Electronic tendering was virtually unknown in India till 2002. Attempts were made to automate the tender document download process for higher-value tenders at around that time, but the success was limited at best-both in terms of acceptance by end-users as well as in terms of how much of the tendering cycle could actually be captured electronically.

Tendering is the most critical form of public procurement, and compulsorily required the world over for governments to demonstrate transparency, impartiality, and value-for-money to their electorates. Electronic tendering is the migration of this process to an online, usually an Internet-based, system. Nearly three years after  electronic tendering was launched in India, there is still a surprising amount of confusion on its process.

The Supremacy of Workflow
One of the important reasons why early attempts at introducing electronic tendering in India did not succeed is that the rules governing private procurement are very different from those governing public procurement. Early solution providers made the mistake of rehashing private procurement systems for public use with predictably disastrous results. A successful electronic tendering solution must successfully mirror them. Thus, the first requirement for an electronic tendering system is that it must be fully workflow-driven. However, workflows differ from government to government, and department to department. To keep implementation costs and lead-times within reasonable limits, an electronic tendering system must also be easily customizable. This seemingly paradoxical requirement of rigidity (workflow) and flexibility (customization) in electronic tendering is a challenge that few have successfully met.

To be successful in the Indian situation, an electronic tendering system also needs to be flexible in another sense: to ease the transition electronic tendering must, at least initially, support alternate modes of submission.

The Technologist's Dilemma
Evangelism comes naturally to the technologist-early electronic tendering attempts came with a strong dose of re-engineering for government business processes. Although the motives behind such attempts may, to a large extent, have been noble, they lost sight of an important fact of life: Indian government bodies are exceptionally resistant to change.

The procedural obstacles to change are pretty formidable as well. Keeping business process change to a minimum at the early adoption stage is therefore, the only practical way of implementing electronic tendering on any reasonable time frame.

The Cost Factor
In addition to being resistant to change, government bodies are also understandably risk-averse. The huge license fees typically charged for enterprise-level software by international software companies, without a clear value proposition, constituted a major entry barrier for India's state governments. The large investments that these companies had made in their software and the high initial cost of implementation meant that there were no easy solutions to this problem. The paradigm shift occurred when the “no upfront cost to government” revenue model was introduced in Chhattisgarh in 2003. There are no licence fees in this model; all investments in server hardware, hosting, and training are taken care of by the application service provider. The source of revenue for the service provider, is a share in the tender document fee–this can either be in the form of a fee for document purchase (Chhattisgarh) or a fee for bid submission (Assam). These fees are typically collected online through the tendering portal. The advantage for the service provider is that he has an assured and reasonably predictable revenue system without the irksome overhead of collecting from government.

The government, on the other hand, has a completely risk-free way of putting its tendering processes online–the revenues earned by the service provider are purely in the nature of a 'success fee'. Vendors/contractors pay service fees equal to, and often less than, the document fees they have been used to paying, providing an automatic incentive for them to migrate to the online system.

Security: The Make or Break Issue
Across the world there are these security challenges. There are various stages in the tendering cycle, and the security issues are different at each stage:

Tender Preparation and Release: An electronic tendering system needs to have workflow-based access for the person(s) preparing the tender (maker), the person(s) validating the tender (checker), and finally for the official who approves and releases it (approver).

Bid Preparation: Only the bidder should be able to view the bid data at this stage. All data resides on the server-it must be encrypted both during transmission and storage in such a way that only the bidder can decrypt it.

Bid Submission: The bids submitted must be in such a form that only the designated tender official can open it, and not before the scheduled time. This last requirement is critical for tendering.

Bid Storage: Even if the service provider, buyer organization, one or more vendors and system administrators join hands/collude, bid data should not be viewable before a cut-off date.

Bid Opening: Bids should be available in an unencrypted format when opened.

Transfer of Privileges: Given that transfer/retirement of tender officials during the life cycle of a tender is not an unusual phenomenon, it should be possible to securely transfer access rights/privileges from one official to another.

The challenges of secure electronic bidding are far from trivial. India is the only country where a fool-proof solution to the security problem has been successfully implemented. And there are international patents to prove this. The reason why the developed countries of the West are nowhere near a level-5 electronic tendering system (in terms of the classification discussed above), is that they have not been able to find an adequate solution to the security problem. What is now practised in these countries is a hybrid system. Tenders are downloaded electronically and submitted manually. The manually submitted bids are then entered into bespoke systems that interface with the buyer organizations' internal systems by software consultancy firms. Alternatively a simple document exchange of bids, using HTTPS and at best a digital certificate login is used. Ironically the latter system is more vulnerable to security breaches than the traditional system.

The only system with level-5 aspirations outside India is a system designed by an arm of the South Korean Government. But the security issue has been glossed over to a large extent.

To make this this theoretical lead an actual one, we need to participate much more actively in the formulation of international data exchange standards through bodies such as UN/CEFACT. Secondly, we need to shed our traditional contempt for the cosmetic aspects of a product -in international contexts slickness is often at least as important as the inherent strength of a product. Thirdly, we need to be aware that platform agnosticism (both as regards operating system and database) is where the bright future lies where we would be setting the tone for electronic public procurement globally in the years to come.

Sujeet Bhatt and Tapan Mehta
mail@dqindia.com
The authors are co-founders of Next Markets Group

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