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    E-procurement in the Aid Business

     

     
     
    © International Trade Centre, International Trade Forum - Issue 4/2001

    Many aid-funded buyers are putting tenders in the Internet.

    In this article, developing country suppliers can find details of some of the trends in aid e-procurement as well as tips and useful addresses.

    A growing range of companies in the developing world are making the Internet a key part of their sales and marketing for aid-related business with governments, the United Nations (UN) and international charities. Procurement for aid needs, from development projects such as road building to emergency relief for refugees, has always involved developing country enterprises, especially in local purchase of basic goods and services through face-to-face negotiation and paper-based transactions.

    The new aid "e-procurement" - using the Internet or e-mail to identify and negotiate with suppliers and buyers - is still in its early stages, but it is encouraging companies to find more customers, offer products for export and increase efficiency to compete in global markets. E-procurement allows aid-funded buyers to compare quickly, easily and cheaply prices, specifications and delivery dates from suppliers worldwide.

    E-procurement can cover many ways of using the Internet, including:

    • Company web sites with catalogues of products, perhaps with online purchase.

    • Aid agency web sites with tenders inviting company bids via online forms or e-mails.

    • Web "portals" or exchanges that create markets by bringing buyers, sellers or both together.

    • Circulating information by e-mail to potential buyers or suppliers.

    Buyers include governments that are both aid donors with operational development or disaster organizations and recipient nations spending grants or loans; UN agencies with specialized roles, from refugees to children; military forces in humanitarian and peacekeeping operations; parts of the International Red Cross and Red Crescent Movement; and other non-governmental organizations (NGOs), such as Oxfam.

    Also involved - demonstrating that aid is a multi-layered market of many small deals - are many brokers, which sell to aid buyers, or act as their procurement agents. With the exception of the United Kingdom-based Crown Agents, however, few have yet to invest significantly in e-procurement.

    Getting aid online

    Efforts are under way to move the aid business to the Internet, with Governments from the United States to Japan and Chile to Mexico putting more government purchasing online through web sites offering tenders for aid or public-sector needs. Development banks are making available online the details of loan programmes for government spending.

    UN procurement staff are helping to create global specifications and codes for thousands of aid items, which will be crucial for online ordering and price comparisons.

    The UN Common Supplier Database (UNCSD) lets companies - for a fee - offer their details to main agencies, though up to 40 other places in the UN system have supplier rosters or registers. Many UN agencies place tender details on their sites, even if paper bids are often required.

    NGOs such as the Red Cross and Red Crescent are of interest to smaller companies in the developing world because they often have a commitment to buy locally, yet they are also exploring use of the Internet, such as preparing joint online tenders to get cheaper prices for common commodities and services, from food to satellite telephone airtime.

    Helping the move to the Internet are companies that offer public tenders - from governments, national and local, the military, and international institutions - on fee-based portal web sites.

    Benefits of e-procurement

    Typical of developing world companies taking advantage of the Internet is the Universal Trading Corporation (http://www.tentsandshelters.com), based in Pakistan, whose main business is tents. The firm's director of marketing, Captain Rana Tahir Abbas, says his company and its web site is registered with various UN bodies and listed on humanitarian sites, such as AlertNet. "The Net is very important for our company because we can communicate with customers promptly. It has certainly boosted our business," he says, though most of that business comes from Internet research to identify potential customers and making contact by e-mail.

    The need to be proactive and not wait for customers to find your web site is endorsed by Mohammad Javed Iqbal, senior executive of Islamabad-based Yasar Tentage and Textiles (http://www.yasar-tentage.org), which has a web site to help it sell blankets, shelters and foodstuffs. He says: "AlertNet is very useful for my company. We are on the UNCSD but get few inquiries from it. We do well by researching customers on sites such as ReliefWeb or InterAction, e-mailing head offices and identifying buyers in each country."

    E-mail, the Internet and a web site are crucial for developing country companies, especially in Africa, according to Dr. Neale du Plooy, managing director of South Africa's Tactical Medical Developments (http://www.icon.co.za/~tacmed), which makes field medical equipment and de-mining suits. "What might have taken a week in letters and calls now takes five minutes," he says. Disappointed by listings sites such as UNCSD or AlertNet, Dr. Du Plooy believes the UN's online tenders magazine DevBusiness is worth the annual US$495 subscription fee for the leads it offers.

    Cost and other implications

    Despite enthusiasm for the Internet, developing world companies should weigh up its advantages and disadvantages. There are financial costs, from computers to extra phone lines and either learning the skills of creating web pages or paying an outside firm, as well as the time needed for researching on the Internet and maintaining a site.

    While a basic site can be very cheap, finding business through e-mail and the Internet will require knowledge of one or more international languages. The quality of web presentation and translation - or lack of it - may be mistakenly assumed to reflect the quality of products. There can also be pressure on prices and profit margins, without a balancing demand for quality, since the buyer may never see the products.

    Finally, the Internet is not only a place for vigilance against scams, but the distance and low level of contact may make it harder to keep ethical procurement standards on child labour, the arms trade or environment, which many in aid wish to enforce.

    There are many advantages to e-procurement, especially in giving companies from developing countries an equal chance to pitch for global business. It should help cut time and costs from sales and marketing, increase efficiency, and improve products and services by showing what competitors are offering. Companies can also use e-procurement to cut supply-chain costs.

    Aid e-procurement has a lot further to go, not because of the limitations of e-procurement - other industries, from food retail to car-making, are developing online exchanges where even contract signatures are electronic - but more because of aid's complexity, fragmentation and low investment in procurement.

    For the future, sites will need continual improvement to match expectations, going from static product shots to offering multimedia demonstrations; interactivity so customers can check stock levels, prices and delivery times online; software to track shipments; increased security and trust mechanisms for web sales; and structural changes to allow integration with commercial portals and aid supplies management systems, such as the widely used Relief Supply Management System (SUMA).

    Within a year or two, many more donors, agencies and companies will be putting their tenders online, either on their own sites or through exchanges, so companies will have to gear up to produce fast, accurate and competitive bids; match their output to the codes and specifications being developed to accelerate e-procurement; and develop financial systems to handle online orders. Now is probably the time for companies to get online and start developing their sites and skills to be ready for the next big steps in e-procurement for aid.

    Nick Cater is a journalist and consultant on aid and business. He can be contacted at n_cater@hotmail.com


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