e-procurement in Europe – common sense made compulsory – but will it work?

e-procurement in Europe – common sense made compulsory – but will it work?

Posted by Pete Loughlin in e-Procurement, P2P Europe, Purchase to Pay, Purchase to Pay Process 09 May 2012

Finally the penny has dropped. Automating the purchasing process and controlling spend more closely by using modern technology reduces cost compared to following a manual or paper based process. This could save between 5% and 20% of procurement expenditure according to the EU commission.

That means that the EU could reduce its public procurement spend of €2 trillion and save a massive €100 million. And all this can be achieved in 4 years – apparently.

That’s a huge amount of money. 150 large hospitals could be built with that so it’s worth aiming for before anyone gets excited – and I hate to be the bearer of bad news – it isn’t going to happen.

Purchasing Insight logoThe EU is mandating the use of e-procurement and it wants to achieve this worthy cost saving by 2016. Their ambitions were announced a couple of weeks ago in a press release which explained the rationale.

“The Digital Agenda for Europe and the eGovernment Action Plan 2011– 2015 highlighted the importance of connecting e-procurement capacities across the Single Market” says the press release. “In the context of the modernization of the European Public procurement Directives, adopted in December 2011, the Commission has proposed to make e-procurement the rule rather than the exception, by making it the standard method of procurement in the EU by mid-2016.”

Commissioner Barnier elaborates: “It’s time to act. E-procurement represents a significant untapped potential for the EU economy. It can simplify the way procurement is conducted, reduce burdens and costs, increase the participation of SMEs and deliver better quality and lower prices. The sooner the transition is initiated, the sooner we will reap the benefits offered by e-procurement.”

Once bitten. Twice bitten.

It is absolutely the right thing to do and I wish the initiative success but this is a well-trodden path and the mistake of thinking that “e” is a panacea should not be made again. The language of the commission’s communications doesn’t provide much hope I have to say.

It is not the “e” in e-procurement that delivers savings – it’s the visibility, the control the measurement and the agility that captures cost reduction. e-procurement only delivers benefits when it is implemented as an enabler of best procurement practice. Taken out of the context of a proper procurement strategy and end-to-end purchase to pay landscape, it delivers nothing.

  • Peter Smith May 11, 2012 at 7:34 am /

    Peter
    Agree – the other thing to note is what the Commission means by e-procurement is what we would generally term e-sourcing. So – I think – they’re only talking about the procurement competition element, not all the subsequent transactional side of things. Which makes the savings estimates even more dubious.
    peter

  • Owen Inglis Humphrey May 11, 2012 at 3:30 pm /

    Peter

    I too saw this announcement from EC and first thought was one of joy that momentum was actually going to be given to getting the adoption of proper electronic trading across all elements of European public sector. Then reality hit. As Peter (Smith) correctly points out the announcement only refers to the use of eSourcing and, from initial reading, suggests that organisations merely have to start using an electronic platform to comply with the target.

    Full eProcurement, spend visibility and ultimate cash benefit realisation is still a long way off and that needs to be made clear to all concerned before folk start rushing off to spend all this new money on hospitals, schools, military hardware or possibly government buildings. As much money can be lost through poor adoption and use of these tools than can be saved through good use.

    As you point out, too often those in positions of responsibility pick up on banner headlines and assume that buying a piece of technology is going to answer all their problems. Why so many of these types of projects/directives have failed in the past, and why this could end up going the same way, is that limited effort is applied to changing the way that business is conducted. eSourcing is only one part of the puzzle and without updates to the Procurement Legislation, Europe wide updates to rules around invoicing and changes to the mind set of buyers, suppliers and finance staff, it’s likely to fall flat.

    That said, its still great to see that “e” procurement is finally being recognised and promoted.

    Owen

  • Pete Loughlin May 12, 2012 at 7:30 am /

    There’s a clear example of this kind of failure from the recent past.

    When the UK government launched it’s e-government initiatives 10 or so years ago, many public sector organisations claimed their “e” credentials by implementing what they called e-invoicing. Insisting that PDF images of invoices were sent by suppliers – only to be printed at the receiving end – was not e-invoicing. Indeed, it was counter productive and wasteful.

  • […] it comes to the “e” in procurement Pete Loughlin summons it up well >>Article saying that the “e” without a proper procurement strategy will not work. Adding to that […]

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