Baek Buildingsuccessfuleprocurement 2015

BUILDING A SUCCESSFUL E-PROCUREMENT SYSTEM IN THE UNITED STATES: LESSONS
FROM THE SOUTH KOREAN SYSTEM

Author(s): Chan Young Baek
Source: Public Contract Law Journal , Vol. 44, No. 4 (Summer 2015), pp. 755-776
Published by: American Bar Association
Stable URL: https://www.jstor.org/stable/10.2307/26419490
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BUILDING A SUCCESSFUL E-PROCUREMENT SYSTEM
IN THE UNITED STATES: LESSONS FROM THE SOUTH
KOREAN SYSTEM
Chan Young Baek
I. From Poor Farmers to Giant High-Tech Corporations ............. 756

II. What Is e-Procurement?................................................................ 757
III. E-Procurement in South Korea .................................................... 757
A. Development of South Korea’s e-Procurement System ....... 758
1. Birth of e-Procurement in South Korea: Electronic Data
Interchange ......................................................................... 758
2. Electronic Bidding System and the Need for an
Integrated System............................................................... 758
3. The Integrated e-Procurement System: Korea’s Online
e-Procurement System ....................................................... 759
B. Benefits of the South Korean e-Procurement System .......... 760
IV. E-Procurement Systems in the United States .............................. 761
A. Birth of the Integrated Acquisition Environment and the
Systems for Award Management ............................................ 762
B. Existing e-Procurement Systems in the United States ......... 762
1. GSA Advantage! ................................................................. 762
2. Federal Business Opportunities (FedBizOpps) ................. 763
3. Systems for Award Management (SAM) ........................... 763
4. Federal Awardee Performance and Integrity Information
System (FAPIIS)................................................................. 763
C. Need for Reform in the U.S. e-Procurement System .......... 764
1. Issues in the U.S. e-Procurement System......................... 764
2. Need for Monetary Savings and Reductions in
Paperwork for Federal Agencies........................................ 765
V. Learning from the South Korean e-Procurement System........... 766
A. Important Elements in South Korea’s e-Procurement ......... 766
1. Security, Transparency, and Reliability Were the Most
Prioritized Goals in Korea’s e-Procurement
Implementation .................................................................. 766
Chan Young Baek (cbaek@law.gwu.edu) is a 2015 graduate of The George Washington

University Law School and is a member of the Public Contract Law Journal. He wishes
to thank Professors Daniel I. Gordon and Mark J. Nackman for their invaluable guidance
and advice on this Note.
755

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756 Public Contract Law Journal • Vol. 44, No. 4 • Summer 2015
2. E-Procurement Legal Framework Was an Essential

Element for e-Procurement Implementation in South
Korea................................................................................... 767
3. Government-Wide Cooperation Was a Key to Success in
Implementing e-Procurement in South Korea................. 768
4. A Well-Established Internet Infrastructure Made
Implementation of e-Procurement Easier in South Korea 769
B. Adoption of South Korea’s e-Procurement Elements in the
United States ........................................................................... 770
1. United States Should Prioritize Security, Transparency,
and Reliability in e-Procurement Implementation........... 770
2. The United States Legal Framework Must Accommodate
the Implementation of e-Procurement ............................. 771
3. The United States Government Must Oversee Both the
Implementation and Maintenance of e-Procurement ...... 773
C. Perceived Obstacles in Implementing e-Procurement in the
United States ........................................................................... 774
D. Problems in the South Korean e-Procurement System and
Lessons for the United States ................................................ 775
VI. Future Challenges of the e-Procurement System ........................ 775
VII. Conclusion...................................................................................... 776
I. FROM POOR FARMERS TO GIANT HIGH-TECH CORPORATIONS
Within one generation, South Korea has transformed itself from a poor
agrarian society to a modern industrial nation,1 an accomplishment never
seen before. In the 1970s, nearly half the population was comprised of farm-
ers, but in less than half a decade South Korea became one of the largest
economies in the world, now known for its high-technology corporations
such as Samsung and Hyundai.2 Unlocking the secrets behind South Korea’s
rapid development offers invaluable insights and lessons for the procurement
system in the United States.
South Korea’s public procurement market is about $100 billion, which is
equal to ten percent of South Korea’s gross domestic product (GDP).3 Elec-
tronic procurement (e-Procurement), public procurement accomplished
through electronic means, is used by 44,000 public entities and 228,000
1. See Christine Ahn & Anders Riel Muller, South Korea: Ground Zero for Food Sovereignty and
Community Resilience, FOREIGN POL’Y IN FOCUS (Nov. 8, 2013), http://fpif.org/south-korea-
ground-zero-food-sovereignty-community-resilience/.
2. See id.
3. Ho In Kang, Public Procurement Service, e-Procurement Experience in Korea: Implementation
and Impact, slide 4 ( June 2012), http://www.europarl.europa.eu/document/activities/cont/
201207/20120710ATT48620/20120710ATT48620EN.pdf [hereinafter e-Procurement Experience
in Korea].

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Building a Successful E-Procurement System in the United States 757
suppliers in South Korea and totaled $76 billion out of the $100 billion pro-
curement market in 2010.4 South Korea’s e-Procurement has received the
United Nations Public Service Award, Global IT Excellence Award, and
the e-Asia Award.5
This Note will discuss South Korea’s e-Procurement experience—with
the hope that South Korea’s successes and failures can offer valuable lessons
for the e-Procurement system in the United States. First, this Note will pro-
vide background on e-Procurement generally. Second, this Note will discuss
the development of the South Korean e-Procurement system and its benefits.
Third, this Note will examine the existing e-Procurement system in the
United States. Fourth, this Note will propose a way to integrate the South
Korean e-Procurement model into the existing framework in the United
States. Lastly, this Note will discuss lessons to be learned from problems
in South Korea’s e-Procurement system and propose solutions to future
challenges in e-Procurement.
II. WHAT IS E-PROCUREMENT?
There is some confusion as to the definition of the term e-Procurement.6

Although the terms “e-Procurement” and “e-Purchasing” have been used in-
terchangeably, e-Purchasing “has a narrower scope.”7 In comparison,
“e-Procurement refers to the use of Internet-based (integrated) information
and communication technologies (ICTs) to carry out individual or all stages
of the procurement process, including search, sourcing, negotiation, order-
ing, receipt, and post-purchase review.”8 In other words, e-Procurement
can be viewed as “an end-to-end solution that integrates and streamlines
many procurement processes.”9
III. E-PROCUREMENT IN SOUTH KOREA
The development of e-Procurement in South Korea consisted of multiple

stages, including the introduction of an Electronic Data Interchange, the de-
velopment of an electronic bidding system, and ultimately, the birth of the
Korea Online E-Procurement System (KONEPS). This section will discuss
the development and benefits of South Korea’s e-Procurement system.
4. Id. at slide 6.
5. Id. at slide 15.
6. Kishor Vaidya et al., Critical Factors That Influence E-Procurement Implementation Success in
the Public Sector, 82 J. PUB. PROCUREMENT 70, 71 (2006).
7. Id.
8. Id. at 72.
9. Id.

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A. Development of South Korea’s e-Procurement System

South Korea introduced an e-Procurement system in an effort to “[en-
hance] transparency and efficiency of public procurement administration”
and improve customer service.10 When the e-Procurement system was intro-
duced, South Korea was undergoing a general paradigm shift towards cus-
tomer-oriented procurement administration.11 To manage the increasing
number of public procurement demands and their growing complexity, an
e-Procurement system was essential.12
1. Birth of E-Procurement in South Korea: Electronic Data Interchange

“E-Procurement in [South] Korea was born from the Procurement EDI
(Electronic Data Interchange) of PPS [(the Public Procurement Service)]
and its electronic bidding system.”13 PPS, Korea’s centralized procurement
agency, operated the EDI procurement project in 1997 and “constructed an
electronic bidding system in 2000, which was used by public organizations
regardless of whether they entrusted their procurement to PPS.”14 PPS
gradually digitalized 88 percent of its procurement procedures.15 The EDI
system enabled sharing of “procurement related information among [PPS]
departments, public buyers, and business firms.”16 During its pilot stage,
EDI processed ten key procurement procedures.17 EDI’s scope continued
to grow, and by 2001 it covered “procurement procedures for all public in-
stitutions.”18 EDI brought numerous benefits to the procurement system,
including “reduced processing time, reduced document volume through
conversion into e-Documents, and reduced payment lead time.”19
2. Electronic Bidding System and the Need for an Integrated System

PPS also developed an electronic bidding (e-Bidding) system. After going
through a pilot stage for bidder registration and the issuance of electronic
signatures (e-Signature) for e-Bidding, the e-Bidding system became fully
10. TAE-HEE CHOI & DAE-SIK KIM, KDI SCH. PUB. POLICY & MGMT., 2012 MODULARIZATION
OF KOREA’S DEVELOPMENT EXPERIENCE: KOREAN GOVERNMENT PROCUREMENT EXPERIENCE 68
(2013) [hereinafter KOREAN GOV’T PROCUREMENT EXPERIENCE].
11. Id.
12. Id.
13. GEON-CHEOL SHIN & MYUNG SUB PARK, LEARNING FROM THE AWARD WINNING KOREAN
PUBLIC PROCUREMENT SERVICE 2 (2004) [hereinafter LEARNING FROM THE AWARD WINNING KO-
REAN PUBLIC PROCUREMENT SERVICE].
14. Id.
15. Id.
16. DAE-IN KIM ET AL., THE EXPANSION OF NATIONAL BUDGET THROUGH ADVANCED PUBLIC
PROCUREMENT SYSTEM 6 (2012) [hereinafter THE EXPANSION OF NATIONAL BUDGET] (citing
NOWOOK PARK ET AL., KDI SCH. OF PUB. POLICY & MGMT., POLICY CONSULTATION TO
STRENGTHEN INDONESIAN ECONOMY’S CAPACITY (2013)).
17. See id. (including “procurement requests, procurement request changes and accounting
for 20 central and local government agencies.”).
18. Id.
19. Id.

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operational in 2001.20 Use of the system quickly spread throughout the

government.21
Although the separate EDI, e-Bidding, and e-Payment systems each gen-
erated productive results, there was still a need for an integrated and all-
inclusive platform for e-Procurement to achieve the greatest efficiency and
convenience.22 Without an integrated e-Procurement system, some public
entities developed their own systems.23 Furthermore, many public entities
were still using paper conduct procurement and not utilizing the
e-Procurement system at all.24 To address such issues, the South Korean
government established a comprehensive national e-Procurement system
called “the G2B project,” which was designed to “drastically [restructure]
the procurement administration based on a ‘single-window’ ” e-Procurement
system.25 The project launched KONEPS in September 2002.26
3. The Integrated e-Procurement System: Korea’s Online

e-Procurement System
Prior to the launch of KONEPS, “bidders had to check tender notices
through the official gazette, associated documents, bulletin boards, and the
website of each procuring entity.”27 Additionally, bidders had to “register
for bid participation with each individual procuring entity for separate ten-
ders.”28 KONEPS solved the inefficiency by “[publishing] tender informa-
tion from all public institutions” and became the sole platform for public
procurement.29 KONEPS also increases transparency, accessibility, and
competitiveness in the procurement process by allowing entities to share
bidder information, thus “allowing bidders to participate in all public bid-
dings . . .”30
“KONEPS processes [all] entire procurement procedures online, from
tender notice, awarding, and contracting to payment.”31 The Ministry of
Public Administration and Security’s (MOPAS) G4C program32 allows
data exchange linkage with KONEPS and eliminates reliance on paper
20. Dae-in Kim et al., Enhancing Efficiency of National Budget Execution through Advanced Public
Procurement System, in POLICY CONSULTATION TO STRENGTHEN INDONESIAN ECONOMY’S CAPAC-
ITY 116–17 (KDI Sch. of Pub. Policy & Mgmt. 2013) [hereinafter Enhancing Efficiency of National
Budget Execution].
21. Id.
22. Id. at 117.
23. Id.
24. Id.
25. Id.
26. Id.
27. Id.
28. Id.
29. Id.
30. Id.
31. Id.
32. The G4C (Government For Citizen) project began in 2000 and is intended to increase
administrative efficiency and transparency by integrating information technology with adminis-
trative services and facilitating information exchange among administrative agencies. See

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documents.33 Further, “through linkage with industry associations, KONEPS

also automatically collects information on bidders for qualification assess-
ment, rendering paper submissions obsolete.”34 To date, KONEPS digita-
lized 166 document forms for electronic processing.35 While submission of
paper documents used to be the norm, most are now submitted online.36
Since 2004, KONEPS has expanded even further, extending its reach to
mobile services.37 KONEPS launched Mobile Information Service in
March 2004, which enabled browsing and searching for tender information
via personal digital assistants (PDAs).38 A year later, “after implementing the
authentication schemes for mobile devices, KONEPS opened its Mobile
Bidding Service, [enabling] bid submission via PDAs.”39 Ultimately, bid sub-
mission via mobile phones became possible in 2008 after PPS developed suf-
ficient safety measures.40
Korea’s e-Procurement system increased both transparency and efficiency
through: [reformation] of related laws and regulations; real-time disclosure of in-
formation on the progress of bidding and contracting; reduction of face-to-face
contacts between procurement officials and bidders; prevention of abuse of
power by government officials; reduction of paperwork; and the systematic publi-
cation, management and shared use of information [inter alia].41
B. Benefits of the South Korean e-Procurement System

“KONEPS exchanges data with 140 external data systems for supplier in-
formation, bid evaluation, and payment, minimizing paper document sub-
missions.”42 Additionally, participation by small and medium enterprises
(SMEs) has doubled since the introduction of KONEPS in 2002.43
E-Procurement has also increased the growth of electronic commerce.44
E-Procurement “promoted the growth of [the] e-Certification industry,”
increasing the use of electronic certificates from 1.1 million in 2001 to
24.4 million in 2010.45 E-certificates are essential in Internet banking, on-
line stock trading, and electronic shopping. Due to the increased use of
MINISTRY OF PUB. ADMIN. & SEC., G4C: GOVERNMENT FOR CITIZEN 8, available at http://unpan1.
un.org/intradoc/groups/public/documents/UN-DPADM/UNPAN042706.pdf.
33. Enhancing Efficiency of National Budget Execution, supra note 20, at 118 (detailing the elim-
ination of paper documents such as business registration certificates and tax payment
certificates).
34. Id.
35. See id. (including “bid, contract, inspection request, and payment request” forms).
36. Id.
37. Id.
38. Id.
39. Id.
40. See id. (PPS implemented electronic signature and encryption methods for mobile
devices).
41. Id. at 118–19.
42. e-Procurement Experience in Korea, supra note 3, at slide 8.
43. Id. at slide 11.
45. Id.

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e-certificates, e-commerce sales rose from $119 billion in 2001 to almost

$1 trillion in 2011.46
E-Procurement also promotes transparency.47 First, real-time informa-
tion disclosure increases transparency by posting bidding results and con-
tract details online, disclosing them to the public and inviting peer monitor-
ing for fair results in the process.48 Second, objectivity is secured in bid
evaluation because the evaluation is “based on objective, validated data.”49
Finally, traceable prices and specifications encourage informed decision
making and reduce the risk of “biased decisions [resulting] from information
asymmetry.”50
Another benefit of e-Procurement is cost savings. In South Korea,
KONEPS is saving $8 billion in transaction costs annually, primarily due to
increased efficiency.51 “Receiving bids, validating related [documents], and se-
lecting the winning bid[s]” take less than two hours with e-Procurement, as
opposed to an average of thirty hours previously.52
Korea’s e-Procurement has also “expanded the selection of [procurement]
products and standardized their classifications.”53 The e-Procurement system
is “linked to more than [thirty] procurement-related external agencies—
including supplier certification agencies, financial clearing institutes, the Min-
istry of Internal Affairs, the Ministry of Finance, and e-guarantee and e-
payment systems.”54 Further, the system “allows cross-agency comparisons
of procurement methods” and prevents collusion among bidders.55 Finally,
the system has “increased public sector participation in private e-commerce,
because it allows users to search for products on the websites of private
companies.”56
IV. E-PROCUREMENT SYSTEMS IN THE UNITED STATES
E-Procurement in the United States is still in the development stage. This

section will discuss the history of e-Procurement in the United States, exist-
ing e-Procurement systems, and the need for reform.
46. Id.
48. Id.
49. Id.
50. Id.
52. Id.
53. THE WORLD BANK, KOREA’S MOVE TO E-PROCUREMENT, 90 PREMNOTES PUBLIC SECTOR
2 (2004), available at http://www1.worldbank.org/prem/PREMNotes/premnote90.pdf [hereinaf-
ter KOREA’S MOVE TO E-PROCUREMENT].
54. Id.
55. Id.
56. Id. at 3.

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A. Birth of the Integrated Acquisition Environment and the Systems

for Award Management
Integration of various agency-specific acquisition data systems in the
United States began in 2001, when the Office of Management and Budget
(OMB) and the General Services Administration (GSA) established the Inte-
grated Acquisition Environment (IAE).57 IAE’s goal was to “integrate, stan-
dardize and streamline government data systems; simplify contractor busi-
ness with the government; allow agencies to share data and make more
informed decisions; and save money.”58 Pursuant to IAE’s goals, the GSA
developed a series of independent online procurement systems.59 These
nine individual systems, referred to as legacy systems, have been imple-
mented government-wide.60
In 2008, the GSA developed Systems for Award Management (SAM) in an
effort to eliminate redundancy, streamline reporting, improve efficiency, and
reduce costs.61 SAM aims to consolidate and replace all nine data systems,
“act[ing] as a single point of entry for government and contractor report-
ing.”62 Unlike the previous legacy systems, each of which was developed, op-
erated, and supported by one vendor, several vendors perform SAM’s many
functions.63 This multivendor approach is intended to “encourage innova-
tion, increase competition, and ensure that the government owns the sys-
tem’s software as open-source code.”64
B. Existing e-Procurement Systems in the United States

1. GSA Advantage!
The United States has an e-Procurement system called “GSA Advan-
tage!,” which is an “online shopping and ordering system that provides ac-
cess to thousands of contractors and millions of supplies (products) and ser-
vices.”65 Federal employees “can make purchases on GSA Advantage! using a
government-wide commercial purchase card (GSA SmartPay); a GSA Activ-
ity Address Code (AAC); or a Department of Defense Activity Address Code
(DoDAAC).”66 GSA Advantage! allows searches for “items using keywords,
part numbers, National Stock Numbers (NSNs), manufacturer names,
57. See generally GAO Suggests Revisiting Plans to Integrate GSA Acquisition Data System, 12
GOV’T CONTRACTOR ¶ 97, May 28, 2013.
58. Id.
59. Diana G. Richard et al., Contractor Reporting Requirements in the Wake of Implementation of
the System for Award Management, BRIEFING PAPERS, May 2013, at 2 [hereinafter Contractor Re-
porting Requirements in the Wake of Implementation].
60. For a list of the legacy systems, see id. (listing the nine independent online legacy systems).
61. Id.
62. Id.
63. Id. at 2–3.
64. Id. at 3.
65. GSA Advantage!, U.S. Gen. Servs. Admin., http://www.gsa.gov/portal/content/104677?
utm_source=FAS&utm_medium=print-radio&utm_term=advantage&utm_campaign=shortcuts
(last visited Apr. 15, 2015).
66. See id.

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contractor names, or contract numbers.”67 Users can “browse by category of

products and services; compare features, prices, and delivery options; config-
ure products and add accessories; place orders directly online; review deliv-
ery options; select a convenient payment method; and view order history to
track status, reorder, or cancel.”68
2. Federal Business Opportunities (FedBizOpps)

The Federal Business Opportunities (FedBizOpps) is “the single govern-
ment point-of-entry for [f]ederal government procurement opportunities
over $25,000.”69 Contracting Officers can announce business oppor-
tunities by posting them online to FedBizOpps.70 Through this portal,
“commercial vendors seeking [f]ederal markets for their products and ser-
vices can search, monitor and retrieve opportunities solicited by the entire
[f]ederal contracting community.”71
3. Systems for Award Management (SAM)

As mentioned above, SAM is an e-Procurement system built to combine
nine federal procurement systems into one new system.72 The goal is to “im-
prove access to compliance and reporting data.”73 This process is being done
in phases; the first phase currently includes implementation of four federal
procurement systems, including the Central Contractor Registry (CCR),
Federal Agency Registration (Fedreg), Online Representations and Certifi-
cations Application, and Excluded Parties List System (EPLS).74 The goal
of SAM is to improve access to compliance and reporting data.75
4. Federal Awardee Performance and Integrity Information System

(FAPIIS)
The Federal Awardee Performance and Integrity Information System
(FAPIIS) is a procurement database that “includes data from the Past Per-
formance Information Retrieval System (PPIRS) and the Contractor
Performance Assessment Reporting System (CPARS),” the Excluded Parties
67. See GSA Advantage! Benefits, U.S. Gen. Servs. Admin., http://www.gsa.gov/portal/
content/101122 (last visited June 21, 2015).
68. See id.
69. Federal Business Opportunities (FedBizOpps.gov), BUSINESSUSA, https://business.usa.gov/
tools/federal-business-opportunities-fedbizoppsgov (last visited Apr. 15, 2015).
70. See id.
71. Id.
72. See Sys. for Award Mgmt. (SAM), About SAM: What is SAM?, https://www.sam.gov/
portal/SAM/?portal:componentId=78d3f342-d23f-424a-a04a-d978528069c2&interactionstate=
JBPNS_rO0ABXc0ABBfanNmQnJpZGdlVmlld0lkAAAAAQATL2pzZi9uYXZpZ2F0a
W9uLmpzcAAHX19FT0ZfXw**&portal:type=action##11 (last visited Apr. 15, 2015).
73. Contractor Reporting Requirements in the Wake of Implementation, supra note 59, at 1.
74. See About SAM: What is SAM?, supra note 72 (the first phase implements “[The] Central
Contractor Registry (CCR), Federal Agency Registration (Fedreg), Online Representations and
Certifications Application (ORCA), and the Excluded Parties List System (EPLS).”).
75. Id.

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List System (EPLS), and “contractor self-reported information from the

Central Contractor Registry (CCR).”76 Initially, only Contracting Officers
could access FAPIIS, but, as of July 29, 2010, the public gained access to
most of the data in accordance with the 2010 Supplemental Appropriations
Act.77
C. Need for Reform in the U.S. e-Procurement System

The e-Procurement system in the United States is experiencing wide-
spread issues and is in need of reform. Functional overlap of different
e-Procurement systems, technical challenges frustrating SAM, and the
need for paperwork reduction and cost savings for federal agencies all call
for changes to the existing system.
1. Issues in the U.S. e-Procurement System

The e-Procurement systems in the United States seem to serve similar
functions, leading to unnecessary overlap. For instance, both SAM and
FAPIIS have the EPLS, and both GSA Advantage! and FedBizOpps provide
a portal for public procurement.78 An integrated system that serves as the
sole window of e-Procurement is necessary to achieve an efficient
e-Procurement system.
SAM is the closest thing to an integrated e-Procurement system.79 In the-
ory, SAM seems to be an ideal e-Procurement system, integrating nine dif-
ferent procurement systems.80 However, in practice, SAM has resulted in
significant cost overruns, primarily due to “errors in the program design.”81
According to a March 2012 report analyzing the GSA’s plan to consolidate
the legacy systems, the program design errors were partly due to GSA’s mis-
take of “omitting hardware and other key components in acquiring a hosting
infrastructure for SAM.”82
SAM is also frustrating its users with technical problems. Contractors
have complained that “information they put into the system would disap-
pear, the system did not issue registration confirmations, and there was a
general lack of easily attainable information and readily available customer
service.”83 Both contractors and the government are frustrated by the
76. See Terry L. Elling & Jeffery M. Chiow, FAPIIS Goes Public: Contractor Performance and
Integrity Information Database Will be Made Publicly Available, VENABLE GOV’T CONTRACTS UP-
DATE (Aug. 2010), http://www.venable.com/files/Publication/49850e59-6200-4909-9074-
344ca66085ef/Presentation/PublicationAttachment/90b8f1fb-49bb-46c9-a2e3-3df2acb21d9c/
FAPIIS_Goes_Public_8-10.pdf.
77. See id.
78. See supra Part IV.B.1–4.
79. See supra Part IV.B.3.
80. See id.
81. Contractor Reporting Requirements in the Wake of Implementation, supra note 59, at 3.
82. Id. (quoting U.S. GEN. ACCOUNTABILITY OFFICE, GAO-12-429, FEDERAL CONTRACTING:
EFFORT TO CONSOLIDATE GOVERNMENT-WIDE ACQUISITION DATA SYSTEMS SHOULD BE REAS-
SESSED (2012)).
83. Id. at 5.

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basic functional inadequacies of the website, as well as extensive delays en-

countered in attempting to update company information or representations
and certifications.84
Problems also arise because SAM’s key terms differ from those formerly
used in the legacy systems.85 For example, “the Code of Federal Regulations
extensively uses the term ‘Excluded Party List System,” which does not exist
in SAM.86 As a result, agencies must update their regulations to reflect the
change, and if such updates are delayed or missing, then “agencies, busi-
nesses, and individuals may inadvertently and unintentionally fail to comply
with applicable regulations and be subject to litigation.”87
SAM’s failure is causing agencies to forego using the system.88 In August
2012, Department of Defense officials started allowing contractors to regis-
ter in databases other than SAM and “removed the requirement for prospec-
tive contractors to register in SAM before they could receive a contract re-
ward.”89 The GSA is working with IBM to fix the problems, but with limited
success thus far.90
2. Need for Monetary Savings and Reductions in Paperwork

for Federal Agencies
In May 2012, President Obama issued an executive order requiring fed-
eral agencies to continually scrutinize rules and requirements on the books
to make sure they are still necessary, streamlined, and up-to-date.91 The
President also emphasized that agencies should “[prioritize] initiatives that
will produce significant quantifiable monetary savings or significant quanti-
fiable reductions in paperwork burdens while protecting public health, wel-
fare, safety, and our environment.”92 In response, agencies across the admin-
istration, including the FAR Council, submitted a paperwork reduction
plan.93 An integrated e-Procurement system can help achieve quantifiable
monetary savings and reductions in paperwork burdens.
84. Id.
85. Id. at 6.
86. Id.
87. Id. at 6–7.
88. Matthew Weigelt, GSA’s SAM Continues to Frustrate its Users, FCW BUS. OF FED. TECH.
(Sept. 13, 2012), http://fcw.com/articles/2012/09/15/buzz-system-for-award-management-gsa.
aspx.
89. Id.
90. Id.
91. See Exec. Order No. 13610, 77 Fed. Reg. 28469 (May 14, 2012), available at http://www.
whitehouse.gov/sites/default/files/docs/microsites/omb/eo_13610_identifying_and_reducing_
regulatory_burdens.pdf.
92. 77 Fed. Reg. 28470.
93. See U.S. Gen. Servs. Admin., Plan for Retrospective Analysis of Existing Rules–Status
Update, at 10 (2012), available at http://www.gsa.gov/portal/mediaId/156239/fileName/Final-
GSA_Retrospective_Review_-_12-18-2012.action.

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V. LEARNING FROM THE SOUTH KOREAN E-PROCUREMENT

SYSTEM
To better understand and learn from the South Korean e-Procurement

system, it is essential to analyze the factors that contributed to its success.
This section will present the important elements in the South Korean
e-Procurement system and suggest ways to adopt the elements in the devel-
opment of an e-Procurement system in the United States.
A. Important Elements in South Korea’s e-Procurement
The e-Procurement system was “part of Korea’s effort towards the en-
hancement of transparency and efficiency of public procurement administra-
tion as well as provision of customer friendly service.”94 Establishment of the
system was also fueled by external factors such as international trade liberal-
ization, worldwide introduction of e-Procurement systems, and demands for
higher transparency and fairness in public administration.95 The United
States is experiencing similar phenomena and thus can also benefit from
the development of a similar e-Procurement system.
1. Security, Transparency, and Reliability Were the Most Prioritized

Goals in Korea’s e-Procurement Implementation
South Korea’s e-Procurement system calls for high levels of security,
transparency, and reliability; to achieve these goals, “several important issues
needed to be considered.”96 First, because certain files were confidential, the
system needed to limit the right of access to the information provided.97 The
solution was public key infrastructure (PKI), a monitoring system that de-
tects any system abuse and protects information.98 PKI requires use of a na-
tionally certified encryption algorithm and a publicly certified electronic sig-
nature.99 The security system provides safe communication among
computers using web XML standard, double firewalls, and intrusion detec-
tion systems to monitor unauthorized access.100 These measures helped
“to control information access and prevent unauthorized program modifica-
tions.”101 Further, use of a data backup system allows restoration of data
“within four hours [of a] system failure.”102 Additionally, fingerprint recog-
nition-based bidding provides higher levels of security in the bidding pro-
cess.103 Second, to promote transparency and reliability, South Korea imple-
mented “web call center[s], information notice service[s], a mobile electronic
94. KOREAN GOV’T PROCUREMENT EXPERIENCE, supra note 10, at 68.

95. Id.
96. Id.
97. Id.
98. Id. at 70.
99. Id. at 71.
100. Id.
101. Id.
102. Id.
103. Id.

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bidding system, mobile inspection of procured goods, and mobile

office[s].”104 Lastly, to promote efficiency, South Korea developed Public
Procurement e-Mall, where different government agencies could make sim-
ple and routine purchases, such as office supplies, online.105 Introduction of
the e-Mall was accompanied by “electronic payment systems and an elec-
tronic warranty issuance and reception system.”106
2. E-Procurement Legal Framework Was an Essential Element
for e-Procurement Implementation in South Korea
Another element of successful e-Procurement was the advanced prepara-
tion of a corresponding legal framework. To achieve legal stability, especially
in online bidding where conflicts of interest can arise, a certificate authenti-
cation service must exist to secure “authentication, integrity, confidentiality,
and non-repudiation.”107 Because difficulties in identity verification in elec-
tronic transactions make the process vulnerable to forgery and falsification,
“[a]uthentication . . . is especially important in e-Bidding, [essentially serving
as a] seal on a bid.”108
Implementing an e-Procurement system requires amending existing
laws and drafting new ones.109 In South Korea, the launch of KONEPS
required the amendment of multiple acts and regulations.110 The amend-
ments contained “provisions regulating general terms and conditions of
the use of e-Procurement service, user guidelines, and any necessary special
provisions.”111
South Korea is a party to the Enforcement Decree of the Act on Con-
tracts (Act on Contracts), which was amended to require the government
to publish all invitations for bids in designated information processing
units (KONEPS) instead of publishing them in daily newspapers.112 The
Act on Contracts also transitioned to online bidding by requiring bidders
to submit bids using KONEPS.113 Further, the Act on Contracts required
publication of notice and information of fraudulent bidders114 and reports
of total contract records on KONEPS.115
The Enforcement Decree of the Government Procurement Act (Govern-
ment Procurement Act) introduced multiple award schedules for commodities
104. Id.
105. Id. at 70.
106. Id.
107. Id. at 73.
108. Id.
109. Id.
110. See id. (stating that “the State Contract Act along with its Enforcement Decree and En-
forcement Regulations, . . . the Enforcement Decree of the Government Procurement Act, and
the Enforcement Decree of Local Finance Act” were all amended prior to the launch of KONEPS).
111. Id. at 74.
112. Enforcement Decree of the Act on Contracts to Which the State is a Party, Presidential
Decree No. 23778, May 14, 2012, art. 33 (S. Kor.).
113. Id. at art. 39.
114. Id. at art. 76(6).
115. Id. at art. 93.

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in demand, increasing competition in price and quality. 116 The Act on Con-
tracts includes a “provision [for] more grounds on the sharing of information
on registered suppliers.”117 Other regulations require “confirmation of [the]
time that electronic documents were sent or received, the use of electronic sig-
nature[s] . . . [and the award of] a contract in electronic tendering.”118
Electronic signatures were introduced by the Framework Act on Elec-
tronic Commerce and Digital Signature Act in 1999.119 Because e-signatures
safeguard the validity of online transaction information and verify the iden-
tity of users, they must be legally valid.120 Legal validity of e-signatures al-
lows bids submitted online to have the same legal effect as bids submitted
offline.121 The legal validity of e-signatures is stipulated in Article 6 of the
Basic Law on Electronic Commerce of Korea, stating that “a digital signa-
ture certified by the authorized certification authority” shall be deemed to
be a legally effective signature or seal and that “an electronic message with
a digital signature . . . shall be presumed to have been in its maintained un-
changed substance after the originator affixed the signature.”122 The
e-signature certification and the validity check of bids are granted by accred-
ited certification authorities, namely, the Korea Securities Computing Cor-
poration (KOSCOM), Korea Information Certificate Authority (KICA), and
National Computerization Agency (NCA).123
The e-Bidding system (GoBIMS), another essential element of KONEPS,
required multiple guidelines adopted in 2000, which focused on the rights
and responsibilities of the PPS and bidders relating to the use of e-Bidding
and special guidelines for e-Bidding on commodity purchases.124
3. Government-Wide Cooperation Was a Key to Success in

Implementing e-Procurement in South Korea
In January 2001, the South Korean government formed an e-Government
Special Committee to carry out Cyber Korea 21, which consisted of eleven
tasks, “including civil application, procurement, taxation, education, [and]
medical administration.”125 The committee also considered the recommen-
dations of ministries and other government agencies to help create an effec-
tive system that included e-Procurement.126
116. The Enforcement Decree of the Government Procurement Act refers to Multiple Award
Schedules as “Contract with Multiple Suppliers” in the Act. See Enforcement Decree of the
Government Procurement Act, Presidential Decree No. 22342, Aug. 17, 2010, art. 7-2 (S. Kor.).
118. Id. at 70.
119. Id. at 74.
120. Id.
121. Id.
122. The Basic Law on Electronic Commerce of Korea, July 1, 1999, art. 6(1) (S. Kor.).
124. Id. at 75.
125. LEARNING FROM THE AWARD WINNING KOREAN PUBLIC PROCUREMENT SERVICE, supra
note 13, at 3.
126. Id.

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The South Korean government continues to actively oversee the

e-Procurement process. For example, the Korea Fair Trade Commission
(KFTC), which has exclusive authority in regulating cartel conduct and en-
forces the Monopoly Regulation and Fair Trade Act (MRFTA), revised the
Act to include corrective actions for bid-rigging conspiracy.127 The KFTC
has since imposed corrective orders and sanctions on companies guilty of
bid-rigging.128 Further, the Enforcement Decree of the Act on Contracts
to Which the State is a Party stipulates that “Public Procurement Service
shall prevent a company violating the regulations of the MRFTA from bid-
ding for government construction contracts for a period it sets of one month
or longer not exceeding two years in the case where the KFTC makes such
request.”129
In 2006, the KFTC initiated a system for monitoring bid-rigging and se-
cured legal ground in 2009 in the MRFTA “mandating all the public bodies
to provide bid-related information to the KFTC.”130 The system, Bid Rig-
ging Indicator Analysis System (BRIAS), “automatically and statistically an-
alyzes bid-rigging indicators based on data concerning bids placed by public
institutions.”131 The Public Procurement Service also operates a bid-rigging
indicator analysis system and requests KFTC “to investigate suspicious bid-
ders.”132 The introduction of BRIAS increased the number of bid-rigging
prosecutions from twenty-eight in 2005 to forty-five in 2008.133 The sur-
charges from the prosecutions range from $79,645,000 to $222,495,000 an-
nually.134 BRIAS is effectively eliminating collusive bidding and promoting a
competitive bidding environment.
4. A Well-Established Internet Infrastructure Made Implementation

of e-Procurement Easier in South Korea
South Korea’s well-established Internet infrastructure made implementa-
tion of e-Procurement easier.135 The Internet is widely used for transactions
in South Korea with online stock trading as high as sixty-seven percent of
total stock trades and the online shopping rate at thirty-one percent.136
127. OECD, DAF/COMP/GF(2010)6, POLICY ROUNDTABLES: COLLUSION AND CORRUPTION IN

PUBLIC PROCUREMENT 233, 236 (2010), http://www.oecd.org/competition/cartels/46235884.pdf.
128. Id.
129. Id.
130. Id. at 238.
131. The data is delivered online from public institutions, and the system calculates the prob-
ability of bid rigging by weighing various indicators such as bid-winning probability, the number
of bidders, bid prices, competition methods, the number of unsuccessful bids, and hikes in re-
serve prices. Id.
132. Id.
133. Jung Won Song, Asia-Pacific Economic Cooperation, Recent Developments in Korea’s
Competition Policy and Enforcement Cases, slide 8 (Feb. 2, 2009), http://www.apeccp.org.tw/doc/
Workshop/w2009/2009015.pdf.
134. Id.
135. See LEARNING FROM THE AWARD WINNING KOREAN PUBLIC PROCUREMENT SERVICE, supra
note 13, at 3.
136. See id.

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Such high Internet penetration and ready infrastructure provided users easy
and natural access to the new e-Procurement system, allowing for its success-
ful implementation.137
B. Adoption of South Korea’s e-Procurement Elements in the United States

Adopting South Korea’s e-Procurement elements would be beneficial for
the United States. In doing so, the United States should prioritize security,
transparency, and reliability; tailor the procurement legal framework to ac-
commodate the implementation of e-Procurement; and require government
oversight of both the implementation and maintenance of e-Procurement.
1. United States Should Prioritize Security, Transparency, and

Reliability in e-Procurement Implementation
The United Nation’s Commission on International Trade Law
(UNCITRAL) Model Law on Public Procurement emphasizes the impor-
tance of security and confidentiality.138 In the United States, “much of the
information transferred electronically . . . is unencrypted and is exchanged
through open websites,” such as FedBizOpps.139 Policymakers prefer tech-
nology neutrality “so that U.S. systems are not bound to any particular
technical solution that may sink into obsolescence.”140 The preference for
technology neutrality is reflected in the UNCITRAL Model Law on Elec-
tronic Commerce and consistent with the Uniform Electronic Transactions
Act (UETA) and the Federal Acquisition Regulation (FAR).141 However, to
protect confidential information in e-Procurement, the United States should
adopt PKI and require nationally certified encryption algorithms and pub-
licly certified e-signatures. Further, double firewalls, data backup systems,
intrusion detection systems, and a web XML standard that provides safe
communication between computers should be implemented to maximize se-
curity and reliability.142
An obstacle to adopting PKI is the possible discriminatory and anticom-
petitive impact the complex technology may have on the procurement pro-
cess.143 PKI encryption has high attendant costs and may hinder competition
by “driving potential commercial vendors away.”144 To address this
137. See id.

138. United Nations Comm’n on Int’l Trade Law, MODEL LAW ON PUBLIC PROCUREMENT 24
(2014), available at http://www.uncitral.org/pdf/english/texts/procurem/ml-procurement-2011/
2011-Model-Law-on-Public-Procurement-e.pdf [hereinafter UN MODEL LAW ON PUBLIC PRO-
CUREMENT] (stating that “the procuring entity shall not disclose any information if non-
disclosure of such information . . . would prejudice the legitimate commercial interests of the
suppliers or contractors or would impede fair competition.”).
139. Christopher R. Yukins, A Case Study in Comparative Procurement Law: Assessing
UNCITRAL’s Lessons for U.S. Procurement, 35 PUB. CONT. L.J. 457, 462 (2006).
140. Id.
141. Id.
143. Yukins, supra note 139, at 463.
144. Id.

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problem, the United States should follow UNCITRAL recommendations,

which suggest that when a procuring entity uses a specialized software, the
entity “should provide it openly and without charge, and . . . ensure that
any electronic systems it uses are fully compatible (or interoperable) with
those in common or general use.”145 Since it would be extremely costly to
provide PKI to all vendors without charge, a trade-off needs to be made be-
tween high cost and barriers to competition.146 South Korea has enjoyed an-
nual savings of $8 billion from the reduction of transaction costs through the
use of e-Procurement.147 Anticipating similar savings, the United States
could use them to offset the cost of providing PKI to all vendors without
charge. This would remove possible barriers to competition and safeguard
the primary procurement objective of fair and open competition.
2. The United States Legal Framework Must Accommodate the

Implementation of e-Procurement
The U.S. legal framework for procurement must be tailored to accommo-
date the implementation of e-Procurement. First, the procuring entity should
be required to publish all invitations for bid in a designated information unit,
such as FedBizOpps, and bidders should be required to submit documents for
tender using the same means, creating an integrated forum.148 The integrated
forum can also serve as a bulletin board where the procuring entity publishes
notice and information of fraudulent bidders. Currently, the notice and infor-
mation of debarred and suspended bidders are posted by the GSA on its web-
based EPLS in accordance with FAR 9.404.149 This system should be inte-
grated into FedBizOpps as a part of an integrated forum.
Second, the Uniform Electronics Transactions Act grants legal recogni-
tion of electronic records, e-signatures, and electronic contracts.150 Since
the legality of e-signatures is already established, all bidders should be re-
quired to use PKI and have e-signatures publicly certified by accredited
145. United Nations Comm’n on Int’l Trade Law Working Group I (Procurement) Eighth
Session, Nov. 7–11, 2005, Possible Revisions to the UNCITRAL Model Law on Procurement of Goods,
Construction, and Services–Drafting Materials Addressing the use of Electronic Communications in Pub-
lic Procurement, U.N. Doc. A/CN.9/WG.I/WP.38/Add.1, 6, available at http://daccess-dds-ny.
un.org/doc/UNDOC/LTD/V05/868/07/PDF/V0586807.pdf?OpenElement.
146. See Yukins, supra note 139, at 463.
148. KOREAN GOV’T PROCUREMENT EXPERIENCE, supra note 10, at 74 (similar to the amend-
ment of Enforcement Decree of Act on Contracts to which the State is a Party).
149. See generally FAR 9.404.
150. Section 7 of the Uniform Electronic Transaction Act (UETA) states that:
(a) a record or signature may not be denied legal effect or enforceability solely because it is in
electronic form; (b) a contract may not be denied legal effect or enforceability solely because
an electronic record was used in its formation; (c) if a law requires a record to be in writing, an
electronic record satisfies the law; and (d) if a law requires a signature, an electronic signature
satisfies the law.
See Uniform Electronic Transactions Act, Nat’l Conference of Comm’rs on Unif. State Laws
§ 7 (1999), available at http://www.uniformlaws.org/shared/docs/electronic%20transactions/
ueta_final_99.pdf.

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certification authorities.151 This would secure the confidentiality and validity

of bids.
Finally, proper regulations must be laid out in order to implement elec-
tronic reverse auctions.152 GAO’s recent report on reverse auctions recom-
mends that “the FAR be amended to address reverse auctions from a regu-
latory standpoint.”153 The report stipulates that in carrying out reverse
auctions, Contracting Officers are required to follow the general rules of
procurement.154 The Contracting Officer must establish the basis for awards
and can make the award to the lowest bidder or use cost/technical trade-off
in making the award when it is in the best interest of the government.155
Similarly, UNCITRAL Model Law on Public Procurement stipulates that
a procuring entity may engage in electronic reverse auction when:
(a) It is feasible for the procuring entity to formulate a detailed description of the
subject matter of the procurement;
(b) There is a competitive market of suppliers or contractors anticipated to be
qualified to participate in the electronic reverse auction, such that effective
competition is ensured; and
(c) The criteria to be used by the procuring entity in determining the successful
submission are quantifiable and can be expressed in monetary terms.156
Accordingly, the FAR must be amended to reflect the GAO report and the
UNCITRAL recommendations for the requirements and elements of re-
verse auctions.
Further, there is confusion among agency officials and vendors in regards
to FedBizOpps’ fees in reverse auctions.157 Although the GSA developed its
own reverse auction tool in 2012 “to allow agencies to use reverse auctions
with the GSA Schedule without using a separate contractor to conduct the
auctions” and does not intend to charge reverse auction fees,158 as yet
there is no clear rule on fees. The FAR should address this issue by eliminat-
ing fees,159 thereby providing all vendors fair access to the e-Procurement
system and thus promoting an increase in competition.160 Elimination of

152. Electronic reverse auction is “an online real-time purchasing technique utilized by the
procuring entity to select the successful submission, which involves the presentation by suppliers
or contractors of successively lowered bids during a scheduled period of time and the automatic
evaluation of bids.” UN MODEL LAW ON PUBLIC PROCUREMENT, ch. I, art. 2(d), supra note 138.
153. U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-14-200T, REVERSE AUCTIONS: GUIDANCE IS
NEEDED TO MAXIMIZE COMPETITION AND ACHIEVE COST SAVINGS 8 (2013) [hereinafter GAO RE-
VERSE AUCTIONS].
154. Id. at 4.
155. In fact, the report found that twenty-four percent of all reverse auction contracts in 2012
were not awarded to the lowest bidding vendor. Id.
156. UN MODEL LAW ON PUBLIC PROCUREMENT, supra note 138, art. 31.
157. GAO REVERSE AUCTIONS, supra note 153, at 7.
158. Id. at 5.
159. The GAO report on reverse auctions states that FedBizOpps may reduce its fee or
charge no fee in certain circumstances; FedBizOpps received no fees in 20 percent of all reverse
auctions in 2012. Id.
160. See supra Part V.B.2.

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reverse auction fees would not be a financial burden for the government
since the savings from reverse auctions in 2012 totaled about $98 million.161
Reverse auctions also promote the growth of small businesses: “[eighty-six]
percent of reverse auction awards . . . went to small businesses” in
2012.162 By providing the required guidance to agencies and vendors, the
government will reap the benefits of increased efficiency and cost savings
from the use of reverse auctions.
3. The United States Government Must Oversee Both the

Implementation and Maintenance of e-Procurement
Government cooperation and intervention in implementing
e-Procurement, such as the effort of the e-Government Special Committee
in South Korea, would help accelerate the process in the United States. More
importantly, government oversight during and following the implementation
stage is crucial. The earliest attempt to screen collusive behavior in the bid-
ding process occurred when President Roosevelt ordered all federal agencies
to report any evidence of cartel behavior to the Department of Justice
(DOJ).163 However, the reporting program was terminated in 1983 by
order of President Reagan, who considered the system to be inefficient
and a wasteful consumption of resources.164 Economists have since proposed
other ways to address collusive behavior. The most viable solution is a
method that focuses on “breaks in the time path of bid or price data that
could be associated with cartel formation or collapse.”165 Breaks could be
found in the “level of bids or prices, or in the variance of prices.”166 Procure-
ment officials currently use this method, but the DOJ has found that it is not
a good use of government resources.167
To resolve this dilemma, the United States should look to the successful
oversight system of Korea’s KFTC and the use of BRIAS. The DOJ should
have a formal role in the e-Procurement process and have direct access to
procurement documents. Further, the government must grant DOJ a legal
ground to require all agencies to provide bid-related information to DOJ
for investigation. In doing so, it is essential to create an electronic analysis
platform, like BRIAS, enabling efficient collection and analysis of bid
information.
161. GAO REVERSE AUCTIONS, supra note 153, at 6.

162. Id. at 3.
163. Note by the United States to the Org. for Econ. Co-operation & Dev. Competition
Committee, Roundtable on Ex Officio Cartel Investigations and the Use of Screens to Detect Cartels,
at 3 (2013), DAF/COMP/WD(2013)117, available at http://www.ftc.gov/sites/default/files/
attachments/us-submissions-oecd-other-international-competition-fora/1310ex-officio-us_
submission.pdf.
164. Id. at 4 (citing Exec. Order No. 12430, 48 Fed. Reg. 31371 ( July 6, 1983)).
165. Id. at 5 (citing Rosa M. Abrantes-Metz et al., A Variance Screen for Collusion, 24 INT’L J.
OF INDUS. ORG. 467 (2006); Yuliya Bolotova et al., The Impact of Collusion on Price Behavior: Em-
pirical Results from Two Recent Cases, 26 INT’L J. OF INDUS. ORG. 1290 (2008)).
166. Id.
167. Id.

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C. Perceived Obstacles in Implementing e-Procurement in the United States

A survey of 104 purchasing officials in U.S. local governments identified
the greatest perceived benefits, the tools most often used, and the biggest ob-
stacles to adopting e-Procurement.168 As to the greatest benefits of
e-Procurement, 81.7 percent agreed that it improved overall purchasing effi-
ciency, 69.2 percent agreed that it streamlined the purchasing process, and
61.5 percent agreed that it shortened purchasing processing times.169 As to
the e-Procurement tools used by local governments, forty-four of the local
governments used e-Procurement for posting bids and quotes with a 95.5 per-
cent satisfaction rate, thirty-six used requisition requests and reported a
97.2 percent satisfaction rate, and thirty-one used supplier registration online
with a 93.6 percent satisfaction rate.170 Lastly, purchasing officials identified
the following obstacles to implementing e-Procurement: too expensive to im-
plement (41.3 percent); lack of financial system interoperability (34.6 percent);
limited resources (33.7 percent); and technological barriers (27.9 percent).171
The responses strongly suggest that adopting e-Procurement is perceived as
leading to efficiency in the procurement process, streamlined purchasing pro-
cess, and shortened purchasing processing times. Further, there is an over-
whelming satisfaction rate among local governments utilizing e-Procurements.
Still, there are a few obstacles to implementing e-Procurement.
The primary obstacle appears to center on the perceived high cost of im-
plementing e-Procurement procedures.172 In South Korea, the adoption of
e-Procurement initially required an investment of $26 million, but it is
now generating savings of at least $8 billion every year.173 Similarly, the
high cost of e-Procurement implementation in the United States can be
overcome with the significant savings the system will generate every year.
Another obstacle is the perceived lack of financial system interoperabil-
ity.174 In order to overcome this obstacle, the United States must initiate a
project similar to G4C project in South Korea,175 effectively linking the e-
Procurement system to the financial management systems “in order to facil-
itate the process of online payment to suppliers.”176
Perceived technology barriers are the last major obstacle.177 This prob-
lem can be easily solved with government training programs on new
168. Eric Prier & Clifford P. McCue, E-Procurement Adoption in Local Governments of the
United States, A M . C ITY & C NTY . (Oct. 9, 2013), http://americancityandcounty.com/
issue20070201/e-Procurement-adoption-local-governments-united-states1.
169. Id.
170. Id.
171. Id.
172. See id. (including statistics for “very satisfied” and “somewhat satisfied” into the overall
93.6 percent satisfaction rate).
174. See Prier & McCue, supra note 168.
175. G4C: GOVERNMENT FOR CITIZEN, supra note 32.
176. Vaidya, supra note 6, at 84 (citing WORLD BANK, ELECTRONIC GOVERNMENT PROCURE-
MENT (E-GP): WORLD BANK DRAFT STRATEGY (2003)).
177. Prier & McCue, supra note 168.

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e-Procurement programs for both bidders and contracting officials.178

Training the end-users will not only enable them to effectively utilize the
new technology, but will also allow them to realize the benefits of
e-Procurement, and ultimately increase “their willingness to change long-
established internal business processes.”179 Further, the United States has
over 318 million Internet users, representing nearly eighty-seven percent
of the population,180 nearly as high as Internet penetration in South
Korea.181 Such high Internet use and well-established Internet infrastructure
will provide users with easy access to the new e-Procurement system.
D. Problems in the South Korean e-Procurement System and Lessons for

the United States
Despite its award-winning success, the South Korean e-Procurement is
not without criticism. Some suggest that e-Procurement is too complex: it
covers too much information, making it difficult for users to reach the infor-
mation they seek.182 Furthermore, the system creates inconvenience by re-
quiring users to install a security system every time they visit the website.183
Lastly, authentication for certain channels is not integrated, which requires
users to go through different registration procedures several times.184
When implementing e-Procurement, the U.S. government must seek to
resolve the shortcomings of South Korea’s system. For example, the com-
plexity of the system can be minimized by offering training programs to
users.185 Further, utilizing an IP address recognition system could eliminate
reinstallation of security systems. The website would recognize the IP ad-
dress of the computer trying to access the system, and reinstallation of the
same security system would be unnecessary.186
VI. FUTURE CHALLENGES OF THE E-PROCUREMENT SYSTEM
Even after a successful implementation of the e-Procurement system,

there are still a number of challenges the U.S. government must confront.
178. Vaidya, supra note 6, at 82.

179. Id.
180. Internet Usage and 2014 Population Statistics for North America, INTERNET WORLD STATS,
http://www.internetworldstats.com/stats14.htm#north (last visited June 13, 2015).
181. Asia Internet Use, Population Data and Facebook Statistics, INTERNET WORLD STATS, http://
www.internetworldstats.com/stats3.htm#asia (last visited June 13, 2015) (stating that South
Korea has 92.4 percent Internet penetration rate).
182. KOREAN GOV’T PROCUREMENT EXPERIENCE, supra note 10, at 71–72.
183. Id.
184. Id.
185. See supra Part V.C.
186. See, e.g., OCLC, Introduction to IP-Address Recognition Access to FirstSearch, https://www.
oclc.org/support/services/firstsearch/documentation/getting_started/ipweb/admhlp_ipdispl_
intro/admhlp_ipdispl_intro.en.html (last visited Mar. 30, 2014) (providing an example of an ex-
planation of how websites generally recognize IP addresses).

202.43.95.117 on Fri, 21 Jun 2024 02:30:03 +00:00
The most significant challenges are fraud prevention, stable system opera-
tion, and customer satisfaction.
The electronic nature of the procurement system will lead to identity is-
sues. In order to prevent bidding fraud, the PPS introduced measures to “elec-
tronically [block] multiple bids from the same IP address.”187 Further, the
PPS introduced a reward program.188 Rewards of up to $10 million for re-
ports of illegal electronic bid activity provide an incentive for companies to
monitor each other.189 Finally, the PPS developed fingerprint recognition
for bidder identification and a system designed to detect fraud or illegal beha-
vior automatically.190 The system analyzes information such as log-in records,
IP addresses, and bidding histories, which effectively prevent fraudulent activ-
ity.191 The United States should adopt similar programs to deal with fraud.
Computer viruses are a danger to the stability of the e-Procurement sys-
tem.192 For instance, South Korea experienced a virus that shut down the en-
tire system, which caused significant financial losses.193 To prevent such ca-
tastrophes, the U.S. government must prioritize implementation of the most
reliable anti-virus program and continuously upgrade it.
Finally, to maximize customer satisfaction of the e-Procurement system,
the United States must minimize the possible risks in using the system
and assure users of the system’s reliability. In order to minimize possible
risks, fraud and virus prevention are essential. Further, the government
must make navigation of the procurement website easier and diversify the
products.
VII. CONCLUSION
In implementing e-Procurement, the United States must prioritize secur-

ity, transparency, and reliability. It must amend the existing legal framework
to accommodate e-Procurement. Further, it must actively participate in the
implementation to ensure success.
Even after the implementation of an e-Procurement system, the U.S. gov-
ernment must continue to monitor and scrutinize the system to prevent pos-
sible fraud and viruses and to maximize customer satisfaction.
A successful e-Procurement system is the key to a promising future
of procurement. With the lessons learned from the South Korean
e-Procurement model, the United States must take the appropriate steps
to provide an efficient and reliable e-Procurement system while still main-
taining a fair and competitive environment.

188. Id.
189. Id.
190. Id.
191. Id.
192. Korea’s Move to e-Procurement, supra note 53, at 4.
193. Id.

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BUILDING A SUCCESSFUL E-PROCUREMENT SYSTEM IN THE UNITED STATES: LESSONS

FROM THE SOUTH KOREAN SYSTEM

Stable URL: https://www.jstor.org/stable/10.2307/26419490

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Chan Young Baek

I. From Poor Farmers to Giant High-Tech Corporations ............. 756

Chan Young Baek (cbaek@law.gwu.edu) is a 2015 graduate of The George Washington

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2. E-Procurement Legal Framework Was an Essential

I. FROM POOR FARMERS TO GIANT HIGH-TECH CORPORATIONS

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II. WHAT IS E-PROCUREMENT?

There is some confusion as to the definition of the term e-Procurement.6

III. E-PROCUREMENT IN SOUTH KOREA

The development of e-Procurement in South Korea consisted of multiple

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A. Development of South Korea’s e-Procurement System

1. Birth of E-Procurement in South Korea: Electronic Data Interchange

2. Electronic Bidding System and the Need for an Integrated System

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operational in 2001.20 Use of the system quickly spread throughout the

3. The Integrated e-Procurement System: Korea’s Online

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documents.33 Further, “through linkage with industry associations, KONEPS

B. Benefits of the South Korean e-Procurement System

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e-certificates, e-commerce sales rose from $119 billion in 2001 to almost

IV. E-PROCUREMENT SYSTEMS IN THE UNITED STATES

E-Procurement in the United States is still in the development stage. This

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A. Birth of the Integrated Acquisition Environment and the Systems

B. Existing e-Procurement Systems in the United States

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contractor names, or contract numbers.”67 Users can “browse by category of

2. Federal Business Opportunities (FedBizOpps)

3. Systems for Award Management (SAM)

4. Federal Awardee Performance and Integrity Information System

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List System (EPLS), and “contractor self-reported information from the

C. Need for Reform in the U.S. e-Procurement System

1. Issues in the U.S. e-Procurement System

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basic functional inadequacies of the website, as well as extensive delays en-

2. Need for Monetary Savings and Reductions in Paperwork

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V. LEARNING FROM THE SOUTH KOREAN E-PROCUREMENT

To better understand and learn from the South Korean e-Procurement

1. Security, Transparency, and Reliability Were the Most Prioritized

94. KOREAN GOV’T PROCUREMENT EXPERIENCE, supra note 10, at 68.

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bidding system, mobile inspection of procured goods, and mobile

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3. Government-Wide Cooperation Was a Key to Success in

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The South Korean government continues to actively oversee the

4. A Well-Established Internet Infrastructure Made Implementation

127. OECD, DAF/COMP/GF(2010)6, POLICY ROUNDTABLES: COLLUSION AND CORRUPTION IN

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B. Adoption of South Korea’s e-Procurement Elements in the United States

1. United States Should Prioritize Security, Transparency, and

137. See id.

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problem, the United States should follow UNCITRAL recommendations,

2. The United States Legal Framework Must Accommodate the