eProcurement

FAQ

eProcurement Policy FAQ's

These questions and answers have not been designed to be exhaustive but rather to evolve in light of comments and enquiries. [i] If you have any suggestions regarding their development, or a question that is not covered, please contact the OGC Service Desk.

1. Is there a written policy statement that reflects the Governments position on eProcurement?
2. What impact will the new Consolidated Public Procurement Directive have on eProcurement?
3. What does OGC recommend in respect of commodity classification coding?
4. Am I allowed to use eAuctions in government procurement?
5. What rules should I follow if I want to use an eAuction?
6. What wording should I put in an OJEU Notice if I want to use an eAuction as part of my procurement?
7. Is it acceptable to run an eAuction within a framework agreement that has been let under the existing EC procurement directive and which did not have a notification of the use of an eAuction in the OJEU notice?
8. What is a Dynamic Purchasing System (DPS)?
9. What is the situation regarding the retention and management of records within eProcurement systems?
10. What are the security and accreditation requirements for eTendering solutions in Government?
11. Must digital signatures be employed in eProcurement in Government?
12. What is the impact of eProcurement on Government contracts?
13. Do I need any special accounting controls in my eProcurement system?
14. Are electronic invoices permitted?
15. What "standards" might I use when sending/receiving eProcurement messages to/from my suppliers?

1. Is there a written policy statement that reflects the Governments position on eProcurement?
There is currently no policy specific to eProcurement. Departments using eProcurement must ensure that they abide by the same legal and policy obligations that govern all public procurement. Specifically, eProcurement must be compatible with the EC rules and the Government's value for money policy, as set out in chapter 22 of Government Accounting. [ii]

The document eProcurement: Cutting through the hype (PDF, 790KB), reflect the government's findings following projects conducted across the public sector. However, the procurement policy landscape in which the public sector operates continues to move on and so OGC intends to publish a comprehensive update of this document in early 2005. This update will take account of the new Consolidated Public Procurement Directive (2004/18/EC) [iii], technical innovation, and the increase in the level of Government eProcurement experience.

2. What impact will the new Consolidated Public Procurement Directive have on eProcurement?
The current procurement Directives pre-date eProcurement, and so one of the aims of the new Consolidated Directive (2004/18/EC) is to encourage the use of eProcurement by making explicit provision for its use. The new provisions on eProcurement cover the following areas:

• Dynamic Purchasing Systems (DPS)
• Rules applicable to communication
• Electronic reverse auctions  (eAuctions)
• Requirements relating to equipment for the electronic receipt of tenders, requests to participate and plans and projects in design contests.

Whilst the Directive sets out the principles and requirements, Member States will be responsible for its implementation, and contracting authorities will be responsible for its application. The Directive must be transposed into UK legislation as Regulations by 31 January 2006. [iv]

The full text of the new Consolidated Directive is available. OGC has recently completed a consultation exercise on the proposed approach to implementing the new Directive into UK law. It has also produced a training module that provides information on major changes arising from the new Public Procurement Directives. The training module includes a slideset and tutor notes, case studies and solutions, frequently asked questions, and a guide to the changes.

3. What does OGC recommend in respect of commodity classification coding?
It is a EU requirement for contracting authorities to include Common Procurement Vocabulary (CPV) codes on tender documentation transmitted across the SIMAP system. UK contracting authorities legally have to comply with this requirement in order to fulfil the UK's obligations under the EC rules. Doing so provides valuable information on procurement activity across the EU.

However, OGC recommends that UN-SPSC [v] be adopted in the post-award transactional environment, the application being the capture and manipulation of data on purchasing transactions. The reason for this being that UN-SPSC is an internationally recognised convention that offers a sufficient level of detail (through its 4-tier hierarchical structure) to provide valuable management information to the contracting authority. OGC therefore recommends that contracting authorities adopt both coding conventions, but that each is used for a very discreet application. [vi]

UN-SPSC can be viewed and the latest version downloaded free of charge.

4. Am I allowed to use eAuctions in government procurement? [vii]
eAuctions are open to use prior to the adoption of the new Consolidated Directive (2004/18/EC) into UK law, which clarifies their use under EC rules (Article 54). They have already been carried out by a number of government departments for a variety of goods and services. They have been shown to be entirely consistent with a value for money approach and the UK government intends to fully implement Article 54 in the new Regulations. Article 54 explicitly provides contracting authorities with the option of using an eAuction as part of a procurement, and allows them to be used for almost all types of procurement. [viii]

5. What rules should I follow if I want to use an eAuction?
Until its implementation in UK law, contracting authorities are advised to follow the text in the new Consolidated Directive when they use eAuctions. This Directive places certain obligations on departments in using eAuctions. For example, departments will be required to state in their OJEU advertisement that they intend to use an eAuction (See question 6 for suggested wording). The Directive also identifies certain information that departments will have to provide to suppliers in tender documents and during the tendering process relating to:

• Award criteria that are the subject of an eAuction
• The technology requirements for the eAuction
• Details of the eAuction process including length, extensions and bid decrements
• Arrangements for training suppliers and users
• Dates, timing and physical arrangements
• Anything else that may affect the supplier's ability to participate effectively

OGC recommends that the risks and benefits be assessed for using eAuctions in all procurements. OGC has developed an online eAuction Decision Tool to provide assistance in evaluating whether an eAuction is suitable for a procurement. Guidance on eAuctions, and the eAuction Decision Tool are available.

OGC Buying.Solutions offer an Electronic Reverse Auction Framework that is available to the entire public sector. Under the Framework, public sector organisations have easy access to contract managed eAuctions and associated support services from an approved service provider. The Framework significantly reduces the investment start up costs and provides access to all of the critical components required to host a successful eAuction event.

6. What wording should I put in an OJEU Notice if I want to use an eAuction as part of my procurement?
The OGC Procurement Policy Unit suggest the following standard wording be used in OJEU Notices:

"The Contracting Authority intends to use an electronic reverse auction in this procurement exercise."

7. Is it acceptable to run an eAuction within a framework agreement that has been let under the existing EC procurement directive and which did not have a notification of the use of an eAuction in the OJEU notice?
There is no inherent objection to using an eAuction under an existing framework.  However, there are two issues to consider. First, the wording of the terms and conditions of the framework or the OJEU notice may expressly or implicitly exclude an eAuction. An example of an implicit exclusion is when the terms of the framework clearly provide for another means of fixing price. Second, the introduction of eAuctions into an existing framework should always be done on a consensual basis between the contracting authority and existing framework suppliers.

8. What is a Dynamic Purchasing System (DPS)?
DPS are a new concept defined within the Consolidated Directive. They are a completely electronic process for making commonly used purchases. Using a DPS allows purchasers to reduce the timescales for procurements made within it. Suppliers wishing to be admitted to the system must meet the selection criteria, and submit an indicative tender. Qualified suppliers can join or leave at any stage during the life of the system. Indicative bids may also be improved at any time provided they remain compliant.

Once the system is established, the Contracting Authority runs a competition (open to those who have qualified onto the system) each time a purchase is made. A DPS is limited (unless there are exceptional circumstances) in duration to a maximum of 4 years.

DPS are not currently utilised within the UK but are allowed under the new Directive (Article 33). OGC are working with the EC and other member states to establish the practicalities of DPS. Once this work is complete OGC will share the findings.

Further information on DPS can be found in article 33 of the Consolidated Directive.

9. What is the situation regarding the retention and management of records within eProcurement systems?
Departments are responsible for the retention and maintenance of commercial records. The same requirements apply to the retention of electronic records as paper records. As a result, policy on this issue should be consistent with general agreed policy on retention of records. [ix] There is no requirement to retain paper versions in addition to electronic records. However, any documents or data transactions that may be required as evidence in a court of law should be managed as secure records, and according to the relevant codes of practice. [x]

10. What are the security and accreditation requirements for eTendering solutions in Government?
Contracting authorities will need to adopt solutions that comply with the new Consolidated Public Procurement Directive, and with standards set internally by Government e.g. the IAG Framework. [xi] Broadly, Article 42 of the new Directive requires the following:

• Means of communication must not restrict access to a tendering procedure for potential participants. They must be non-discriminatory, generally available and interoperable with IT products in general use
• The communication and storage of tenders must protect the integrity of the content
• The storage of tenders and requests to participate must ensure that contracting authorities are not able to open tenders before the deadline has passed
• Specifications necessary for electronic submissions of tenders and requests to participate, including encryption, have to be made available to all parties

OGC Buying.Solutions plan to have an eSourcing (including eTendering) solution in place for use by government contracting authorities in December 2004. They will ensure that their solution is suitably compliant with both the Consolidated Directive [xii] and Government policy.

11. Must digital signatures [ ] be employed in eProcurement in Government?
Applying the definitions of the IAG Framework to procurement transmissions suggests that trust service levels 2 or 3 be applied. [xiv] However, both trust levels require that procurement transmissions should, where possible [xv], use PKI [xvi] and electronic signatures [xvii]. The OGC eTendering pilot (part of the ePilots) [xviii] demonstrated practical difficulties in taking this approach, because of the administrative difficulties of obtaining and using advanced digital certificates, smart cards and card readers.

The e-Government Unit are running a PKI project called HMG PKI, and have developed policies to support this programme. Once established, the UK Government will have the capability to issue digital certificates [xix] to departments that voluntarily apply. In turn, these departments will be able to issue individual certificates to staff in accordance with Article 42 (5)(c) of the Consolidated Directive. This covers government users - under normal circumstances departments would not issue certificates to third parties. This means that suppliers need to obtain certificates from providers that are acceptable to government. However, whilst widespread PKI is unavailable users might consider other forms of security, such as using username and password protection across a 128-bit secure socket layer (SSL) connection.

OGC recommends that departments carefully consider how their transactions are classified by looking at the risks and how they are mitigated. The OGC Buying.Solutions eSourcing solution will be able to accommodate the use of advanced digital signatures, and so provide departments with a path to adoption. [xx]

12. What is the impact of eProcurement on Government contracts?
The implementation of electronic systems in the purchasing cycle does not affect the normal practice of contracting with government. However, departments do need to consider whether any additional contractual provisions are required that relate to electronic trading. Departments can require that activities in the contractual relationship be enacted electronically provided that technology is generally available and non-discriminatory.

Aspects identified by OGC as potentially needing consideration by departments include:

• Provision for order, invoice and payment to be conducted by electronic means
• Relevant legislation including the Data Protection Act and the Freedom of Information Act
• Management of risk and indemnities (including liability for system failure)
• Requirements for relevant government standards
• Use of digital forms of identification

In case of doubt, departments should consult their appointed legal advisers.

13. Do I need any special accounting controls in my eProcurement system?
Implementation of electronic systems should neither detract from nor significantly alter how departments discharge their obligations under Government Accounting. Government Accounting notes that there is no single system of controls that will suit all circumstances. It is a department's responsibility to make sure there is proper control in their systems over expenditure and payment. The introduction of an electronic system in no way detracts from this requirement, and if implemented correctly should in fact enable departments to increase their reliance on preventative controls as opposed to more traditional detective measures.

No one person should control all aspects of the payment process and electronic systems can and should be designed to ensure that the adequate segregation of duties are mirrored in the system workflow. The design of the system should include absolute clarity about the roles and responsibilities of those involved at each stage of the process.

14. Are electronic invoices permitted?
Government contracting authorities are permitted to issue, receive, and store invoices in electronic format. They must contain the same information as paper invoices and guarantee both the authenticity of the origin and integrity of the data. Further information on electronic invoicing can be found in "Notice 700/63 Electronic Invoicing" available on the HM Customs and Excise.

 
15. What "standards" might I use when sending/receiving eProcurement messages to/from my suppliers?
Consultation between central civil government, the NHS Purchasing and Supply Agency, and local authorities resulted in a joint OGC/e-Government Unit team designing a core procurement and payment process. This process was then developed in Unified Modelling Language (UML) and resulted in a model containing 14 electronic message specifications ranging from Request for Quotation to Statement (of account). These messages are intended to ensure eProcurement interoperability in the UK public sector. These "standards" are recommended within the eGovernment Interoperability Framework (eGIF).

Unlike many other standards the OGC model is very precise in defining the optionality and cardinality of the message attributes e.g. a document must (optionality) have one (cardinality) identifier. Other standards tend to list all the possible attributes a message may have and state that you can have any number of them.

Throughout its development, the OGC Interoperability Model has also been exposed to public consultation in the EU, and internationally; a large portion of the current Interchange of Data between Administrations (IDA) EU interoperability model is based on the OGC Model. OGC is committed to the development of a set of independent and non-proprietary eProcurement standards and will work with recognised standards bodies to ensure interoperability.

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[i] This is version 3.0 and is dated 13th September 2004.
[ii] This can be accessed at http://www.government-accounting.gov.uk/current/frames.htm.
[iii] Directive 2004/18/EC on the coordination of procedures for the award of public works, supply, and services contracts.
[iv] The Directives are implemented in the UK via Regulations (Statutory Instruments) under section 2(2) of the European Communities Act 1972.
[v] UN-SPSC is a hierarchical commodity coding classification that has sufficient granularity to allow full visibility of spend. It can provide detailed management information on what is being bought and can classify indirect spend.
[vi] The OGC Interoperability Model (that developed eProcurement XML Schemas for central government) specifies UN-SPSC as the data type for commodity code. The model currently specifies the first two levels of UN-SPSC as mandatory and the third and fourth as optional in the relevant messages.
[vii] An eAuction is an online exercise in which suppliers compete against each other with open bids for the right to provide goods or services to the buyer.
[viii] According to the Consolidated Directive "non-quantifiable elements should not be the object of electronic auction. Consequently, certain works contracts and certain service contracts having as their subject matter intellectual performances.should not be the object of electronic auctions."
[ix] Further information on the retention and management of electronic records can be obtained from the National Archives website at www.nationalarchives.gov.uk.
[x] BSI standard BIP0008: 2004: Legal admissibility and evidential weight of information stored electronically.
[xi] This stands for the Information Age Government Framework and can be found on the e-Government Unit website http://e-government.cabinetoffice.gov.uk.
[xii] Covered by Annex 10.
[xiii] Information added to digital data to authenticate the identity of the sender and to make data tamper-proof.
[xiv] Level 2 trust services are appropriate for e-Government transactions in which significant damage might arise from failure to keep any commitments made. This covers transactions of an official nature in which failure to complete the transaction may be interpreted as a statutory infringement that may incur a penalty, or which may have a significant impact on a third party. Level 3 trust services are appropriate for e-Government transactions in which substantial damage might arise from failure to keep any commitments made. This level would cover transactions of an official nature in which failure to complete the transaction might have a substantial financial impact, or impact on the health or safety of installations or individuals. Such transactions may be attractive to criminal exploitation i.e. substantial risk of fraud or criminal damage. Further information is available at http://e-government.cabinetoffice.gov.uk.
[xv] The guidance regarding trust level 2 does state that other mechanisms, based for example on username and password, may be acceptable (though strongly deprecated) while widespread PKI's are unavailable.
[xvi] PKI stands for Public Key Infrastructure. This is an infrastructure supporting secure transmission over the Internet of information encrypted using public and private pairs.
[xvii] A definition of an "advanced" electronic signature can be found in Article 5 of Directive 1999/93/EC.
[xviii] The ePilots project carried out research into eProcurement systems and services to understand their applicability to central civil government. Results were incorporated into eProcurement: Cutting through the Hype.
[xix] A form of digital signature that authenticates the identity of the sender of data using public and private pairs.
[xx] However, this functionality will not be available initially.