Bidding online helps boost public expenditure efficiency

Wednesday, 2018-10-24 08:28:17
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E-procurement is expected to help facilitate public expenditure efficiency.
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NDO – The National Procurement Network was established in 2009 and was officially put into operation nationwide from 2016. To date, the number of tenderers and contractors using the system has increased significantly.

According to the Ministry of Planning and Investment's (MPI) Public Procurement Agency, during the first seven months of 2018, more than 8,900 bidding packages were bid for online, doubling the number in the same period last year. This year, it is expected that there will be approximately 15,000 packages applied for online bidding.

From the perspective of a party calling for tenders, Pham Thi Thuy Ha, Head of the Board of Procurement Management under Vietnam Electricity (EVN), said that EVN's total investment is roughly US$4-5 billion a year. In the first year of joining the bidding system, EVN had only 10 online bidding packages, but the number went up to 200 packages during 2010-2012 and increased up to 4,500 packages in early 2018, with the largest package worth VND200 billion. Currently, EVN has 57% of the total bidding packages carried out online, with a savings rate of around 13%, much higher than the savings rate at 9-10% on traditional bidding.

On behalf of a contractor, Ha Tien Luc, Deputy General Director of Hanoi Electro-Mechanical Manufacturing JSC (HEM), said that in previous years, HEM won only one or two packages per year. Recently, as the annual main tenders and separate procurement programmes from the Hanoi Electricity Corporation have been implemented online, HEM has had the opportunity to participate in almost all tenders in electrical equipment supply.

Online auctions help reduce the cost of printing materials and travel at an estimated rate from 3-5%, depending on each package. For power generation, profits from only 1-2% have been considered a success. Practical experience has showed that traditional bidding poses a lot of risks. For example, when participating in a bidding package in Ho Chi Minh City, an enterprise may lose the opportunity if they get in trouble during travelling, or have missing documents or mistakes in their paper work.

In the online bidding, it is acceptable if paper errors are detected and revised within the allowed time. But the most important factor is that the online auction is very open and transparent and goes against negative acts, thus creating a fair and equitable competition for the participants. "Thanks to the online bidding process, we have won tender packages that previously we had to fight for, while helping reduce the unmanageable material burden and easing suppression when making good products but being unable to compete with “backyard” contractors. Continuing to promote this form of bidding will be a source of encouragement for us to focus on making quality products at competitive prices," affirmed Luc.

According to Decision No. 1402/QĐ-TTg, dated July 13, 2016, by the Prime Minister, by 2015, 100% of regular procurement activities must be carried out online and at least 70% of all packages covered by the Procurement Law must be done on the system. As the leading locale in terms of online bidding, Head of the Da Nang municipal Department of Planning and Investment, Tran Van Son, estimated that his city would save around 10-15% of the costs thanks to online auctions. From the experience of Da Nang, it is necessary to accelerate the speed of online procurement, because the public investment volume for the whole country is very large, at approximately VND400 trillion (over US$17 billion) each year, thus saving around 10% is a huge gain to the State budget.

According to the National Centre for E-Public Procurement (under the MPI’s Public Procurement Agency), the number of online winning packages has increased steadily over the past three years. Specifically, in 2016, the rate of winning packages through the network was at 5%, in 2017 it was up to 11% and in the first seven months in 2018 it increased to 18%. Generally, since the pilot implementation, a total of nearly 23,000 packages have applied for online bidding with a value of VND20 trillion. Despite the above positive results, it is very difficult to realise the objectives set out in Decision No. 1402/QĐ-TTg.

Head of the Public Procurement Agency, Nguyen Dang Truong, said that the e-procurement operation is encountering obstacles in the facilities, processing techniques and capacity of operating staff. Technically, Vietnam has applied the online bidding system since 2009 under the design of the Republic of Korea. Currently, this system only works on the Internet Explorer platform and cannot be used in other open-source browsers, thus limiting the participation of the parties concerned as well as the provision of bidding information. This limitation will be tackled under a technology improvement project being implemented by the MPI under the auspices of the World Bank and the Asian Development Bank.

The technical limitations can be overcome, but the biggest obstacle is still laying in the limited thinking and awareness related to e-procurement. Unlike traditional bidding, the online auction is highly transparent, but there are many agencies, units and contractors that still do not really trust in it or do not want to participate.

Pham Thi Thuy Ha shared that the biggest challenge is to change the mind-set. Although there have been technical upgrades, so far, the online bidding system is still limited and sometimes overloaded when uploading files with a high capacity. But it is impossible to reduce costs when waiting until the system is upgraded. In recent years, EVN has stipulated that online bidding is the compulsory criterion in the set of indicators in its units, so the implementation rate is very high.

Up to now, among the 119 agencies designated to carry out e-bidding, 41 of them have not implemented any bidding packages yet. Some agencies at first cited a number of reasons to delay, but later they proved that they could effectively implement online bidding. Currently, on average, there are only 2.67 contractors participating in one online bidding package. This fact shows that there are many contractors who do not know about the information to join or are not yet confident in joining. To facilitate enterprises in accessing information on tender packages in the future, the MPI will study options to inform contractors about the groups of packages they are interested in, instead of having to access to search for individual packages posted on the system themselves.

Nguyen Anh Tuan, Deputy Head of the MPI’s Public Procurement Agency