eProcurement Scotland is One of The Most Successful eGovernment Initiatives In The World.

eProcurement Scotland (ePS) is regarded as one of the most comprehensive and successful Public Sector eGovernment initiatives in the world. Managed by the Scottish Government it is a fully hosted and managed 24 x 7 eProcurement service, accessed via web browsers.

The service allows routine purchases to be processed electronically from requisition to payment, and interacts with finance systems. It also supports electronic sourcing activities that are undertaken by public sector procurement professionals. The Scottish Government support a centrally co-ordinated eProcurement service to help meet eGovernment targets and embrace and exploit the opportunities provided.

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The wider suite of eSolutions are collectively referred to as 'Technology for Reform' and they are the services of choice for public sector procurement in Scotland. They are implemented in Central Government, Universities & Colleges, Health Boards and Local Authorities. For more information, please see the Purchasers & Suppliers Guides to Technology for Reform.

Case Study :

Scottish Govenment eAuction Success

The Scottish Government undertook an eAuction during February 2004 as the final stage of a procurement exercise to obtain IT equipment. The process ran very smoothly and substantial savings were obtained.

Background

The Scottish Government (SG) had a requirement for a large quantity of personal computers comprising 2500 base units plus 800 flat-screen monitors. It was decided to make use of an electronic auction as the final stage of the competition. Four Gartner-rated tier 1 suppliers of IT equipment had already been short-listed and, prior to the auction event, were requested to provide a sample of the equipment they would supply against the Government's specification. The SG was thus able to evaluate the equipment for network testing and performance.

The Approach - Resources, Technology and Support

The technology used was the eAuction module of the DTC electronic tender software which is available to the Scottish Government as a subscriber to eProcurement Scotland (ePS). Some additional external resource was provided by both the service provider and the technology provider to the ePS programme.

• The external resource requirements amounted to around six man-days of management consultancy support (provided by Capgemini) and three man-days of technical support (provided by Elcom). The main tasks undertaken by the Capgemini consultant were: providing guidance on auction strategy; providing template documentation; advising on the wording of communications to suppliers; and providing over-the-phone briefing to the four suppliers. The main tasks undertaken by the Elcom consultant were: coaching for those involved in running the auction; providing advice on the characteristics of the technology; setting up the auction on the system and providing a "help-desk" facility to suppliers on the day (both of the trial run and of the auction). Capgemini report that the preparatory work done by Scottish Government was crucial to the success of the event without further support being required.

• Internal resources amounted to 8 to 10 man-days, shared among several procurement staff and the internal client in preparing for and conducting the auction. However, a large proportion of this time was accounted for simply by it being the first auction of this type run in the Government.

In the opinion of the procurement staff involved, the tasks conducted by the external support were indispensable - especially as a short timescale necessitated a rapid run-up to the auction event. On the other hand, they were also confident that for future electronic auctions many of the tasks could be carried out internally instead. While it is difficult to estimate the shape of the learning curve based on a first experience, the normal complement of external resources might be expected to be no more than six man-days (four consultancy plus two technical) for the next few auctions, eventually dropping to one (or none?) once they become regarded as routine.

Auction Parameters

Decisions were required to be taken on such matters as: the initial price at which to start the bidding; whether to bundle the requirement or split it into separate line-items; the start-time and duration of the auction; whether or not to employ auto-extensions (where a bid received in the final minutes triggers one extension after another until the auction peters out); and what information on the bidding each bidder would be enabled to see.

For the purposes of this auction, the requirement was split into two line-items (the base units and the monitors) so as to allow bidders to provide separate bids for each item. For this to be feasible, the client must be content that the separate items are interchangeable and compatible in any combination. In the present case, while there was a slight preference for both items to be from the same manufacturer purely for aesthetics, it was decided to proceed to auction on an "any combination" basis.

An "anonymous" auction was employed, that is the auction was set up so that each subsequently lowest bid was communicated to all bidders but without showing the identity of the bidder.

The Outcome

The auction took place on 26 February 2004. Both the buyer and the winning supplier thought that the technology performed well. Bidding was highly competitive by all four bidders and the 30-minute auction was auto-extended to 44 minutes altogether. 31 bids were received and covered all 4 bidders. A final price dramatically below the best expectations of both the internal client and procurement officers was obtained. The saving was circa £400,000 against the previous contract price (for lower specified machines) and £300,000 compared to the "reserve price" (which the SG had recently been paying for comparable equipment). Said one observer: "We could not have forecasted such a huge drop in price of the system boxes from our reserve price". Following normal practice a purchase order - the final total value being around £1 million - was placed via eProcurement Scotl@nd with the winning supplier the following day.

Critical Success Factors

•  The subject matter must be suitable. There should be no significant remaining differences in quality between the products offered. In the present case, a sample of the equipment which each bidder was offering had been provided beforehand to ensure that it met the client's quality threshold. (Consequently, no factoring for quality was used in the auction: "bare" prices were used.) 

 

• Prior preparation. The electronic auction followed a normal procurement exercise, during which terms and conditions had been agreed with each of the prospective suppliers and the buying organisation had satisfied itself as to the standard of the equipment offered, standing of the suppliers, etc. Arrangements covering any other extraneous factors (such as transport and warehousing) not directly addressed by the auction had also been made in principle with each supplier prior to the auction.

 

• Dry run. A dry run of the auction involving both procurement staff (with internal client) and suppliers was held two days prior to the actual event. The dry run was made as realistic as possible (except that obviously fictitious commodities were used to avoid risk of confusion) in order to flush out any possible technical or communications issues.
  
• Open dialogue with suppliers. Suppliers participating in the electronic auction were kept informed as to the buying organization's intentions to use an electronic auction. They were given coaching and practice in the technology being used, provided with support both prior and during the auction and fully consulted on such decisions as auction timing and parameters.
  
  -scotland.gov.uk