1. Legal Foundation of
Electronic Procurement
- Comparison Among
UNCITRAL, EU, US and
Korea
International Public Procurement Conference 6
August 24, 2014
Dublin City University
Associate Professor Dae-in Kim (Ewha W. University, Korea)
2. Background
Electronic Procurement (E-procurement): procurement of goods,
works, and services through internet based information
technologies (UNCITRAL, 2011)
Challenges to e-procurement (UN, 2011)
1) Lack of awareness and capacity building program: lack of
government policies and legal framework
2) Resistance to Change
3) IT infrastructure and internet readiness
4) Lack of cross governmental coordination: difficulties in
legislation
5) ineffective implementation
6) Obstacles to cross border e-procurement
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3. Issues (1)
Legal Issues on e-procurement
1) What’s the desirable legal framework of e-procurement from
the perspective of relationship among e-procurement law,
general procurement law and e-commerce law?
- Diffusion Model: tendering and award aspect of e-
procurement is regulated by general procurement law, while e-
documents and e-signature is regulated by e-commerce law
- Integration Model: integrated most e-procurement related
provisions into general procurement law
- Independent Model: almost all aspects of e-procurement is
regulated by independent legislation separated from general
procurement law or e-commerce law
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4. Issues (2)
2) What’s the relationship between tendering and award
mechanism in general procurement law and e-procurement?
Is there any relationship between the level of facilitation of e-
procurement and level of discretion of public officer in
tendering and award mechanism? Is there any specific type of
tendering or award which is more adaptive to e-procurement?
3) What’s the desirable relationship between law and technology
in e-procurement legislation among following models (World
Bank 2011) ?
- Minimalist approach
- Technology specific approach
- Two tiered approach
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5. Research Method
Comparative Legal Studies among UNCITRAL, EU, US and Korea
1) UNCITRAL (United Nations Commission on International Trade
Law): Model Law on Procurement of Goods, Construction and
Services (2011), Model Law on Electronic Commerce (1996),
Model Law on electronic Signatures (2001)
2) European Union: Public Procurement Directive (2014),
Electronic Commerce Directive (2001), Electronic Signature
Directive (1999)
3) United States: Electronic Signatures in Global and National
Commerce Act (E-Sign Act 2000), Federal Acquisition Regulation
(FAR)
4) Korea: Act on Use and Facilitation of E-Procurement (2013),
Act on the Procurement, Act on the contracts in which the State
is a party
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6. UNCITRAL
Three considerations in implementation and use of e-
procurement in the “Model law on Public Procurement” (2011)
1) facilitates the use of e-procurement
2) technologically neutral
3) give guidance of introducing and operation an e-procurement
E-procurement related provisions in Model law
- Article 5: publicity of legal text
- Article 6: information on possible forthcoming procurement
- Article 7: communications in procurement
- Article 40: presentation of tenders
- Chapter VI: electronic reverse auction
- Chapter VII: framework agreement procedure
E-signature and e-document is regulated by “Model Law on
Electronic Signatures” and “Model Law on Electronic Commerce”.
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7. European Union
Across the EU, e-procurement is still used in only 5-10% of
procurement process. There are over 240 electronic platforms or
portals in the EU for public procurement, but only about 50% of
them are capable of receiving electronic bids. Only two thirds of
the EU Member States are operating such systems. (European
Commission, 2012)
The new EU Public Procurement Directive (2014) has many
provisions which facilitate e-procurement.
- Article 33: framework agreements
- Article 34: dynamic purchasing systems
- Article 35: electronic auctions
- Article 36: electronic catalogues and centralized purchasing
activities and central purchasing bodies
- Article 53: electronic availability of procurement documents
- Article 61: online repository of certificates: e-Certis
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8. United States (1)
Electronic Signature in Global and National Commerce Act (E-
Sign Act): Affords federal and state entities the right to set their
own standards for electronic records (Section 104)
Federal Acquisition Regulation (FAR) Subpart 4.5: electronic
commerce in contracting
FAR Subpart 8.4: Federal Supply Schedule
Federal Government’s Major Online acquisition system:
1) Electronic Subcontracting Reporting System (eSRS)
2) Federal Business Opportunities (FedBizOpps)
3) Federal Funding Accountability and Transparency Act (FFATA)
Portal,
4) Federal Procurement Data System – Next Generation (FPDS-
NG), etc.
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9. United States (2)
Things to be improved (Halchin, 2013)
1) questions have been raised regarding the accuracy,
completeness, and timeliness of the contract award data
available from FPDS and its successor FPDS-NG.
2) separate logins, overlapping data, the absence of a single,
uniform level of service, and multiple vendor hosting system
3) efforts are being made to making procurement documents,
including contracts, available to the public
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10. Korea (1)
In 2002, Korean government established a comprehensive
national e-Procurement system called “Korea On-Line E-
Procurement System (KONEPS)” which is managed by centralized
procurement agency (Public Procurement Service: PPS).
To support the implementation of KONEPS, related regulations
were revised including “Presidential Decree of Act on the
Contracts in which the State is the Party” and “Presidential
Decree of Act on Government Procurement.”
“Presidential Decree of Act on Government Procurement”
provides the foundation of Multiple Award Schedule (MAS)
system, which was modified based on the framework agreement
in EU and IDIQ contract in US.
“Act on the E-Document” and “Act on the E-Signature” is also
applied to e-procurement which is conducted through KONEPS.
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11. Korea (2)
Despite many achievements of KONEPS, following limitation were
indicated.
1) Limited protection of KONEPS user’s information
2) Lack of prevention of fraudulent and illegal tendering
3) Limited accessibility of contracting information to general
public
4) Overlapping investments into e-procurement system in some
public enterprises (Ministry of Defense and other 20 public
enterprises manage their own e-procurement system)
To address these problems, “Act on the Use and Facilitation of E-
Procurement” was enacted in March 2013.
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12. Korea (3)
E-tender notice and establishment e-contract document (Article 6-9)
Sending and Receiving of E-Document (Article 11)
Relationship between PPS and customer agencies in e-procurement
(Article 12-13)
If each agency would like to establish its own e-procurement system, it
should get consultation with Minister of Strategy and Finance. (MOSF)
(Article 14)
The protection of KONEPS user’s information with criminal penalty
(Article 16-18)
Prohibition of illegal and fraudulent bidding (Article 19-20)
Strengthening training of e-procurement personnel (Article 21)
Promoting international cooperation development in e-procurement
(Article 22)
Establishment of E-Procurement Support Center (Article 23-24)
False Claims (Article 26)
Sanctions and Penalties (Article 27-29)
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13. Overall Framework of Legislation (1)
Framework
Agreement,
Reverse
Auction
E-signature, E-document Others
UNCITRAL General
procurement
law
E-Signature, E-Commerce
law
General
procurement law
EU General
procurement
law
E-Signature, E-Commerce
law, but part of this is
regulated by general
procurement law
General
procurement law
US General
procurement
law
E-Signature, E-Commerce
law, but can be regulated by
general procurement law
General
procurement law
Korea General
procurement
law
E-Procurement law, but can
be regulated by E-Signature,
E-Commerce law
E-Procurement
law
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14. Overall Framework of Legislation (2)
Models Strength Weakness
Diffusion Model
(UNCITRAL)
- Enable easy
regulation using pre-
existing legislations
- Hard to understand overall
aspects of e-procurement
- May result tendering and
award aspects and e-commerce
aspects of e-procurement are
separated
Integration Model
(EU, US)
- Easy to understand
e-procurement in
tendering and award
context
- E-commerce aspects of e-
procurement tend to escape
from the sight, as general
procurement law is more
focused on tendering and award
Independent
Model
(Korea)
- Easy to understand
overall aspects of e-
procurement
- Avoid overlapping
legislation on e-
procurement
- May result in inefficient
separate regime both from
general procurement law or e-
commerce related law
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15. Relationship between e-procurement and tendering and award
mechanism in general procurement law
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Tendering and Award E-Procurement
EU - Open procedure is widely used
- Economically advantageous tender is
actively used
- Contracting Officers tend to have
intermediate discretion
- Limitation in
automation of
information can be a
detriment to facilitation
of e-procurement
US - Competitive negotiation is widely used
- Tradeoff between cost factor and non-
cost factor is not strictly quantified
- Contracting Officers tend to have wide
discretion
Korea - Open or Restricted competition is widely
used
- Lowest price is widely used, even in
economically advantageous tender, price
factor is critical
- All evaluation factors in tendering or
award tend to be quantified and
aggregated
- Contracting Officers tend to have little
- Easier to have
automation of
information
- Facilitates end-to end
e-procurement
16. Relationship between law and technology
Strength Weakness
Minimalist
Approach
(UNCITRAL,
EU, US)
- Flexible to technological
development
- Facilitate cross-border
procurement
- Various authentication system
can cause inefficiency in
procurement
Technology
Specific
Approach
(Korea)
- Uniform authentication
system can enhance overall
uniformity of procurement
- Reduce risks of vendors to
choose various
authentication methods
according to different
procurement chances
- Can be an obstacle to cross-
border procurement
- Need to revision of regulation
according to technological
development
Two-tiered
Approach
- Can adapt to different
level of security need in one
jurisdiction
- Can be an obstacle to uniform
authentication system
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17. Lessons
1) Overall framework of e-procurement should be approached
comparing the strength and weakness of each model.
- Overlapping legislation should be avoided, and efforts should
be made to allow e-procurement users understand the system
more easily.
2) Full digitalization of procurement tend to be more compatible
with tendering and awarding system which focuses on
quantifiable factors such as price.
- E-procurement should have enhanced compatibility with
procurement system which allows more discretion to Contracting
Officers.
3) The strength and weakness of technology specific approach
should be taken into account.
- In Korea, technology specific approach contributed to the
facilitation of e-procurement. However, it is criticized to be lack
of cross-border competition.
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