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The governance evidence of e-government procurement

Siriluck Rotchanakitumnuai
Department of Management Information Systems, Thammasat University, Bangkok, Thailand
Abstract
Purpose E-government procurement (E-GP) can improve the traditional government procurement process. E-GP can help decrease corruption. This research aims to present the factors of E-GP that can create good governance in government procurement through e-auction. Design/methodology/approach A survey was conducted with Thai public managers who are involved in e-government procurement. The sample size is 169 professionals representing 67 government agencies. Findings There are ve factors that enhance governance procurement. These relate to the transparent e-procurement process, committed public managers and political ofcials, honest vendors, and specic policies and regulations. A transparent e-procurement process has a positive effect on good governance practice, increasing cost effectiveness and accountability, and decreasing collusion among vendors. Vendor honesty has a negative impact on collusion. Supportive policy and regulations requirements improve cost effectiveness, accountability, and law enforcement. Practical implications E-GP is not a guarantor of enhanced governance and reduced corruption. It requires a dedicated commitment to strong rule enforcement and penalties to achieve successful implementation of e-government procurement. Originality/value Using a wide range of government agencies, the research addresses the best practices e-government procurement governance and the benets of good governance in terms of cost effectiveness, accountability, collusion reduction, and stringent law enforcement. Keywords E-government procurement, Good governance, Thailand, Procurement, Governance Paper type Research paper

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1. Introduction Information technology has changed how goods and services are purchased in the public sector. E-procurement is an online system that can streamline the procurement process. In the digital era, government uses the internet to deliver services and to communicate with citizens and organizations. The Thai Government has implemented e-government procurement (E-GP) to be more efcient and to enhance procurement governance and reduce corruption. Good governance refers to the process and structure that insures good management of resources (ADB, 2004). Good governance in public sector management is focused on transparency and maximum benets to the country, people, and society consistently and fairly. These include clear principles, citizen participation, responsibility, rule of law, effectiveness, efciency with equity and accountability.
The author would like to thank Thailand Research Fund for funding this research. The author is also grateful to Associate Professor Mark Speece and Associate Professor Fredric W. Swierczek for their constructive comments.

Transforming Government: People, Process and Policy Vol. 7 No. 3, 2013 pp. 309-321 q Emerald Group Publishing Limited 1750-6166 DOI 10.1108/TG-01-2013-0004

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There are many studies with regard to e-procurement (Croom and Johnston, 2003; Croom and Brandon-Jones, 2007; de Boer et al., 2002; Evenett and Hoekman, 2005; Hui et al., 2011). Much of the prior work to date has focused on the system implementation and effectiveness of the e-procurement system. Warsta (2004) found that the most important corrupt interface between private companies and public ofces is the public sector procurement. Croom (2000) indicated that process efciency is a key driver of e-procurement performance. A recent work by Hui et al. (2011) highlighted the opaqueness and failure of public agencies to acquire the right quantity, specications and price in the Malaysian procurement process. Hackney et al. (2007) found that human factors are critical in the e-reverse auction. Padhi and Mohapatra (2011) suggested a statistical approach based on pattern analysis to detect collusion. However, prior studies are fragmented with little concern for the effect on both the e-procurement process and human involvement. They do not focus on identifying the key factors for assessing the good governance of e-government procurement. In 2011, for Transparency Thailand was rated 3.4 points on a scale of 0-10 (ten equates to a low level of corruption), and ranked 80th among 183 countries. Thailand is perceived to have a high level of corruption (Transparency International, 2006). One of the major objectives of e-government procurement (E-GP) implementation is to reduce corruption and its implementation success is still an issue. Lack of transparency in the tender awarding process is common in Thai Government procurement (Rotchanakitumnuai, 2012a). Moreover, excessive intervention from politicians and collusion among vendors creates corruption and misuse of public resources (Rotchanakitumnuai, 2012b). For implementation of good governance it is important to detect the components of e-government procurement governance from a number of government agencies at both the operational and management levels to assess the best practices of e-government procurement. This paper begins with a discussion of the theoretical literature and proposes an integrated model which includes the e-procurement process, and three human factors (public managers, vendors and politicians) to assess the effectiveness of e-government procurement governance. This study will also identify the relationship of e-government procurement governance best practices on the good governance. The focus is on the e-government auction approach business procurement. The second part of the paper reviews the literature of e-procurement and good governance. Next, the research framework of the antecedents of good governance in the e-government procurement auction and their impacts on good governance is demonstrated. The research methodology and analysis are described. Finally the conclusions highlight the implications of the research results for good governance of e-government procurement and future research directions. 2. Literature review Procurement is the acquisition of goods or services by an organization. It normally is a complicated process and uses a large number of resources including signicant time use. Information technology has a major impact on reducing the steps of business process, and increasing productivity. Electronic procurement is an information system for business to business purchase (Holmes, 2001). Electronic procurement uses the internet to lower costs, change purchasing routines, reduce procurement time, and build relationships with suppliers (Chopra et al., 2001; Davila et al., 2003; de Boer et al., 2002; Rotchanakitumnuai, 2013; Tassabehji, 2010). E-government procurement (E-GP)

employs online information technology to purchase goods or services for public agencies from businesses. E-GP can add service value and increase cost savings to the government (Casaki and Gelleri, 2005; Iqbal and Seo, 2008; Rai et al., 2006). E-GP can improve transparency and governance change business practice and encourage new suppliers/vendors to participate in public procurement (Harris and Rajora, 2006). E-GP is an effective system which achieves good governance in procurement and limits political interference (Heywood, 2002). The procurement process is a major problem for good governance. The selection of procurement method and dening the product specication are important practices that can improve procurement (Hui et al., 2011). For instance, special tendering is applied for big projects which require e-auction. Human resource is another factor that relates to corruption. Kennedy and Deeter-Schmelz (2001) found that top management was a signicant motivator for the use of e-procurement. Government managers or decision-makers set the priorities for procurement (Hardy and Williams, 2008). Political involvement also has major inuence on corruption (ADB, 2004; Belwal and Al-Zoubi, 2008) (Table I). The interaction between government and private sector can cause favoritism and bribery in procurement (Hui et al., 2011). To prevent abuse and fraud, public policy should emphasize regulations prevention, and best practices of e-procurement governance (Rotchanakitumnuai, 2010).
Authors Croom (2000) Croom and Johnston (2003) Saxena (2006) Hackney et al. (2007) Croom and Brandon-Jones (2007) Issue of study The impact of web-based order processing systems for procurement strategy in the management of maintenance, repair, and operating (MRO) supply Issues relating to the impact of e-business developments on internal customer service with a focus on electronic procurement Developing attributes ensuring excellence in egovernance implementation Evaluation issues related to eReverse auction Implementation The evaluation of e-procurement implementation and operation from of e-procurement ve key themes are considered system specication, implementation management, changes to organizational characteristics, changes in total acquisition costs, and changes to governance structures To assess the direction of e-governance and the public perception of corruption, trust, and e-governance The perception of the contractors and the procurement ofcers on accountability, transparency, corruption, integrity and cronyism pertaining to the public procurement system The impact of system specication and implementation management on e-procurement system Development of a statistical of collusion analysis in government procurement auctions Research method Exploratory study In-depth interview Case study Case study Qualitative study

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Belwal and AlZoubi (2008) Hui et al. (2011)

Survey Qualitative work

Aman and Kasimin (2011) Padhi and Mohapatra (2011)

Qualitative study Quantitative assessment of bid-price-to-reserve price ratio

Table I. Literature analysis

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2.1 Good governance Governance involves the process of decision making and the formal and informal structures that are set to get and implement the decision (UNESCAP, 2007). Typically the government sector has a problem with transparency in procurement (Mitra and Gupta, 2007). In this sector, there are both formal and informal government structures. Formal government structures are described decisions on procurement and how they are implemented. Informal decision-making involves kitchen cabinets or informal advisors. Such informal decision-making is frequently the result of corrupt practices or leads to corrupt practices. Good governance in procurement consists of integrity, transparency, accountability, and fairness. Good governance requires a fair process of transactions and services with accountability administration (Bedi et al., 2001; Saxena, 2006). In general, corruption can be business or government related. Economic corruption is the use of public ofce for private gains. Political corruption is the violation of the formal rules governing the allocation of public resources by administrators for nancial gains or political support (Ampratwum, 2008). Hasan (2004) emphasized that e-governance can increase efciency, effectiveness and organizational performance. It provides a solution to corruption, bureaucratic inefciency and ineffectiveness, nepotism, cronyism, the lack of accountability and transparency. 3. Research framework Past research indicates that an effective e-procurement process can improve transaction costs and nancial benets to the organization (Amit and Zott, 2001; Arbin, 2003; Subramaniam and Shaw, 2004). Effective cost savings accrue from improvements in the procurement process itself. These savings are realized through increased automation of procurement with improved accuracy (Cox, 1999; Croom, 2000; Deeter-Schmelz et al., 2001; Kalakota and Robinson, 1999; Zsidisin and Ellram, 2001). A higher level of IT process and system compliance can increase the level of transparency (Croom and Brandon-Jones, 2007; Croom and Johnston, 2003; Neef, 2001; Subramaniam and Shaw, 2004). Good governance in this research insures transparency in e-government procurement through using the e-auction approach. This approach provides effectiveness, accountability, and fairness. Transparent procurement can ensure a public organization gets the best choice of product/service with a reasonable price (Evenett and Hoekman, 2005; Hui et al., 2011). These six hypotheses considered are based on the good governance practices and their impact on the e-procurement process. The rst hypothesis is: H1. The more transparent the e-procurement process, results in signicantly: H1a. More cost effective. H1b. Higher accountability. H1c. Less collusion among vendors. H1d. More stringent law enforcement. The attitudes of executives, emphasizing good governance commitment are also important (Ararat and Ugur, 2003). Public managers have a major inuence on enhancing good governance (Hui et al., 2011). Strong governance commitment is required in order to implement an appropriate E-GP system that ensures transparency (Leipold, 2007). The second hypothesis is:

H2. The higher commitment of public managers to governance, results in signicantly: the higher level of e-government procurement governance: H2a. More cost effectiveness. H2b. Higher accountability. H2c. Less collusion among vendors. H2d. More stringent law enforcement. One of the risk factors that can create corruption is the collusion among bidders in procurement (www.freshelds.com). Hui et al. (2011) found that reduced vendors collusion can enhance governance of e-government procurement. E-auction procurement has a major role in diminishing collusion in procurement by broadening participation and expanding the suppliers or interested rms to join the e-government procurement auction (Almeida, 2006). It provides transparency to e-government procurement by providing established procurement procedures and ensuring easier public access to procurement data: H3. The more honest the vendors, results in signicantly: H3a. More cost effectiveness. H3b. Higher accountability. H3c. Less collusion among vendors. H3d. More stringent law enforcement. Many studies conrm that politicians increased in government procurement corruption (Almeida, 2006; Granados and Masilungan, 2001; Pillay, 2004; Radics, 2001). Members of government procurement boards have been changed for personal benet (Aizawa, 2008). Politicians can have a positive impact on governance procurement (e.g. insuring cost effectiveness, requiring transparency, and enforcing rule and regulations) (ADB, 2004; Aizawa, 2008; Belwal and Al-Zoubi, 2008; Bhatnagar, 2003): H4. The higher commitment of political ofcials for governance, results in signicantly: H4a. More cost effectiveness. H4b. Higher accountability. H4c. Less collusion among vendors. H4d. More stringent law enforcement. Regulations and transparent procedures in e-government procurement (e.g. strict e-procurement standards, establishment of a procurement committee, streamlined process of e-government procurement, and public awareness and penalties for corruption and fraud) are examples of effective measures to improve good governance procurement (Aizawa, 2008). Specic government policies and regulations, and formal communication to the public can enhance good governance practice (Rotchanakitumnuai, 2010):

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H5. The more specic public policies and regulations fore-procurement, results in signicantly: H5a. More cost effectiveness. H5b. Higher accountability. H5c. Less collusion among vendors. H5d. More stringent law enforcement. Finally, politicians involved in the procurement process and who use public funds for personal benets negatively affects the procurement process (Almeida, 2006; Hui et al., 2011): H6. The less involvement of politician to governance, the more effective of the e-procurement process. 4. Methodology A survey was conducted with e-procurement professionals in a wide range of government agencies. The questionnaire items measured by a Likert scale ranging from 1 to 5 (1 strongly unimportant, 5 strongly important). Respondents were selected using purposive sampling to insure a variety of public agencies. Personal interviews were used to gather data from at least two respondents responsible for purchasing in the e-procurement department. One of the respondents was in a manager position. The other was a purchasing professional. The names of government departments have been disguised due to condentiality because this study originated as an investigation of good governance in Thailands e-government procurement initiative. A total of 169 respondents from 67 government agencies completed the questionnaire. The respondent prole is presented in Table II. 5. Analysis An exploratory factor analysis was conducted to examine the dimensionality of E-GP governance. The analysis suggested that the ve factors based the literature review adequately summarized the construct (Table III). The convergent and discriminant validity of the constructs was conrmed. All ve factors had an Eigenvalue above 1, with negligible cross loadings. All constructs of E-GP governance factors have the high levels of reliability with Cronbach a ranging from 0.640 to 0.938 (Table III). Table III identied the E-GP governance factors. The rst factor was the strict e-procurement process. One item related to Selection of an online intermediary to advise e-auction was dropped (loading factor , 0.5). The result showed that in a good e-procurement process, clear and fair specications of product/service insure a positive procurement process (mean 4.72). Setting product/service priorities and online intermediary selection are the lowest scores. The second factor relates to public professionals and managers should receive no benet from purchasing is ranked highest commitment to government (mean 4.83). Public managers recognizing the benets of E-GP is positively related to governance (mean 4.81). The third factor considers Vendors. Reduced collusion among vendors (4.73) and no benets offered to them (4.71) are critical to E-GP governance. The fourth factor relates to minimizing politician involvement. This would enhance good

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Detail Age , 25-30 . 30-40 . 40-50 . 50-60 Education Below bachelor Bachelor Master Annual budget of e-procurement (USD) Less than US$333,000 US$333,001-US$1.60 million US$1.61 million-US$3.30 million US$3.31 million-US$16.60 million US$16.61 million-US$33.30 million More than 33.3 M. USD Working level Operational level Management level Average duration of e-Auction adoption 4.7 years Note: 30 Thai Baht US$1

No. 21 41 52 31 15 103 27 46 51 17 17 7 7 93 49

% 14.5 28.3 35.9 21.4 10.3 71.0 18.6 31.7 35.2 11.7 11.7 4.8 4.8 64.1 33.8

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Table II. Respondents prole

governance or limited involvement in the e-procurement decision. The last factor is specic policies and regulations that require E-GP governance. Documentation on E-GP increases good governance. These requirements reduce corruption and limit E-GP problems (mean 4.16). Multiple regression analysis was used to determine the impact of the good governance practices of e-government procurement on good governance. Table IV summarizes the results and summary of six hypotheses is presented in Table V. A transparent procurement process with specic policies and regulations has a positive effect on good governance practice and improves cost effectiveness. This transparency has major impact on reducing collusion among vendors. In addition, vendor honesty reduces the impact on collusion. Only specic policies and regulations of good governance practices have a signicant impact on enforcement. Public managers had a negative impact on enhancing law enforcement. The last hypothesis was concerned with the impact of politicians on the procurement process. Less politician inuence (b 0.243) has a positive impact on good governance in the process. 6. Discussion and implications The results from the survey show that a transparent procurement process has a positive impact on cost effectiveness, accountability transparency, and reducing the collusion of vendors. The transparent process consists of the determination of procurement product/service features specication including the priorities of purchased products receive services, and the appropriate method of procurement. Politician involvement has no direct impact on the four impacts of good governance but have a major inuence on the government procurement process. In many countries, political ofcials have a high

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Items Transparent e-procurement process (Cronbach a 0.640) Dened product/service specications Disclose procurement results to public E-procurement committee receives no benet Appropriate procurement method selected Priority of products/services procured Selection of an online intermediary to advise e-auction Committed public managers/staff (Cronbach a 0.835) No personal benet obtained from government procurement from vendors to staff Realize specic benets to government from procurement Public managers has no personal benet from e-government procurement Staff follows the product/service specications The public agency enforces laws Vendor honesty (Cronbach a 0.861) No collusion of the vendors No benets between vendors and public managers/staff No benet offers to public managers/staff Limited involvement of politician (Cronbach a 0.938) No intervention from political ofcials No political nominees involve in E-GP No political involvement in setting procurement priorities Specic policies and regulations (Cronbach a 0.797) Requirements limit E-GP problems Requirements reduce corruption Transparent of E-GP practices Note: aItem with factor loading less than 0.5 is dropped

Factor loading 0.516 0.596 0.742 0.500 0.560 0.355a 0.790 0.790 0.718 0.673 0.682 0.813 0.824 0.814 0.962 0.954 0.827 0.684 0.964 0.521

Mean 4.72 4.59 4.44 4.34 3.97 3.60 4.83 4.81 4.73 4.52 4.33 4.73 4.71 4.66 4.66 4.63 4.61 4.16 4.16 3.95

SD 0.559 0.723 0.798 0.923 0.912 1.05 0.532 0.461 0.748 0.774 0.943 0.766 0.716 0.768 0.836 0.799 0.868 0.940 0.962 0.930

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Table III. Good governance elements in electronic government procurement

Impact Good governance practices A transparent e-procurement process Public managers/ commitment Vendor honesty Limited involvement of politician Specic policies and regulations R2 Cost effectiveness Accountability 0.422 * 2 0.302 2 0.126 2 0.002 0.726 * 0.335 0.443 * 2 0.316 2 0.195 0.119 0.580 * 0.240 Reduced collusion 0.462 * 2 0.128 2 0.303 * 0.063 0.720 0.229 Stringent law enforcement 0.207 2 0.381 * 2 0.073 0.132 0.819 * 0.373 0.243 * 0.132 A transparent e-procurement process

Table IV. Analysis of good governance practices

Note: Signicant at: *p , 0.01

H1 H1a H1b H1c H1d H2 H2a H2b H2c H2d H3 H3a H3b H3c H3d H4 H4a H4b H4c H4d H5 H5a H5b H5c H5d H6

The more transparent e-procurement process, results in signicantly More cost effectiveness 0.422 * More accountability 0.446 * Less collusion 0.462 * More stringent law enforcement NS The higher the commitment of public managers, results in signicantly More cost effectiveness NS More accountability NS Less collusion NS More stringent law enforcement 2 0.381 * The more honest the venders results in signicantly More cost effectiveness NS More accountability NS Less collusion 2 0.303 * More stringent law enforcement NS Less involvement of politicians the e- procurement process, results in signicantly More cost effectiveness NS More accountability NS Less collusion NS More stringent law enforcement NS The more specic public policies and regulations, results in signicantly More cost effectiveness 0.726 * More accountability 0.580 * Less collusion NS More stringent law enforcement 0.819 * The lower the involvement of political ofcials in the e-procurement process, the more 0.243 * effective the process

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Note: *NS not support

Table V. Summary of hypotheses

level of inuence on the e-procurement process which may impede E-GP governance practice. Moreover, public managers have a negative impact on law enforcement because they are not involved in enforcement and have low inuence on reducing corruption. Specic policies and regulations have an impact on the cost effectiveness of procurement, accountability of the organization, and stringent law enforcement. Government agencies must enforce the law and punish the lawbreakers seriously. Lastly, less honesty vendors increase collusion among service providers. Collusion among vendors is difcult to reduce even when traditional procurement is substituted by technology-based procurement. Human factors are the biggest concern for good governance in E-GP. The lack of awareness of the best good governance practices in e-government procurement represents a signicant risk to government effectiveness. E-government procurement is not a guarantor for enhanced governance and reduced corruption. Many solutions to governance are suggested from this research. Vendors should not receive benets or support collusion among bidders. They should not bribe the professionals or the executives of government agencies. Sharing benets with the managers of government agencies must be eliminated. Politician should not be involved in setting the requirement for procurement, interfering in the procurement process or receive any gains from government projects, especially when participating in the procurement auction.

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This research provides a rigorous analysis on governance issues in e-government procurement. Specically, this research species the key good practices of e-government procurement governance, and its impact on cost effectiveness, accountability, collusion reduction, and stringent law enforcement. This study conrms key ndings of the negative role of vendors and politicians (Aman and Kasimin, 2011; Hui et al., 2011). There are ve factors that enhance governance procurement: a transparent e-procurement process, committed public managers, neutral political ofcials, limited vendor collusion, and specic policy and regulation requirements. Additionally, this study provides guidelines for future e-government procurement. However, by result E-GP is cannot insure enhanced governance and reduced corruption. It requires a dedicated policy with strong governance rule enforcement and penalties to prevent government managers, politicians or vendors malfeasance so that the potential goals from the successful implementation of e-government procurement can be achieved. 7. Conclusion The results showed that the three human factors of committed public managers, honest vendor and less politicians interfering play an important role in e-government. Public managers should consider the maximum benets to the agencies from government procurement. Shared benets with vendor or service provider in government procurement must be eliminated. Transparent policy and detailed specications of the products/services must be emphasized. Strong good governance procurement practices needs to be supported by the Thai Government, particularly eliminating the involvement of politician. It requires strong enforcement and penalty to achieve the potential benets from the successful implementation of e-government procurement. It is critical to highlight the procurement governance practices because corruption affects the governments ability to manage the public budget more effectively. Corruption limits the economic growth and the social development of the country. Finally more stringent law enforcement for corruption and fraud in government procurement has to be undertaken more effectively including black listing dis honest vendors. The limitations of this study relate to the purposive sample which includes only public managers and measurement based on perceptions rather than actual behaviors in good governance in procurement. Future research can extend the study to assess the actions of politicians and vendors to determine their impact on good governance procurement practices. Research may also investigate in more detail the strategic implications of good governance procurement and evaluate their impact on government.
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Rotchanakitumnuai, S. (2012a), Critical governance concerns of Thailand e-government procurement, paper presented at International Conference on Information Resources Management 2012 (Conf-IRM-2012), Vienna, Austria, May 21-23. Rotchanakitumnuai, S. (2012b), The empirical evidences of good governance in E-government procurement, paper presented at The 18th Americas Conference on Information Systems, Seattle, WA, USA, August 9-11. Rotchanakitumnuai, S. (2013), Assessment of e-procurement auction with a balanced scorecard, International Journal of Physical Distribution & Logistics Management, Vol. 43 No. 1, pp. 39-53. Saxena, K.B.C. (2006), Toward excellence in e-governance, International Journal of Public Sector Management, Vol. 18 No. 6, pp. 498-513. Subramaniam, C. and Shaw, M.J. (2004), The effects of process characteristics on the value of B2B EProcurement, Information Technology and Management, Vol. 5 Nos 1/2, pp. 161-180. Tassabehji, R. (2010), Understanding e-auction use by procurement professionals: motivation, attitudes and perceptions, Supply Chain Management: An International Journal, Vol. 15 No. 6, pp. 425-437. Transparency International (2006), Handbook: Curbing Corruption in Public Procurement, Transparency International, Berlin. UNESCAP (2007), Economic and social development in Asia and the Pacic, available at: www.unescap.org/pdd/prs/ProjectActivities/Ongoing/gg/governance.asp (accessed December 2012). Warsta, M. (2004), Corruption in Thailand, International Management: Asia, Swiss Federal Institute of Technology, Zurich, April 22, available at: http://aceproject.org/ero-en/ regions/asia/TH/Corruption_in_Thailand.pdf (accessed November 2012). Zsidisin, G.A. and Ellram, L.M. (2001), Activities related to purchasing and supply management involvement in supplier alliances, International Journal of Physical Distribution and Logistics Management, Vol. 31 No. 9, pp. 629-646. Web site www.freshelds.com About the author Siriluck Rotchanakitumnuai is a Professor of Management Information Systems, Thammasat Business School at Thammasat University. Her research focuses on e-business, e-service, and e-government. She is a recipient of the Outstanding Researcher Award of Thammasat University and Vice President of Academic Affairs of Thammasat University. She is also the President of Executive Board Members of International Conference on Electronic Business and Conference Chair of The Eleventh International Conference on Electronic Business (ICEB2011). Siriluck Rotchanakitumnuai can be contacted at: siriluck@tu.ac.th

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