The Latvian eProcurement system (EPS) was put in production at the end of 2005. It operates as an “eCatalogue current practice” system, as described in section, primarily focusing on achieving the following goals: - Reduce product and procurement process administrative costs - Achieve transparency - Introduce benefits to suppliers through automated processing Latvian eProcurement system strongly complies with the laws of Republic of Latvia and regulations of the Cabinet of Ministers of Latvia, as well as with EU regulations. Electronic Procurement State Agency (EPSA) administers and maintains the EPS. To participate in EPS Framework Agreement has to be concluded.

Policy Context

Improvement of procurement process and implementation of the EPS is one of e-government strategic initiatives, defined in E-government strategy of Latvia. Such a goal is also in line with the Lisbon strategy that was adopted in March 2000 by European Council in Lisbon with the aim of making EU the world’s most dynamic and competitive economy and that among other things specifically addresses priorities in the areas of public procurement and electronic commerce. In 2002 Latvia adopted the eGovernment Conception, aimed at modernising state administration through the use of ICT. It complements the Latvian State Public Government Reform Strategy 2001-2006, set to introduce optimised/modernised rules and processes for state administration. Based on the reform strategy, in 2006, public procurement in Latvia should be centrally controlled. In line with these legal provisions, the eGovernment Development Program 2005-2009 was initiated, for improving state and municipal information technology infrastructure and collaboration between public sector entities.

Description of target users and groups

The EPSA is set to provide a single portal for all public sector procurements and for monitoring procedures. The purpose of EPS implementation is to improve public sector procurement in Latvia by achieving the following objectives: -Reduce the risk of corruption in the procurement process by promoting open competition between suppliers; -Ensure efficient use of budget funds; -Reduce the duration of the procurement process; -Simplify the procurement process for small government bodies; -Create infrastructure that will ensure compliance with EU directives 2004/17/EC and 2004/18/EC. The proposed EPS is the act as an electronic marketplace where government buying organizations will act as buyers, selecting and ordering standard goods and services from the product catalogues maintained in EPS by independent suppliers. Even though public sector procurement process in Latvia is being continuously improved by modernizing existing legal framework and further expanding it, significant benefits can also be reaped from modernizing the technical side of procurement process and adopting modern technologies and concepts used in the area of procurement. One of such concepts is EPS, which implies the electronic communications that are used throughout the full (or part of) procurement cycle. Use of E-procurement brings the following benefits that are of interest to EPSA: -Reduced duration of procurement cycle as a result of using more efficient communication mechanisms; -Reduced procurement spending as a result of more complete information available to the buyer and buying power consolidation; -Greater process transparency as a result of keeping audit trails of communications and party activities. The EPS is a web-based. The users of the EPS (Buyers and Suppliers) have access to the system through widely used web browsers. Authorization is required for all registered users before the use of EPS. Authorization for users "A Guest" is not required as they have only limited access to EPS.

Description of the way to implement the initiative

The enterprise AS “RIX Technologies” worked out the project of e-procurement system for Procurement Monitoring Bureau of the Republic of Latvia. Afterwards newly established organization-Electronic Procurement State Agency has overtaken the project and the maintenance and the operation of the system is under control of the EPSA. Multi-channel issues: The EPS is one single integrated web-based system. The users of the system (Buyers and Suppliers) have access to the system through widely used web browsers. Buyer can search the product catalogue, select the products, make purchases and perform other operations. Supplier can online update its product catalogue (change offered products in compliance with specification and prices), respond to Buyers’ purchase requisitions and purchase orders, search product catalogue, register shipments to clients, and perform other operations. EPS will provide standard open interface for Buyers and Suppliers to import specific information from EPS into their Enterprise Resources Planning or accounting systems.

Main results, benefits and impacts

1) Operational impacts Impact on Buyers: Those buyers who would like to integrate their systems with EPS to minimize additional manual work resulting from the use of EPS must develop interfaces from their systems to open interfaces provided by EPS. The purchase procedures for the products available in EPS change – no price quotations is needed anymore since system performs that function by indicating the prices of available products; Less administrative recourse is needed to make procurements order. Less paper. The approval process changes since approvals for EPS purchases has been done electronically within EPS; Impact on Supplier: Those suppliers who would like to integrate their systems with EPS to minimize additional manual work resulting from the use of EPS must develop interfaces from their systems to open interfaces provided by EPS; In order to use EPS effectively, suppliers should understand well the necessity to update product catalogue regularly; Supplier experiences increased competition from other suppliers represented in EPS, since all information about suppliers’ product and price is readily available to buyers and comparisons can be made easily. Smaller supplier is eventually losing to bigger ones due to potential inability to supply sufficient quantity of products for the high-volume orders of larger supplier; Unfair competition and non-fulfillment of contract terms by suppliers are minimized by use of supplier ratings, and it provides more business opportunities for those suppliers that comply with all requirements set in the agreement; The administrative burden on suppliers decreases and the requirements of competence level for supplier personnel involved in public sector procurement is less strict as a result of using EPS. Less paper and time Impact on third parties: In the future, other external organizations such as Statistical Bureau of Latvia, EUROSTAT, State Treasury, State Audit Office of Republic of Latvia etc. may develop interfaces from their systems to EPS; Specific changes in legislation will be required in order to adjust the legal basis for the existence and operations of EPS; 2) Organizational impacts Impact on Buyers: Buyers must determine who will be users of EPS and ensure that users have sufficient skills to use the system (consider internal training, to be performed by some nominated “key user”); Buyers may have to adjust their existing approval schemes to the technical capabilities of EPS; Buyers must develop internal procedures for substituting approvers during their absence (sickness, annual leave, etc.). Impact on Supplier: Suppliers must determine who will be users of EPS and ensure that users have sufficient skills to use the system (consider internal training, to be performed by some nominated “key user”); Suppliers have new responsibility of maintaining updated catalogue information and managing incoming purchase requisitions and purchase orders – this may require part-time or full-time commitment from supplier employees, so suppliers should take it into consideration when they decide on participation in EPS; Suppliers can reduce the time spent on administrative tasks of supplying public sector organizations due to the fact that they must not prepare multiple price quotations anymore. Impact on third parties: External organizations whose information EPSA uses for EPS needs must sign contracts (Framework Agreements) with EPSA allowing it to get access to their data. Innovation: EPS is developed as national system for state institutions, municipalities and local authorities to conclude Public contracts for the participation in supply of Standard goods and services without any discriminating approach. Framework Agreement between the customer, supplier and the maintainant of E-catalogue on bargain. Buyer can search the E-catalogue, select the products, make purchases and perform other operations. Supplier can update its product catalogue, respond to Buyers’ purchase requisitions and purchase orders, search product catalogue, register shipments to clients, and perform other operations. User “Purchaser” can specify catalogue product category / subcategory until the 4th level and then specify the category-specific product features as a search criteria. The system will display the relevant product item that matches the requirements specified and has the lowest price. User “Purchaser” can select the product and add to the newly created or previously saved shopping cart. After selection of products user can perform check-out. The purchase requisition is sent to relevant supplier(s). Alternatively, user can exit the process without checkout – by saving the shopping cart for later use or exiting without saving. User “Receiver” marks the status of receiving transaction for ordered products. Supplier’s users can browse the E-catalogue and see all other products in those product categories that are agreed in Framework agreement between EPSA and Supplier. Suppliers should be able to see the prices (inclusive of VAT and delivery costs) set by the other suppliers. User “Supplier” can acknowledge or reject purchase requisition. By acknowledging a purchase requisition Supplier agrees to supply specified goods in specified quantities if the requisition is finally approved by Buyer’s Approver and a respective purchase order is generated. User “Supplier” can reject a purchase order in cases when this purchase order was generated from a requisition that was changed after it was acknowledged by supplier.

Return on investment

Track record of sharing

Our neighbouring country - the Republic of Lithuania is also on their way to electronic purchasing system. The representatives of Ministry of Finance of the Republic of Lithuania had expressed willingness to gain experience in EPS. After they had acquainted with EPSA experience they found it very useful for their project. As far as we know they had already partially used our experience for constructing electronic procurement system in Lithuania and for organizing centralized tenders for the purchase of standard goods and services.

Lessons learnt

It is obvious that the procurement procedure that is performed „on paper” is not possible to transfer directly into EPS. It is still necessary to prove that EPS is as safe as paper chain. We think that nevertheless the working experience of EPSA is not great we have already gained good experience in our case that is specific enough to share it with other administrations. We are the maintainant of E-catalogue and perform the role of mediator in electronic procurement process till the conclusion of the Framework Agreement – contract between the customer, supplier and the maintainant of E-catalogue on bargain. Afterwards we still render assistance to EPS contractors and coordinate supervision of the terms and conditions foreseen by the contracts concluded. By using electronic procurement system the efficient use of customer funds is provided, the transparency, publicity and the accessibility of the information on procurement process is increased. Newly established Central purchasing bodies from other countries are welcome to evaluate the case and overtake the best from our experience.