are covered, and procurement requirements can be supplied by roughly 1,000 public agencies. There are 2,500 suppliers who are digitally-certified via the system. Hundreds of procurement transactions are undertaken each day, with typical examples being the purchase of office supplies for some schools, or bulk-buying of drugs by a hospital (though there are much larger contracts as well).

The system works on a reverse auction basis. The contracting authority from the government side issues a public notification through the system with terms of reference for the purchases to be made, including a clear description of the goods required. There is a time-bound automated bidding system, and the choice of winner is based on the lowest price bid to supply the required goods.

As well as automating the procurement auctions, E-licitatie can also provide information about:

The interface offers advanced search options for quick retrieval of specific information.

The system is monitored by a group of subject-area specialists employed by GICIT. After closing a transaction within the e-procurement system the status and the evolution of procurement are monitored. Assuming all is well, a physical contract is signed and the physical transaction undertaken. In case there is a complaint arising from any stakeholder, claiming some irregularity in the process, there is a special economic crime task force that will investigate the problem immediately. However, no such complaints have so far been received.

Public procurement is strictly regulated in Romania by statutory law. The major statute on procurement was enacted in 2001, while electronic procurement is covered by a couple of specific laws and statutes enacted between 2002 and 2003. The major aspects covered by these laws are: terms for participation, operating procedures, evaluation of the bids, closing of the contracts and execution, session termination, legal possibilities for appeal, the sanctions in case of law breaking, nomination of public institutions or types of public institutions that have to ask for bids by using this system, and types of products to be traded electronically. Article 2 of Governmental Order no.20 from 24/01/2002 states that one of the main legal principles fundamental to this system is the 'transparency principle', meaning that all information pertaining to public procurement should be made available to all interested parties.

Role of ICT

The auction engine used by E-licitatie was developed using Microsoft ASP technology and it allows fine tuning operations, if required by changes in the economic environment. The system not only employs a high degree of ICT security (encrypted communication, digital certificates, security tokens, etc.) but is also hosted in a building employing secure facilities by means of smart cards, biometrics, IP-based and closed circuit video surveillance. The hardware supporting the system is distributed in a high-availability architecture with dedicated Internet connections on fibre optics and radio waves in a balanced configuration. At its peak, the system has an average traffic of more than three megabytes per second.

The main role of ICT within the procurement system is the automation of the notification and bidding processes. It also creates an accessible channel for suppliers to find out about and participate in public acquisition auctions. Thirdly, it acts as the vehicle for storage and dissemination of information on the purchases of public institutions, available to anybody with Internet access.

Application Drivers/Purpose

Corruption was and still is a major challenge for governance in Romania (as in many other Eastern European nations), and it is seen as a root cause of problems in Romania by many voters. Consequently, every post-revolutionary government has taken a strong public stand against corruption even if, at the implementation stage, many actual initiatives have gotten stuck.

After the national elections in 2000, when the social democrats came back to power, Romania entered into a convergent trajectory towards membership of the European Union (EU) and the North Atlantic Treaty Organisation (NATO). Reduction of corruption was placed high on the agenda of the membership negotiations and the external agencies involved have been monitoring actual results in this direction. Moreover, important players such as the US ambassador in Romania, the ambassadors of EU countries, and representatives of the EU Commission have taken a hard and public stance against corruption in Romania (so hard, in fact, that sometimes their declarations were perceived as interference in Romania's national sovereignty).

In this general context, the Romanian government rated corruption as one of its major concerns and acted in various ways to diminish it - it created a national prosecutor's office for corruption allegations, and dismissed high-ranking public officials suspected of misuse of their powers. As part of this anti-corruption drive, the Romanian government also promoted concrete measures to post public information online and to provide complete online governmental services that would automate some processes away from human control. E-licitatie was designed as a first step in this direction, meant to demonstrate the value of such services in Romania.

Some of the main objectives of E-licitatie were to provide:

Stakeholders

There are three central stakeholders involved in this project:

Romanian citizens are a distant stakeholder of this system, as the transparency and the financial-related benefits have an effect on the cost and execution of public services. In some countries, civil society organisations take an active role in monitoring procurement. This has not been the case with E-licitatie. Transparency International, for example, has focused its attention on more significant sources of corruption rather than E-licitatie's high volume of low-value transactions which would not be cost effective to monitor.

Transparency and the Poor

The project does not address poor communities and individuals, but it does offer equal access for small suppliers (at least, those with Internet access), who would not otherwise be able to participate in such auctions.

Impact: Costs and Benefits

The main overt cost of the project was the development of the software, estimated to have cost around US$40,000. In addition to this, there were also implementation costs, both capital costs (servers and infrastructure) and operational ones (installation, maintenance etc.). These are more difficult to quantify effectively, but capital costs are likely to have been at least as great as those for the software.

The system brings some specific benefits to the process of procurement: increasing the speed and reducing the costs of the procurement process. It also reduces the costs of public sector purchases through the open auction process. In its first 18 months of operation, the system processed around 150,000 transactions with a total value of roughly US$350 million. Direct savings (calculated by subtracting the final bid price from the starting bid price) are estimated at around US$70 million, or roughly 20% of procurement value.

In transparency terms, the automation and disintermediation properties of the E-licitatie system have greatly reduced the opportunities for human discretion within the system, while the system's tracking and communication/reporting properties open procurement up to greater scrutiny by the public and, perhaps more importantly, by other competing bidders. This has helped to create a situation of more equal and fair treatment of bidders, opening up the process to a greater number of firms - especially small firms - but also squeezing out opportunities for corrupt collusion between public servants and private vendors.

There is no objective evidence available about the actual impact on corruption. However, in a survey of system users, 70% felt that the system did help to reduce corruption.

Evaluation: Failure or Success?

There has been no independent evaluation of the project. An internal evaluation commission (drawn from MCIT, GICIT and the government's General Secretariat) has monitored the system's transactions, savings and any disputes, and declared the system to be a success. There is no evaluation in relation to transparency, accountability or corruption.

Implementation proceeded smoothly, with a generally good reaction from users, especially the vendors. The system is quite simple to use, and there have been no major technical breakdowns. Public agencies did suffer something of an 'electronic shock', in having to change their procurement processes to the very precise requirements of E-licitatie. However, this seems to have generally been handled well, and the system is currently being extended to cover a broader and more complex range of procurement, including services such as construction contracts. Nonetheless, nearly 90% of public sector purchases by value are still conducted outwith the E-licitatie system, so it could be seen as stronger on image than on significant penetration into public expenditure.

Late in 2003, MCIT requested a formal investigation of repeated claims from some public organisations that E-licitatie was not working as intended, and that there was a misallocation of contracts. However, the evidence unveiled to date - including the system's logs - shows many of the claims to have been false or exaggerated. According to MCIT, any problems that have arisen seem to relate to the design of the procurement documentation and process by the initiating public agency rather than to any technical or functional flaw in the online system. There are also suggestions that the accusations arose from corrupt procurement officials seeking to undermine the automated system.

Enablers/Critical Success Factors

  1. Strong leadership and political support . These were essential for this e-transparency project, as public institutions and their employees are highly reluctant to accept change. A public relations campaign raised the profile of and created a positive image for the system, thus increasing the pressure on public institutions to adopt it. However, at root of the system's success was high-level internal political support, driven partly by the demands of external political agencies. Such support is particularly valuable in transitional economies, which are used to a culture of strong leadership and top-down command.
  2. Timing and targeting . The project came at a time when the concept of e-government was ripe for Romania and the participants in the system were those with the highest Internet penetration rate in the country: companies (suppliers) and public institutions (purchasers).
  3. External demands for transparency . In addition to the demands imposed by prospective membership of the EU and NATO, there were also demands from within Romania itself - from businesses and from the citizenry at large - for public procurement processes to become more transparent, and for action to be taken on corruption. This created a general atmosphere of expectation that helped facilitate the rapid and successful implementation of the project.

Constraints/Challenges

  1. Institutional resistance . The most important challenge for this e-transparency system was acceptance by staff within the public institutions involved, due to inertia and corruption. Besides the strong political and societal commitment to make the system succeed, laws were enacted in order to help ensure compliance.
  2. Lack of ICT skills . Lack of computer skills among the public servants involved was and still is something of a challenge for effective use of the system. National training programmes have been designed to help try to resolve this problem.
  3. eCorruption . There is no evidence yet of this e-transparency system being used to facilitate corruption. However, this does remain an ongoing challenge given the physical elements of procurement that have been removed by E-licitatie: there are fears that fake identities could be used, or that programmers could interfere with automated auctions in order to deliver a pre-arranged result. There are good safeguards in place: encryption and electronic security certificates; the hierarchical system of controls over procurement by bodies above GICIT; and the monitoring both by GICIT specialists and by the auction participants. Nonetheless, as human ingenuity and greed are always with us, the challenge remains.

Recommendations

  1. Ensure stakeholder incentives . If e-transparency is to succeed, it must deliver some benefits, or other incentives, to the majority of stakeholders. In the case of E-licitatie, the benefits to businesses - lower costs, greater access, and equality of treatment - have been fairly clear. For the public sector overall, there are cost-saving benefits. The only grey area has been the benefits to individual public servants, but here the framework of legislation and leadership at least provides an incentive.
  2. Appraise both hard and soft factors . eTransparency projects should consider economic issues within their plans, such as a basic consideration of financial costs and (where possible) benefits. However, soft factors should also be appraised: the human costs and benefits; the political costs and benefits (e.g. alignment with national political agendas). A scorecard rather than budget approach would be appropriate to this form of appraisal.

Further Information

http://www.e-licitatie.ro

Case Details

Case Editor : Richard Heeks.
Author Data Sources/Role : Web Site, Documents and Interviews; No Direct Role.
Centrality of Transparency : Mixed. Type : Transaction. Audience : External. Content : Contractual. Sector : Multiple
Outcome : No Independent Evaluation.
Region : Eastern Europe. Start Date : 2002. Submission Date : December 2003.

Last updated on 19 October, 2008.
Please contact richard.heeks@manchester.ac.uk with comments and suggestions.