Back in 2001, e-procurement was a largely untested concept, more associated with transitory dotcoms than purchasing best practice. So when the Scottish Executive signed a seven-year, £35 million contract in November that year to provide an e-procurement service for the public sector in Scotland, it looked like a gamble.

Yet only four years later, Glasgow City Council, which has an annual procurement spend of £1.3 billion, is moving its purchasing operation onto the system, now known as the eProcurement Scotland (ePS) platform.

Tom Wilson, one of three ePS programme directors, is proud of its achievements. “Since the programme started in April 2002 we have processed more than 180,000 orders and £200 million worth of spend. Eight thousand users across more than 60 Scottish public-sector bodies use the system, buying goods and services from 12,500 suppliers,” he says.

The programme has even begun to achieve international recognition. Wilson has outlined Scotland’s experiences to civil servants in Thailand and Singapore, and is scheduled to brief French purchasing officials next month. The system was also described in favourable terms by a recent Australian government report that looked at public-sector purchasing around the world.

The system has succeeded because it is simple to use, and gives quick and obvious efficiencies in the management of order processing and invoice settlement.

It also links into the back-office financial systems used by most public-sector organisations, and in some cases, directly into suppliers’ sales order processing systems.

A further spur was the establishment of the Scottish Executive’s procurement supervisory board in 1999. Made up of chief executives from five local authorities, three Scottish health boards and several large private-sector companies, the board has agreed a common purchasing strategy.

According to Wilson, that consensus was crucial. “We were looking to secure the buy-in from the top of the house. You have to have buy-in at senior level. It may take time, but without it you are not going to be successful.”

The official nod of approval has worked. A wide range of public-sector organisations use the platform, ranging from West Lothian and Highlands Councils to the Education Inspectorate and the Scottish Public Pensions Agency.

How it works

The system relies on both web-based and catalogue-management software. The Pecos web system replicates and simplifies the elaborate paper chase that normally exists between departments, buyers and goods-in offices.

But it also provides electronic tendering, invoicing and auctions, as well as integration with government procurement card schemes and other types of electronic payment programmes.

Further expansion is also likely. ePS is experimenting with CXML-based ordering and invoicing, a method of exchanging electronic data directly with the sales order systems of larger suppliers, thereby cutting out all paper-based invoices, orders and goods-despatch notes.

IT services and business consultancy company Cap Gemini provided the original system. It now works with software suppliers Elcom (Pecos provider) and Reqio (which supplies the catalogue-management software) to ensure a back-up disaster recovery programme is in place.

“In the early days of the contract, one of the biggest problems we had was persuading councils, some of them tiny, that there was a business case for the e-procurement service we were offering,” recalls Neil Mackenzie, delivery director for eProcurement Scotland at Cap Gemini. “We had to build a business case arguing that the ePS platform would act as a catalyst for better procurement in general.”

Public-sector buyers have to pay an £80,000 joining fee to use ePS, plus a reducing monthly charge of £5,000. Mackenzie says that the business case is won when buyers see the improvement in internal order processing, compliance with central contracts, and hugely improved negotiating position with suppliers.

Mackenzie points out, for example, that there are 12 councils in the west of Scotland, supplied by 30,000 companies, a third of which are supplying the same goods and services to all councils.

By sharing the management information produced on products and services with a common specification, council buyers and suppliers can collaborate to improve pricing and delivery terms.

And small firms are not disadvantaged, as many councils’ local needs can only be met by local suppliers.

“We have the ability to buy all our goods and services through ePS,” says Neil Gubby, purchasing manager for West Lothian Council. “This includes everything from services for IT, operations, business support, finance, housing and customer services.”

Gubby says the council put £33 million of spend through the system last year, out of a total of £80 million. He hopes to eventually push all spending through ePS by insisting that suppliers will not be paid unless an order has been created through the system.

Putting all spend through ePS allows the council to keep a far tighter grip on off-contract spend, and Gubby has noticed that some of the 3,000 suppliers signed up with the system have started to offer an unsolicited discount.

“They are getting the orders they should have got when a contract was signed. You always get people buying outside the systems, but Pecos drives all orders through the one supplier,” he says.

The supplier angle

One supplier who thinks well of the system is Steve Reeves, e-business development executive for PC World Business, part of the Dixons Stores Group.

Reeves trades directly with 10 Scottish public-sector organisations using ePS and says that the ePS arrangement with PC World allows buyers to “punch out” directly to the sophisticated PC World electronic catalogue, which carries 40,000 items.

Reeves likes the fact that although public-sector buyers can access the entire PC World catalogue, they can equally limit their choice to selected ranges and, more importantly, see prices that are relevant to their organisation and the contracts that they have negotiated.

Other suppliers – who pay nothing for the ePS service unless they decide to integrate a CXML system – make use of the Reqio product information system. Suppliers’ catalogue descriptions of products inevitably differ from those of buying departments, and the Reqio service will match the two formats.

“Suppliers need enter their product information only once, which can be overlaid with pricing and contract information,” says Will Lovatt, Reqio commercial director. “The product or service information is then made available to all buyers on the ePS system.”

Observers of ePS say that the Scottish approach has worked because it has achieved consensus among procurement professionals and suppliers and is using reliable technology.

“The technology used is not fancy, but clean and simple,” says Mike Davis, senior research analyst at research company the Butler Group.

“ePS has taken a holistic approach to delivering services for the benefit of the public sector in Scotland, and shows the way England and Wales could go.”

Wilson is sanguine enough to acknowledge that the platform will not meet every buying requirement in the public sector. But he is most proud of the fact that the Scottish Executive has reduced its annual paper invoice trail from 320,000 to 50,000.

It looks as though the gamble might be paying off.

Simon Vail is a freelance business journalist