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Bangladesh Priorities: E-Procurement, Wahid

New research by Wahid Abdallah, a research fellow at the BRAC Institute of Governance and Development, examines the effects of transforming the current procurement system into one that uses online systems. Abdallah’s study shows that electronic government procurement (e-GP) holds enormous potential benefits for the country—each taka spent on such efforts will do a phenomenal 663 takas of good.

 

Strategy Takas of benefits per taka spent
E-procurement across government 663

An ongoing project started in 2008 aims to reform public procurement. By 2011, four Bangladeshi agencies had implemented electronic procurement, representing about 10 percent of all public procurement. 

If anyone can easily bid on a government contract from their office or even own home, and if everyone feels that the process will be fair, more companies are likely to bid. More bids for a given project increases competition, leading to lower prices tendered to the government.

The research analyzes data from the Local Government Engineering Department (LGED), which implemented e-GP in 2011. LGED first introduced e-GP as a very small pilot in 2012. After great expansion, about 95 percent of LGED procurement uses e-GP today.

Before any project, LGED engineers make their own cost estimate for every item that will be procured. This provided a clear measure to track the effects of e-GP. Unsurprisingly, as more and more users adopted e-GP, prices went down—the new price was typically 11.9 percent lower.

The effects of expanding e-GP across most of the other 90 percent of government procurement would be humongous. The costs are straightforward. The majority goes toward purchasing computers and software, costing Tk 985.8 million (Tk 98.58 crore). It will also require training staff to handle e-GP nationwide, as well as paying for operations and maintenance. The total value of these costs spread across the indefinite future equals Tk 1.44 billion (Tk 144 crore).

The benefits would dwarf these costs. Expanding e-GP would bring savings of an estimated Tk 52.7 billion (Tk 5,274 crore) per year. Across the entire future, e-GP would give total benefits of Tk 956.8 billion (Tk 95,677 crore). And this is a cautious estimate, because it includes savings on works procurement only, given that the LGED analysis covered works only. So in all, each taka spent to expand e-GP would yield at least 663 takas in benefits.

To give a sense of proportion, total expenditures by the Road Transport and Highways Division were Tk 55.6 billion (Tk 5,560 crore) for the most recent year data are available. So the benefits from e-GP could pay for nearly all government spending on road systems.