If public sector procurement is big business, public sector e-procurement has much less to boast about. Isolated islands of excellence apart, e-procurement has yet to make much headway among Europe’s public sector bodies and national and regional governments. And cross-border public sector e-procurement is an even rarer occurrence, despite a legal requirement for every European state to publish details of public sector procurement opportunities that exceed a certain stipulated value.

All of which poses some interesting questions. Which countries are making the most progress? Why are they making this progress – when other countries so clearly lag behind? What are the barriers to public sector e-procurement? And what can be done to further the opportunities for cross-border public sector e-procurement?

Huge potential savings

The advantages of e-procurement are obvious. From a strategic perspective, correctly targeted public spending can help to sustain and stimulate economic growth, protecting and promoting employment. E-procurement can help achieve this, as well as ensuring free and fair competition, and open access.

Operationally, too, e-procurement offers significant cost savings over traditional paper-based procurement that is dependent on manual processes. According to one source, e-procurement and e-invoicing could together reduce total procurement costs by around 5 percent, and lower transaction costs by 10 percent or more, saving governments tens of billions of Euros annually.

Not many are doing it

Yet European public sector examples of this actually happening are relatively few. ”The good news”, says Robyn Wright, a London, UK-based principal with consulting firm A.T. Kearney, ”is that those initiatives that are underway are generally driven by a strong sense of the potential benefits, rather than being technology-led.”

In Italy, she points out, an e-procurement marketplace including some e-catalogue initiatives – has been established by Consip Spa, a public company governed by Italy’s Ministry of the Economy and Finance that is tasked with acting as a central procurement agency for all levels of government administration.

In Germany, too, she adds, the Berlin-based Deutsche Rentenversicherung Bund – the national German pension agency – has an initiative underway to implement a comprehensive procurement solution focused on eliminating paper documentation and manual processes, making tendering processes faster, and achieving better terms and prices based on catalogue buying.

And in Britain, a significant regionally-based e-procurement initiative is underway at the National Health Service, while government departments as diverse as the Ministry of Justice, Revenue and Customs, and Home Office are each either all already on or moving towards a single vendor’s solution for data management and e-sourcing.

Comprehensive solutions

Look closely, though, and most of these – and similar – initiatives share a common failing: they aren’t ‘big picture’ A-to-Z procure-to-pay initiatives. That may follow, and might indeed already be the cited destination. But the reality on the ground is more prosaic, and ultimately less impressive: what generally exists today is apart-solution, such as e-sourcing, rather than an all-embracing e-procurement transformation.

One obvious exception to this seeming rule, though, is Norway. The Norwegian electronic public sector procurement portal Ehandel.no was established as far back as 2002, with the objective of providing public sector entities and their suppliers with an e-procurement platform.

More recently, Ehandel.no has come under the aegis of Difi, the Norwegian Agency for Public Management and eGovernment, which was established in January 2008.

Ehandel.no allows public sector entities and their providers to track spend and purchase goods in a more secure, user-friendly and cost-effective manner. Some 80 public sector entities in Norway – including local governments, county councils and government departments – use the service, generating a total procurement transaction level in 2009 of over NOK 3 billion (EUR 350 million).

By 2013, it is estimated that trade volume through Ehandel.no should reach NOK 16 billion (EUR 1.9 billion), partly facilitated by funding from the Norwegian Ministry of Government Administration and Reform, which has allocated an additional NOK 19 million annually from the 2010 state budget to further encourage the use of the Ehandel.no e-procurement platform.

Scotland, too, is another country that is usually pointed to as a success. eProcurement Scotl@nd was set up in 2002, and is now one of the most comprehensive and successful public sector e-procurement initiatives in the world, with almost a hundred public sector bodies using the service, collectively buying some £2.4 billion of goods and services in 2008, equivalent to over 25 percent of the total spend in the public sector.

Austria, too, is another example of success. Its Bundesbeschaffung GmbH, established in 2001, is a private company acting as a federal procurement agency to provide central procurement services to federal agencies.

Part of this work has been the creation of an e-procurement platform, through which its 14,000 users, employed by some 2,500 registered organizations – at federal, country, regional, state-owned organization level – place around 3,000 orders per month, equating to around EUR 12 million per month.

Room for improvement

But why is progress generally restricted to these isolated – and, it must be said, smaller-country – examples? Take Norway, for example. The Norwegian government has openly regarded Scotland as more successful in its e-procurement initiatives, and has pushed public sector bodies to take advantage of the Ehandel.no platform, says a Norwegian managing consultant.

“It’s been a long slow haul, with a lot of hard work being put it to raise levels of adoption,” he notes. “And despite the apparent success, total uptake still leaves plenty of room for improvement: while there are almost 80 public sector bodies using the platform, the ‘population’ of potential users is much higher – there are 434 municipalities alone.”

“Generally speaking,” he adds, “it’s the larger bodies that have used the platform, while the small and medium-sized organizations aren’t using it yet. That said, there’s been a lot of progress in the last year, with volumes rising by 50 percent. And an electronic invoice mandate, due in 2011, should help increase the volume even more.”

The very complexity of e-procurement is another problem. “People talk about ‘e-procurement’, but it’s actually an extensive set of processes,” says a manager at a Finnish e-sourcing solutions provider. “You have to ask: what comes first – the buyer side, ready to accept e-invoices, or the seller side, ready to accept e-orders and provide those e-invoices. It’s all about two-sided network economics.”

Pan-European initiative

Which, of course, is a problem compounded when the two sides are separated not just by an electronic gulf, but by national boundaries as well. An initiative known as the Pan-European Public Procurement Online (PEPPOL) platform aims to address both concerns, by helping European companies participate electronically on equal terms in EU-wide public sector competitive bidding.

Funded until 2011, the intention is to see European Union member states move a significant volume of their procurement spend over to e-procurement. And while the stated objective of 100 percent by 2010 might be difficult to attain, the minimum target of 50 percent represents a very worthwhile ambition, given e-procurement’s cost and transparency advantages.

Specifically, PEPPOL has the aim of creating an infrastructure capable of sending and receiving CENBII compliant e-procurement documents – e-ordering, e-invoicing, and ultimately the whole e-procurement cycle. “The vision of the PEPPOL project is that any company in the EU – and in particular small and medium-sized enterprises – can communicate electronically with any European governmental institution for the entire procurement process,” is how the PEPPOL website puts it.

Much work ahead

PEPPOL is clearly a big step forward, and a move beyond the surveying and feasibility projects that have characterized the area in recent years. If successful, the PEPPOL project will be a working e-procurement tool, delivering real benefits.

But will it be successful? “The EU and European governments are providing funding for PEPPOL for delivering inter-operability between national e-procurement systems. The building of those national e-procurement systems themselves are not supported,” says André Hoddevik, PEPPOL project director at Difi in Norway. “Many countries don’t yet have national systems that support the full procurement cycle. We have our main focus on aligning the systems that do exist through common standards and connect them through the PEPPOL infrastructure, but we also need to give guidance and create solutions that can help the remaining countries get started.”

The time scale, too, is tight: even if PEPPOL delivers on its objectives in the required time, a continued effort is needed to bring onboard member states and suppliers throughout Europe. “It is an important part of PEPPOL tasks to come up with a methodology to encompass all member states and – together with the European Commission – to establish solutions, organizational structures and governance that enable increased use and long term sustainability of PEPPOL results also after 2011” says Hoddevik.

Real opportunities

PEPPOL enthusiasts, though, are undaunted. “To compete effectively, it is important that EU states improve public sector capability to share documents electronically,” says Olli-Pekka Rissanen, special adviser at the Ministry of Finance in Finland.

“PEPPOL is a collaborative project designed to enhance competitiveness and increase efficiency of EU public sector procurement processes. Based on a common platform, PEPPOL will eventually enable the private sector to use the network as well as make it much easier for small and medium-sized enterprises to do business outside of their own countries, opening new markets to this sector,” he predicts.