Innovating Public Procurement through

Korea ON-line E-Procurement System

November 2010

Kang-il Seo
Public Procurement Service
Foreword: Korea’s e-Government Project
The Korean Government initiated 11 e-Government projects to enhance national
competitiveness utilizing information technology

e-Government

Innovation in Services Administrative Productivity

1 Government-wide e-Procurement System 5 National Finance system

6 Integrated Administration System for

2 Local Governments
Single Window for Civil Services
7 Nation-wide Educational Administration
3 Integrated Social Security System
Information System 8 Standardized HR Management System
4 9 Consolidation of e-Document Exchange
Internet-based National Taxation System
and e-Reporting

INFRASTRUCTURE

10 e-Authentication and e-Signature 11 Government-wide IT-governance

System Environment
Problems Prior to KONEPS
Korea ON-line E-Procurement System (KONEPS)

KONEPS

Government-wide e-
Procurement System

Developed and operated

by PPS

Commonly used by all

public agencies for
procuring goods and
construction works

International standards
to ensure inter-
operability
Characteristics of KONEPS

Single Window for Public Procurement

Publication of all public tender notices
Bidders can participate in all public biddings after one-
time registration

Integration of Entire Procurement Work

Entire procurement processes from supplier registration,
bidding through to payment via the internet
One-click purchase at the Online Shopping Mall

One-stop Service
160 types of documents handled online through the data
exchange linkage with 100 information systems
Functions of KONEPS
KONEPS processes the entire procurement procedures through the 4 major
sub-systems: e-bidding, e-contracting, e-payment and the online shopping mall

e-Bidding e-Contracting
Contract Registration
Tender notice
Composition and
Price Assessment sealing of Contracts
Evaluation / Analysis Contract Review

KONEPS
e-Payment Online
E-Payment
Shopping Mall
Product Registration
Expenditure Mgmt.
E-Catalogue
Fee Management Product Search
Online Order
KONEPS at a Glance
KONEPS e-Tendering Processes
Certificate Other Bidding PG System Related Certificate D-Brain
G4C System
Authorities Systems Certificate Associations Authorities System
Authentication Integrated Commission for Supplier Data Authentication Contract Certificate for
Certificate Notice Bid Participation Certificate Information Tex Payment

Delivery/
Supplier Integrated Bid Opening/
Bidding Contracting Inspection/ Payment
Registration For Bid Evaluation
Acceptance

Encryption
Public Org. Surety Surety D-Brain
G4C System Key Issuance Banks
(40,000) Company Company System
System
Supplier Integrated Bid Bond Encryption/ Performance Electronic Funds
Registration Notice Time Stamp Bond, etc Transfer

All procurement processes are digitalized

Online KONEPS electronically obtains information on the bidders (business
Transaction registration, credit rating, past performances, etc) from other public and private
information systems (no need for submitting paper documents and certificates)
Transactions through KONEPS

41,000 Public Entities

$86 bn
$63 bn
191,000 Registered Suppliers
$56 bn

In 2009, over 70% of Korea’s total

public procurement (122 billion
USD) was conducted through
KONEPS 2007 2008 2009

Total Volume of Transactions

Conducted via KONEPS
Transparency and Cost Efficiency

Enhanced efficiency and transparency

Estimated transaction cost savings of USD 8.1B annually

USD 6.6 on the suppliers’ side, USD 1.5 in the public sector
Reduction of visits and contract-related papers, time-saving, etc
Savings of labor and time for searching for tender information
Savings from increased competition (not included in the figure)

Improves transparency in doing business with the government

Minimized face-to-face contacts

All the information are published on-line on a real time basis
The number of bid participants increased three-fold
Corruption Prevention through KONEPS
Increase public access to procurement information & decrease
contracting officer’s discretion

•Reduce the possibility for corrupt and illegal activities involving abuse of classified
information
•Clarify criteria for bid evaluation & disclose evaluation results
• Digitalization of successful bidder selection reduces public officers’ discretion at the bid
evaluation stage, therefore prevents corruption

Minimize face-to-face contact and increase information exchange

between public organizations
•Minimize possible corruption between government officials and suppliers
•Discourage defected companies’ participation in biddings & prevent documents from
being forged, consequently preventing corruption

Increased competition as a remedy to bid rigging

• Augmenting the number of bidders curbs collusion between bidders
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Dimensions of e-Procurement Implementation

Business Process
Reengineering Technology

Leadership

Change
Management
Business Process Reengineering

Redesigning Procurement Work Process for Improvement

• 80% of the total 565 processes in three categories (goods, services, construction
works) were revised
• 152 processes were removed, and over 300 processes were streamlined through
integration and digitalization

Standardization of e-Document forms and contents

• Foundation for standardized product catalogue system
(product classification / identification)
• Determining standard e-Document forms
(eb-XML based standards with development guidelines)

Revision of Legal and Institutional Basis

• Provisions for the registration of information and mandatory reporting for
e-Procurement services
• Revisions for the streamlining of procurement procedures
Revision of Laws and Regulations for e-Procurement
Framework Act on Electronic Commerce
• Ministry of Knowledge & Economy
• Established in 1999/ revised in 2002, 2005, 2007
• Provides for legally binding effect for digital documents

Digital Signature Act

• Ministry of Public Administration and Security (MOPAS)
• Established in 1999/ revised in 2001, 2005
• Legal force clarification for a digital signature

Revision of Relevant Regulations

• Mandatory: tender notice via KONEPS, sanctions against fraudulent bidders,
disclosure of award information
• Optional: use of e-Bidding and e-Contracting
• Grace period (3 months) and interim measures for smooth transition
Technology (1) – Intl. Standards for Interoperability

Adopting the most up-to-date technology standards to ensure

compatibility for data exchange with other external systems

eb-XML based web applications

Application of public digital signature

e-Documents are generated on and sent from the sender’s PC, and received by
the recipient's PC, to ensure end-to-end security system for e-Documents

PKI-based personal keys are issued for each individual tender and stored in the
responsible contracting official’s PC, so that the system operator may not access
the bid information

Adopting the government’s standard values (business registration information,

standard public institution codes, etc.) to ensure compatibility for data exchange
with other external systems
Technology (2) – Security and Authentication
Digital signature and encryption technology is used for the security of e-
Transactions (PKI method)
Experiences in Other Countries
E-Procurement System Implementation in Costa Rica (MER-link)

• Opened in June, but final modifications still going on

• Principles of single window, process & data integration, and one-stop service
• e-Tendering, e-Contracting, e-Catalogue, e-document exchange
• PKI authentication system

Lessons

• Inter-departmental Coordination, in addition to legal foundation, to promote

broader use
• Organizational manpower to operate the support center (call center) and for IT
maintenance
• National certification system and standards to be planned in well in advance
Recommendations

Simplification and Clarification of Procurement

Regulations for Process Transition through BPR

A single e-procurement system for all public

organizations

Standardized procurement process and electronic

document forms (XML) with digital signature

Take the step-by-step approach from integrated bid

notice (e-Notice), bidding (e-Submission) and e-
Shopping Mall
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THANK YOU

19
Appendices
e-Biddings through KONEPS

235,178
207,960
207,633 213,539

23.2
20.8 20.9 20.5

2006 2007 2008 2009

Number of e-Biddings Total number of bid participants (unit: million)

Focal points in the implementation of KONEPS

Gateway to Government Procurement Integrated Information & Shared Use

E-Procurement Portal Comprehensive information on public

Comprehensive Information Contents bids and bid awarding
Integrated Information Search Access to integrated data from public
Customer Service authorities and industry associations
Shared use of information

Standardized Procurement Process Korea Standardization of Fundamental data

ASP for public institutions

ON-line Standardizing Product Catalog and
Services for suppliers E-Procurement consolidating the database
System development for the System System Creation of e-Catalog
Operation Authority Standardizing 149 e-Document forms
(KONEPS)

Efficient Procurement Process Reliable e-Document Exchange

One-time registration for participating in Conformity to W3C/ebXML international

all public bids standards
Reducing the paper document End-To-End security measures
submissions by bidders Security assurance
Security and Operation Policies
Network Security
Separation of Internet and Extranet, Dual Fire-wall, Intrusion Detection
System, Security Solutions, etc

System Operation complying with ITIL

Check and Balance between PPS and outsourced Operator, Programmers
and System managers

Access control to system, program and D/B

National Computing & Information Resources Center
Automatic management of log access and program modification history,
post-verification system

Service Stability against accidents

Dual operation of servers and networks, Back-up Center(Data mirroring),
ITSM
Features of KONEPS Modules

All bidding notices of public organizations (central government entities, local

autonomies and educational institutions) are published thru KONEPS.
e-Bidding
It secures stability and confidentiality via digital-signature, encryption and e-Data.

Generation of e-Contact forms and electronic signing of the contract document

e-Contract
The contract info is stored in the system

The real-time fund transfer via data-linkage to the dBrain after payment request.
e-Payment
Unnecessary documents for inspection/tally and off-line payment request were removed.

Businesses can take impartial opportunities, and public organizations can have multiple
e-Shopping choices, which satisfies various demands.
Mall Repetitive purchase and vexatious bidding process have been simplified via registration of the
unit-price contract product and ordering function.