eAuction for simple product procurement in public administrations

Acronym of the case:

eASP (eAuction for S

Web address of the case:

http://ekozbeszerzes.eu/

Country of the case:

Hungary

City/region:

Budapest

Posting Date:

5 March 2008

Last Edited Date:

12 March 2008

Author:

Laszlo Szabados (eeeBid)

eAuction | eTendering | eProcurement

Type of initiative

Project or service

Case Abstract

The Directorate of Central Services in Hungary decided to run some pilot electronic auctions to see how this awarding procedure can be used for public procurement. The gained experience should be exploited for guiding the definition of the new national law.

The Directorate has chosen the Hungarian subsidiary of the eeeBid.com Inc. company, due to its flexible solution and its (also international) experience.

The first auction has been used for awarding the procurement of Cleaning Supplies for the central governement.

The system supports the following phases:
- eNoticing and eAccess: the on-line publication of procurement notices (available on the eeeBid portal),

- eAwarding: a reverse auction mechanism is implemented

- eSubmission: is not yet supported: bids are submitted only in paper form in the first term. Certainly the bids of the second term eAuction is accepted electronically.

Electronic catalogues can be uploaded and maintained by the bidders. No standard is used.

Description of the case

Domain

eGovernment

Topic

eProcurement

Sector

Other

Date

January 2003 to January 2004

Date operational

January 2003

Target Users

Administrative

Target Users Description

Directorate of Central Services, Hungary

Scope

National

Status

Ended

Language(s)

Hungarian

Policy Context and Legal Framework

The Hungarian Legislation did not allow auctioning in public procurement between 2004-2007, as a centralised auction provider was expected to be established, that failed, therefore this project is one of the first experience in the use of eAuction.

The outcomes have added to the completion of the legal framework for Public eProcurement in Hungary that was regulated at the end of 2007, being in act from 1st January 2008.

Project Size and Implementation

Type of initiative

Other

Overall Implementation approach

Public administration

Technology choice

Not applicable/not available

Project size

Implementation: €49-299,000

Yearly cost:

€49-299,000

Implementation and Management Approach

300 customers are using the system worldwide as ASP (Internet based) and also others as installed licences. Modules are Desktop, Supplier Management, RFX/Tendering, Auctioning, Evaluation, Contract Management, Ordering (incl. Catalogues and Requisition Process), Spend Analysis.

Impact, innovation and results

Economic effects

€5-15,000

Impact

Being the purchase selected for the pilot a well-known one (each year the Contracting Authory issue a procurement procedure for more or less the same volume of cleaning products), it is possible to make good estimation of savings.

The base of saving calculation was:

The actual price of the products as unit price. The volume of the past year was the estimated volume for the next year. The expected saving in 2008 is
21,34% , corresponding to 13.870 EUR

The benefits perceived from the bidders are:

- time and costs savings from the reduction or elimination of travels and reduction of time spent for negotiation

- improved visibility on the market whihc means possibility to better place offers for the coming public and private tenders

- easily receive feedback from the Contracting Authority on the proposed prices and possibility to over-react in some minutes

- transparency of the negotiation:there is no doubt that the best bidder wins the competition

The training and support of the users is very important: International Call Centers, User Guides, on-phone training and personal trainings will be implemented soon.

Track record of sharing

The same solution can be adopted by other adminstration in Hungary,
An experience of re-use has been conducted by the eeeBid Group in the Czech Republic, where e-auctions have been done for procurement in public hospitals.

Lessons learnt

Lesson1: Exact preparation of the tender is important. defining all the used products and the alternative products is essential for apple-to-apple comparison. Filling all the products and not lacking any is needed also. Afterwards an eCatalogue solution should be used for clear and easy ordering and pricing: it isnot yet available for this project, aimed at producing a pilot for the eAuction procedure, but should be included in the future.

Lasson2: a strong background on the legal framework and on the procurement procedure is necessary before starting the implementation of the eAuction solution. It is necessary to identify if eAuctioning is allowed on free market, if it is allowed with one central supplier; then the appropriate auction strategy has to be planned, to have a good competition with several bids.

Lesson3:
A purchasing Portfolio Analysis should be used to define which projects are good for the auction negotiation techniques. There might be some projects that could be fine if some conditions are fullfilled, for instance finding more suppliers. definitely there are projects that are better to cunduct in tenders or personally negotiated. e.g. if an investment needs a lot of technical discussions and all suppliers offer different alternatives that cannot be technically compared. A Other success factors for the eAuction are: involve the relevant suppliers and carefully define the auction parameters, that is identifing which elements can be auctionable, conditionally -auctionable or non-auctionable is important.

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