AP set to reap dividends from e-procurement bid

The Andhra Pradesh government's e-procurement initiative, which began on a small note about 15 months back, will take a new shape shortly with the government deciding to set up a joint venture by April 1, 2004.

According to sources, the government, which envisaged a 51:49 joint venture initially with Bangalore-based CommerceOne (C1) India, is evaluating the possibility of increasing its shareholding to more than 51 per cent to have higher revenue share through the venture.

With several other state governments and non-government agencies expressing interest in the project, the state government is planning to extend the e-procurement services to other state governments and even to private companies through the JV from the beginning of the next financial year.

The e-procurement exchange, which is an end-to -end e-procurement solution, will have an added functionality i.e., automatic bid evaluation facility from January, 2004.

This will not only eliminate human intervention in contract finalisation, but will also reduce the time of evaluation process to almost zero. The e-procurement platform will also be enriched with the complete data base of the eligible contractors, which is currently under preparation.

The addition of database, which is the last component in the architecture of the platform will complete the full circle of e-procurement programme, where the prospective 'L1' (lowest bidder) will not have to bring the original documents for inspection before the finalisation of contract, thus enabling almost instant selection of the bidder.

According to sources in the IT department, the bid evaluation module, which is designed to evaluate both technical and financial bids, is already readied for integration with the main platform.

The state government entered into an agreement with C1 India in June 2002 with the twin objectives of elimination of cartelisation and avoiding delay in tender finalisation process as part of its e-governance initiative. C1 was assigned the project to develop, operate and maintain the 'e' market place as a pilot initially.

After careful evaluation of the progress of the project, the government decided to upgrade the project into the public-private partnership mode from the next financial year. With a major stake in the joint venture, the government will have firm control over the project, the sources disclosed.

The e-procurement process was introduced on a pilot basis in the irrigation and roads and buildings departments besides AP Road Transportation Corporation(APSRTC), AP Medical Infrastructure Development Corporation (APHMHIDC), APTS and Commissionerate of Tenders at the beginning of the current financial year.

Though the project faced a lot of resistance from the departments concerned initially, the total worth of contracts hosted, finalised as well as in the process of finalisation crossed Rs 2,000 crore mark as on 18 December, earning around Rs 1 crore to the C1 India Limited in the form of tender hosting charges and transaction fee.

The success of the Rs 844 crore EPC contract of the prestigious Godavari Lift Irrigation Project won laurels for the e-procurement initiative.

C1 India was allowed to collect Rs 4,500 as hosting fee for each contract and 0.24 per cent of the agreement value of the work as the transaction fee. But these charges will be progressively decreased along with restructuring of the transaction fee formula.

With around Rs 8,000 crore average annual spend of AP government alone, and the proposed commercialisation of the e-market place, the promoters are already looking at the huge revenue prospects in the project.

The irrigation department alone contributed Rs1,547 crore so far to the total turnover, followed by the R&B works at Rs 286 crore, APHMHIDC Rs 97.93 crore, Panchayat Raj Engineering department Rs 71 crore, Public Health department Rs 19.38 crore , AP Technology Services Rs 14.62 crore, and from APSRTC Rs 1 crore .

According to the IT department's figures, the average number of bids received per tender has increased from 3.4 to 6.7 reflecting an increase in participation. The average time for tender processing decreased from 6 months to 3 months, and would come down further with the automatic bid evaluation facility.

"One of the most important achievements in the e-procurement process is that we could save up to 24 percent in the project cost through the tender process, saving around Rs 100 crore from 300-odd projects," an official said.

The government is also thinking of processing all the future works being taken up with the World Bank's assistance through e-procurement. The work orders of APTransco, APGenco, power distribution companies and Singareni Collieries are being planned to be brought under the e-procurement fold in the second phase of the project, beginning from the next financial year.