1. Learning from the Award-Winning Korean Public Procurement Service
Geon-Cheol Shin (Kyunghee University, gcshin@khu.ac.kr)
Myung Sub Park (Korea University, yonghee@kic.ac.kr)
89th Annual International Supply Management Conference, April 2004
Abstract. The Public Procurement Service of Korea (PPS) received the first award from the
United Nations in 2003, an award given to institutions that make great contributions to
improving public service. Learn about the improvements in public service and in the quality of
public service processes, as well as innovations in public service that contributed to earning
the U.N. award. You will gain a better understanding of the Korean PPS that will help you to
make more effective purchasing overseas strategies.
Introduction
With the emergence of a knowledge and information-based society, countries all over the world
are trying to enhance their administrative efficiency and lead technological development by
implementing an e-procurement project with the use of IT technologies. The Public
Procurement Service (PPS) is the central procurement agency in Korea. It arranges
procurement for those government agencies whose procurement needs exceed US$25,000.
The main purpose of this kind of procurement system is to ensure government transparency
and to reduce national budget spending through centralized purchases. In 2001, the amount
spent on public procurement in Korea was 67 trillion won (US$56 billion), which was 47% of all
government expenditures (142 trillion won or US$118 billion). PPS handles roughly 30% of all
public procurement.
PPS provides around 30,000 Korean public institutions with goods and services needed to
carry out their responsibilities and give better service to the people. Such procurement
administration, however, formerly had cumbersome procedures such as an enormous amount
of required documents and frequent visits to the PPS. PPS has gone through the
procurement administration reform in general to reduce inconvenience and inefficiency and
eliminate irregularities. PPS has established the Government e -Procurement System (GePS)
as part of its e-government projects. GePS provides integrated procurement information and
conducts the entire procurement process from purchase request, bidding, contract award,
contract making, and to contractor payment, electronically.

2. Characteristics of GePS
On September 30, 2002, Korea opened GePS which allows digital processing of procurement
work for all public organizations, including government agencies, local municipalities, and
institutions receiving government funds. GePS is a system that digitally processes complicated
procurement procedures which previously was done by paperwork. Without GePS,
complicated paperwork was required to clarify the responsibilities of the government in private
sectors and to legitimize the procedures involved in using the government funds in contracts
with private companies.
Under GePS, however, all the procurement procedures from purchase request to payment are
digitalized, and documents are removed or drastically reduced. Since its opening on
September 30, 2002, all advertisement of domestic public procurement contracts had been run
through GePS, while more than 80% of actual bidding has been conduc ted electronically.
Currently, 27,000 public organizations and 70,000 suppliers are using this system.
The History of Building an e-Procurement System
E-Procurement in Korea was born from the Procurement EDI (Electronic Data Interchange) of
PPS and its electronic bidding system. PPS operated the model 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. PPS gradually
digitalized 88% procurement procedures (based on the end of 2001) between public
organizations and supplier companies. Although such achievements were made in e -
Procurement, the procurement administration still remained immature - judging from a
government-wide point of view - since even public bidding information could not be provided to
companies in an integrated manner.
This is due to the fact that the use of e-Procurement was encouraged only by large public
organizations; small public organizations did not have any electronic means. As for the
suppliers, there was no single window through which they could have access to tender
information. Thus, they had to look for such information in official gazettes, newspapers,
bulletin boards, or bidding information journals. The suppliers had to register with each
organization to participate in bids, visit the related organizations, and meet with the appropriate
public officials. On the part of public organizations, it involved time consuming procedures and
inconvenient processes to shop for suppliers since each of them had to maintain information
on multiple suppliers. Consequently, it was necessary to integrate procurement on to a
platform like GePS.

3. A Government-wide Cooperation and Internet Infrastructure
In January 2001, the government formed an e-Government Special Committee to carry out
common jobs between government agencies and to link jobs between private institutions such
as commercial banks and insurance companies. The committee was formed to realize the
project Cyber Korea 21, which consists of 11 tasks including civil application, procurement,
taxation, education, medical administration and etc. The committee carried out a major
function for the successful launching of the e-government system in November 2002, by
evaluating and reviewing various opinions and views between ministries and other government
agencies.
Beside the above government-wide cooperation, GePS has a background of Korean IT
infrastructure. Korea holds a higher level of internet infrastructure qualitatively and
quantitatively with more than ten million broadband Internet subscribers as of November 6,
2002. This accounts for 70% of Korea’s 14.3 million households while the Internet user
population has exceeded 25 million people. Online stock trading has reached 67% of the total
stock trades and the online shopping rate is at 31%. Since the foundation of the e-government
infrastructure (based on broadband internet), it has been thought that the nationwide internet
infrastructure could support the e-government system.
Major Functions of GePS
GePS has a single window (www.g2b.go.kr) for public procurement, which provides
procurement information for all public organizations. It was developed to carry out the
complete contract process on the internet from the purchasing decision and bidding to
payment. The portal of GePS consists of the following features: tender information, e-shopping
mall, electronic bidding and e-payment, etc. It has also two individual functions so that each
public organization and each supplier can handle pertinent work online. It is possible to check
all tender information through the bid information section.
GePS is a single contact point or window for public procurement, providing integrated domestic
bidding information. All the bid information is required to be placed on GePS. 92.6% of public
domestic bids were conducted by electronic bid (44,416 cases were accomplished, involving
six million participants - 9.1 trillion won (US$ 7,475 million) - of procurement business) as of
March 2003. In the past, a bid of less than 30 million won (US$25,000) was posted only on the
bulletin board of each procuring organization. Suppliers thereby had to browse daily
newspapers in addition to visiting each organization to look at the bulletin boards to make fair
bids. However, this regulation was abolished through the revision of related laws.

4. Instead, a bid notice through GePS is now mandatory, allowing private companies to examine
all domestic bidding information on a single window.
To participate in public procurement in the past, suppliers had to register their company with
PPS. These companies also had to register with each public organization to participate in each
organizations procurement contracts or projects. However, because GePS provides company
registration, which is shared through the preparation of a single window, the inconveniences of
corporate duplicate registration has been streamlined. Through GePS, regulated documents
required for public procurement have been greatly simplified or removed. For instance, due to
common information use with public organizations and associations, documents such as
business registration certificates, registered seal certificates, and tax paid certificates have
been abolished. Under the integrated system, the information of 90,710 suppliers is provided,
which was previously managed by several separate organizations; including PPS (managing
105,753 suppliers), Ministry of National Defense (9,915), Korea Highway Corp. (41,178),
Korea National Housing Corp. (1,011), and Korea National Railroad (4,410).
Effects of Geps
Among all advantages of GePS, the most important enhancement is to the transparency of
public procurement rather than the quantitative effects. PPS expects open competition
between of bidders to develop from publicly held information of a bid announcement. The
transactions between public organizations and companies are improved through the internet
and not as a face-to-face mode. Potential corruption factors, for example, frequent
relationships between procurement officials and the staff of private companies which caused
absurdity in procurement in the past, are prevented. PPS is looking forward to a greater
enhancement of transparency and efficiency in public e-Procurement.
Opening real-time data to the public interrupts release of specifications to a certain staff
member of a private company. Also, the placing of an order between public organizations (bid
and contract details) can be compared and evaluated at real time on a screen including the
results of a contract award, estimated prices, and winning bids. By interrupting a certain
company’s favorable specification to win the bid, every bidder can participate to make an
estimated specification. Internet bidding on GePS has reached 92.6% of PPS load (44,416
cases with six million bidders) as of March 31, 2003. It is a complete digitalized system of pan-
government dimensions including government offices, regional autonomous municipalities, and
private companies.

5. Due to all the bid information seamlessly provided on GePS, each company's opportunity to
participate in public procurement has been broadened. It is expected to trigger intense
competition between companies in terms of technology, price, and quality with comparisons
and evaluation. In fact, after GePS had been introduced, 61,922 placing orders, and 10,500
announcements of free contracts and international tenders were posted on the web between
October 2002 and March 2003. After the electronic bid implementation (January 2001), the
number of participant companies per case had increased 3-fold. In order to prevent the
participation in bidding of inappropriate companies under non face-to-face transactions, PPS
bars these companies from the participation through the result of an evaluation standard for
reliabilities and contract performance. The evaluation of competition restrictive factors on each
organization's contract is provided and is used to manage suppliers effectively. Also, it is
impossible to confer privately about the bidding among participants because all bids are
disclosed online. By releasing all the procedures online, it is not possible for a procurement
officer to delay in placing orders, determining successful bidders, concluding contracts, and
arranging payment intentionally. Prior treatment of customers in a discourteous and high-
handed manner, it stopped as GePS processes procurement work on the web; officers have
no control over the documents, nor ability to issue or receive false documents.
GePS helps to prepare an opportunity for rational policy making. As the related basic data
collection becomes easier with procurement implementation of all public organizations, it will
help to establish rational policy in public procurement. Because procurement statistics is just a
click away, it has never been easier to check the status of the public procurement market, bid
cases, procurement opportunities, and all the processes of the procurement administration. As
a consequence of this favorable condition, it is possible for government agencies and for
private companies to set their procurement policy based on the system. Because GePS
regulates standard guidelines of procurement, suppliers can use unified standard guidelines of
procurement for each organization which differs from procurement practices in the past.
Future Prospects of GePS
GePS is considered a success for making e-government in Korea a reality. The UN Secretariat
has established a classification system for the development of e-government among 190 UN
member nations. Korea has been included in the elite group of 17 nations at the top of the e-
government field, countries in which online money transactions are possible. Although no
country in the world has yet managed to digitally integrate all of its administrative services, the
scope of e-government administration conducted through Korea’s GePS makes it a breath-
taking system, advancing Korea into the top levels of e-government. Because of this, the UN

6. decided to award 2003 Public Service Award to PPS. UN considered PPS has succeeded in
introducing an integrated GePS which contributes to the reform of procurement administration.
Although GePS is such a successful system, this success reflects only on hardware aspects of
the procurement process. Many tasks still remain in developing software aspects that make
the procurement process even more transparent. In order to maximize customer satisfaction,
PPS will improve the reliability of GePS contents, broaden product choices, and develop more
flexible contract methods. PPS will also focus on enhancing its expertise in the procurement
market while strengthening user training to encourage public use of e-Procurement. In addition,
PPS, as the central e -Procurement supporting agency, will continue system upgrades to renew
its functions. PPS is committed to work out new managerial expertise in various areas such as
IT-related services (from information strategic planning to hardware purchase), general
research contracts, construction supervision, and settlement of contract disputes. By doing so,
PPS maximizes its transparency and to minimize corruption potentials through the continuous
development of e-Procurement in the public sector.