E-Procurement Adoption: Theory and Practice

Helle Zinner Henriksen and Kim Viborg Andersen

Department of Informatics
Copenhagen Business School
Howitzvej 60
2000 Frederiksberg
Denmark
{hzh.inf,andersen}@cbs.dk

Abstract. This paper addresses eProcurement adoption strategies in public

sector institutions from four perspectives (capability, interactivity, value
distribution, and orientation of the decisions). The paper analyzes eProcurement
in the largest municipality (Copenhagen) in Denmark. Our analysis suggests
that efficiency and effectiveness (capability), and improved coordination of
private sector and public sector interaction (interactivity) are the drivers for the
adoption strategy pursued by the municipality.

1 Introduction

It has been emphasized that an important part of eGovernment is to focus on the

delivery of faster and cheaper services and information to citizens, business partners,
employees, other agencies, and government entities (Layne and Lee, 2001). In this
paper focus is on how the public sector manages its internal operations. Our focus is
on the aspect of organizational management in eGovernment, which so far has
received little research attention: eProcurement. eProcurement is here defined as the
public sectors’ potential improvement of operations through electronic means in the
form of electronic purchase of goods and services.
eProcurement has been on the political agenda in EU for a while. At the Lisbon
summit in 2000 it was decided that EU should pay special attention to eProcurement.
It was emphasized that “The emergence of the new Information and Communication
Technologies (ICTs) offer promising opportunities as regards the efficiency,
transparency and opening-up of public procurement” (European Commision, 2000).
However, European governments appear to have hesitated adopting the concept of
eProcurement. One reason could be the burst of the dot.com bubble in the spring of
2000 and the concomitant reluctance to establish the underlying structures of
electronic marketplaces. Another and maybe more likely explanation could be rooted
in structural conditions in the public sector. In this paper we analyze the expectations
to eProcurement and the consequently adoption strategy for eProcurement pursued by
the largest municipality in Denmark.

R. Traunmüller (Ed.): EGOV 2003, LNCS 2739, pp. 121–124, 2003.

© Springer-Verlag Berlin Heidelberg 2003
122 H. Zinner Henriksen and K. Viborg Andersen

2 E-Procurement

As stated in the introduction eProcurement is referred to as “the public sectors’

potential improvement of operations through electronic means in the form of
electronic purchase of goods and services.” Timmers (2000) suggested that the
benefits derived from eProcurement include a wider choice of suppliers, lower cost,
better quality, improved delivery, and reduced cost of procurement. This approach to
organizational improvement of operations through electronic means is not
significantly different from those ideas applied in the traditional strategy literature
building on IT adoption and usage in private enterprises (e.g. Hammer, 1995; Porter,
1985). However, when it comes to procurement in the public sector most purchases
in public sector institutions require a bureaucratic procedure to be followed due to
different reasons. One reason is that the majority of items are bought on requisition.
This means that enormous amounts of efforts are spent on sending forms back and
forth in the system. Another reason for the bureaucratic procedures of public
procurement is related to the tendering process. The public sector institutions in the
European Union countries do, unlike private businesses, have to follow a highly
regulated procurement process. In the EU it is thus illegal to favor domestic over
foreign firms.
One consequence of these conditions is the increase of the complexity of the
technical solution of a given eProcurement system for public sector institutions.
However, another issue, which might play an even more important role, is that
eProcurement adoption is a matter of change of organizational routines, which go
beyond mere rationality.

3 Strategies for E-Procurement Adoption

Based on the particular characteristics of eProcurement we suggest a framework for

eProcurement uptake, which embraces a number of different aspects related to the
public sectors’ internal operations. The framework is derived from a comprehensive
study on impacts of IT on the public sector (Andersen & Danziger, 2001). The study
found that IT had impacts in four areas: Capability, interaction, values, and
orientation of the decision making process. In this context we apply the four areas for
evaluating the adoption incentives of the municipality of Copenhagen.
The capability perspective suggest the motives for eProcurement adoption to be a
matter of better access to valid information about products which could lead to
improved quality of the information about eProcurement. The perspective also
includes the expectation of more efficient routines and faster procurement processes
inside the public sector institutions.
The interactivity perspective focuses on how digital procurement is corresponding
with the patterns of power and control of the eProcurement process, communication
among the units involed in eProcurement, and the coordination of the eProcurement
tasks, people, and policies. It also considers the relations between the public and
private sector such as enabling of shared eProcurement between the private and public
sector and a different role of the suppliers.
 E-Procurement Adoption: Theory and Practice 123

Orientation of the decision-making processes is related to the impact of digital

procurement on the unit’s cognitive, affective and evaluative considerations. For
example, we consider whether digital procurement makes actors structuring problems
differently and whether the employees perceive that their discretion has been altered
by digital procurement.
The perspective concerning value distributions is related to whether a public
institution experiences a shift in values that is attributable to digital procurement.
Specifically values associated with the well-being of employees (do they experience
increased surveillance of their procurement behavior and do they disapprove this) as
well as the job satisfaction and job (domain) enlargement of public employees (do
they experience a more interesting job) are core attributes related to this perspective.

4 The Case of E-Procurement in the Municipality of Copenhagen

In the following an example of an eProcurement adoption strategy for a municipality

is presented. The objective of the presentation is to illustrate how practitioners focus
on the adoption of eProcurement. The case presented is related to the eProcurement
strategy of the municipality of Copenhagen.
The municipality of Copenhagen is the largest municipality in Denmark. With its
60,000 employees the municipal supports 500,000 inhabitants with services related to
schools, libraries, eldercare etc. The annual purchase in the municipality is around
EURO 500 million. It is estimated that the 2,000 purchasing agents who perform the
procurement in the institutions handle about one million invoices on an annual basis.
In 1999 when attention was first paid to the purchase behavior in the municipality
of Copenhagen there was not an explicit purchase policy, purchase strategy, or any
cross-functional activities. At that time it was demonstrated that there was none or
little coordination of purchases between different units in the municipality, very few
purchases were done jointly, and there was a limited use of collective framework
agreements for procurement. Additionally, procurement was done through
requisitions, which was a very resource demanding process. Given these conditions
there was a limited overview of procurement behavior in the municipality. Based on
these insights it was decided to pronounce an explicit strategy for the purchases for
year 2001 and onwards. The official and articulated vision was that: “The
procurement procedure in the municipality of Copenhagen is among the best in
Denmark by the end of year 2003.” Two means for achieving this vision were
identified to be: 1) Improvement of IT usage and procedures and 2) Encouragement to
better purchase behaviors.
Improvement of IT usage and procedures included to pursue an implementation of
full electronic integration of all work-procedures from requisition to payment,
gathering and use of management information, and finally full integration to the
electronic procurement portal, which was planned to be launched by January 2002.
The strategy for achieving better purchase behaviors took an offset in a goal of
using framework agreements in the procurement process. It was expected that
framework agreements automatically would lead to higher volume, which again could
lead to more information both with respect to purchase behavior and suppliers. Given
these insights better framework agreements could be achieved, which again would
lead to an increased use of framework agreements and so on and so fourth. In 1999
124 H. Zinner Henriksen and K. Viborg Andersen

the usage of collective framework agreements was about 20 percent of all purchases.
The goal was to use collective framework agreements in 50 percent of all purchases
by year 2003. One of the means for achieving commitment to collective framework
agreements was according to the purchasing manager to use the public procurement
portal.

5 Discussion and Conclusion

The case from the municipality of Copenhagen illustrates a mixed adoption strategy
for eProcurement. Based on the information provided by the purchasing manager the
adoption process appears to have been driven by rational choices related to improved
efficiency and effectiveness. The two mentioned objectives for achieving savings
relate to improvement of IT usage and procedures and encouragement to better
purchase behaviors. The immediate categorization of the adoption strategy as outlined
by the purchasing manager can therefore be classified as “capability” with respect to
the improvement of IT usage. The objective of better purchasing behavior is related to
a goal of improved control and coordination of processes and especially strengthened
relations to suppliers. This lends support to that the “interactivity” perspective also
played a role in the adoption strategy pursued in the municipality of Copenhagen. The
softer approaches to eProcurement adoption (“value distribution” and “orientation of
the decision-making process”) on the other hand were not reported to have driven the
adoption process from the purchasing managers’ point of view. This could lead to the
conclusion that adoption of IT-driven work practices such as eProcurement in public
sector institutions is rather driven by rational concerns than aspects related to
improvement of work environment and empowerment.

References

1. Andersen, K. V., & Danziger, J. N. (2001) Impacts of IT on Politics and the Public Sector:
Methodological, Epistemological, and Substantive Evidence from the ”Golden Age” of
Transformation. International Journal of Public Administration, 25(5).
2. European Commission (2000) Directive of the European Parliament and of the Council. On
the coordination of procedures for the award of public supply contracts, public service
contracts and public works contracts. In: (COM(2000) 275).
3. Hammer, M. & Stanton, S. A. (1995) The Reengineering Revolution: A Handbook. New
York: Harper Business Press.
4. Layne, K. & Lee, J. (2001) Developing Fully Functional E-government: A Four Stage
Model. Government Information Quarterly 18, 122-136.
5. Porter, M. E. (1985) Competitive Advantage: Creating and Sustaining Superior. Perform-
ance. New York: The Free Press.
6. Timmers, P. (2000) Electronic Commerce: Strategies and Models for Business-To-Business
Trading. Wiley and Sons, New York.