REVIEW OF LITERATURE

2.1 INTRODUCTION

Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.

2.2 CONCEPTUAL FRAMEWORK

E-Procurement

There are several definitions and explanations of e-Procurement in existing literature. Bausal et al (2013) defined e-Procurement as the use of electronic communications and transaction process when buying supplies and services or conducting tendering for works. While Lee and Whang (2005) defined e-procurement as the use of online means to source direct or indirect materials and to handle value-added services such as transportation, payments or warehousing. Another important definition of e-Procurement by Tatsis (2006) is that e-Procurement is the integration, management, automation, optimization and enablement of an organization’s procurement process, using electronic tools and technologies and web-based applications. Summarily, e-Procurement is seen as an end-to-end solution that integrates and streamlines many procurement processes using automation throughout the organization. There are various opinions regarding the number of existing e-procurement processes. Corsi, Gumina and Ciraci (2006) grouped the construction e-procurement process into nine stages of operation namely e-Sourcing, e-Aggregation, e-Tendering, e-Catalogue/Purchasing, e-Contract, eAward, e-Ordering, e-Invoicing and e-Payment. While United Nations Procurement Practitioners' Handbook (2006) grouped the e-Procurement process into two phases namely, the pre-award phase (comprising e-Notification; e-Submission; e-Evaluation; and e-Awarding) and the post-award phase (comprising e-Ordering; e-Invoicing; and e-Payment). Existing technologies integrate these eProcurement processes for easy adoption. Ibem and Laryea (2014) in their research also identified several of these e-procurement technologies and applications available to support the execution of construction procurement activities. Some of these e-Procurement technologies and applications are in the form of web-enabled/ supported software packages for the performance of specific procurement tasks, network technologies for the exchange of data and information among project participants. Others are web-supported transactional and collaboration applications, websupported data collection and handling technologies, and interactive, integrative and collaboration technologies. The common feature of these technologies is that they tend to promote real time interactions and exchange of information and data in the entire construction procurement lifecycle. There are various benefits accrued from the use of e-procurement in businesses as it utilizes ICT tools and applications. Several empirical studies opined that e-Procurement makes the procurement process more efficient and effective and has an impact on firms' performance (Eadie, Perera and Heaney, 2011). Other benefits outlined by Hashim, Said and Idris (2013) includes lowering of procurement cost, reduce time of preparing cot plan, improve control and monitoring, reduce and eliminate problems with suppliers, and reducing operational costs.

Challenges with E-Procurement

Despite reported benefits of e-Procurement, the adoption of e-Procurement is considerably low in the construction industry as it lags behind other industries such as manufacturing and retail industry (Mansor and Abidin, 2010). Oyediran and Akintola (2011) however, observed that despite the ambivalent disposition of construction industry professionals towards e-tendering (one part of e-Procurement), the prospect of its adoption in the Nigerian construction industry by construction industry professionals is still high. Some requirements needed to have an effective adoption of e-Procurement in any organization include but not limited to technology, objectives, information, staffing and skills (Khanapuri et al., 2011). Such requirements carry with them a number of challenges in the adoption of e-Procurement in relation to compatibility, integration, adoption and regular use by employees and lack of capacity by small suppliers (Mose, Njihia and Magutu, 2013). Hawking et al (2004) identified some barriers to the adoption of E-procurement as; lack of supplier e-procurement solutions, high cost of technology, lack of a legal framework, lack of technical expertise and lack of e-procurement knowledge. Another challenge is the cost implications of the system where some organizations perceive the system as too expensive to implement (Harrigan et al., 2008). Lack of e-procurement knowledge/skilled personnel is another barrier hindering the smooth implementation of eProcurement (World Bank, 2003). Other notable challenges to e-Procurement adoption are company culture and upper management support as a notable challenge (Eadie, Perera and Carlisle, 2007) and resistance to change, lack of a widely accepted solution and lack of leadership (Davila, Gupta and Palmer, 2003). Ibem and Laryea (2015) identified four key areas of concern in the use of e-Procurement in construction procurement activities: unreliable and unequal access to IT infrastructure; cultural and security issues, and limited understanding of how e-procurement systems work amongst industry stakeholders. They posited that if these challenges are handled, the construction sector would definitely enjoy the perceived value of e-Procurement.

Risk Associated with E-Procurement

Risk occurs in every dimensions of human life; and construction projects are not an exception and are thus, characterized by activities prone to different types of risks ranging from political to construction risk Ogunsami, Salako and Ajayi (2011). There are risks involved in e-Procurement adoption. Davila, Gupta and Palmer (2003) identified four basic risks associated with the process of adopting e-procurement namely internal risks, external business risks, technology risks and eProcurement process risks. While Agaba and Shipman (2017) identified some risks in eProcurement adoption as operation process risks (comprising human resources risks, sourcing risks and business interruption risks); empowerment process risks (comprising leadership risk, authority/limit risk and change readiness risk); information technology process risks (comprising infrastructure risk, relevance risk, access risk, integrity risk and availability risk). Other categories of risks identified are integrity process risks (comprising management fraud risk and employee fraud risk); financial process risks (comprising price risk, liquidity risk, settlement risk and market risk); and decision-making risks (comprising performance measurement risk, accounting information risk and organization structure risk). Three phases were developed for managing these risk and they include identification, assessment/analysis, and response (Smith, Merna and Jobbling, 2006). While Cooper et al (2005) developed the process/procedure of managing risks to include establishing the context, identifying, analyzing, assessing, treating, monitoring and communicating risks. In responding to the risks, Larson and Gray (2011) developed four strategies in addressing them namely: mitigating risk, avoiding risks, transferring risks, sharing risks, and retaining risks.

Public Procurement

Burton (2005) believes that public procurement is the central instrument to assist the efficient management of public resources. It supports the works and services of the government and can cover all acquisitions, including stationery, furniture, temporary office staff as complex and high cost areas such as construction project, aircraft carriers, and other private financial initiative projects. A United Nations (1999) report argued that public procurement is a government business system which is concerned about the government procurement process such as preparing project specification, requesting, receiving and evaluating bids, awarding contract and payment.

Public procurement processes have different phases and each phase has a risk of corruption. Matechak (2002) identified three main phases of procurement process which include procurement planning and budgeting, procurement solicitation, and contract award and performance. Szymanski (2007) proposes the five stages of procurement process: procurement planning and needs assessment, product design and documentation, tender process, contract award and implementation, and accounting and audit. identification of the risk of corruption came from the lack of transparency, limited access to information, and lack of accountability and control at each stage. Ware et al. (2012) view procurement as the four stages of project identification and design: advertising, prequalification, bid document preparation, and submission of bids; bid evaluation, post-qualification and award of contract; and contract performance, administration and supervision.

2012 International Public Procurement Conference, August 17-19, Seattle, Washington Neupane, Soar, Vaidya, & Yong 306 Corruption in public procurement has been prevalent throughout the world and is more in developing countries. It has negative effects on the wide range of public level including local, regional, and national (Ampratwum, 2008). Most importantly, it influences the public competence and wealth in a country, increase government operation cost, corrodes the social structure and trust in government, distorts the composition of the government expendecture on different services includes education, health, operation and maintainance. Therefore, it is a deadly socio-economic problem, which is widespread especially in the developing world.

Public e-procurement has been defined as the use of information and communication technology such as internet / web based system by governments in conducting their procurement relationship with bidders for the acquisition of goods, works, services and other consulting services required by the public sectors (Davila,Gupta & Palmer, 2003; Leipold et al., 2004). It has been defined as an interorganizational information system, which automatizes any part of the procurement process in order to improve efficiency, quality, and transparency in government procurement (Vaidya, 2007). Currently there are different types of E-procurement systems available in the market such as e-market, e-MRO, esourcing, e-tendering, e-ordering and e-exchange (De Boer et al. 2002). Each type of system is built for special purpose and has its own specific functionality and characteristics.

Factors of anti-corruption capability of public e-procurement in public procurement processes

Procurement planning is the first phase of procurement process used by the government or private companies, which relate the plan of purchasing activity for specific periods. It is the process of reviewing the existing procurement process, identifying the present and future needs, and effective way of procuring goods and services (Basheka, 2009). Government wants processes that are more transparent and accountable. But, different issues such as unjustified or hidden procurement planning, lack of need assessments, political pressure, lack of monitoring capacity of government, inconsistent cost estimate (Ware et al., 2012) are always there to create the corruption in developing countries. In developing countries, there are more chances of corruption in planning phase rather than developed countries. For example, sometimes the minister, government, or the senior officer may plan the unwanted project for their private benefit. They may disclose confidential information; or add extra requirements of the project. To address those issues, public e-procurement can play an anticorruption role to reduce the risk of corruption. The public or bidders can view and monitor all the procurement activities through the e-procurement government web portal. Public e-procurement helps to disclose all the procurement related information. The government officer or procurement officer cannot easily hide confidential information to others. All the project technical specifications are posted in e-procurement web-portal so the officers or planning level officers cannot easily add extra specification for their private benefit.

Product design and documentation is the second phase of public procurement processes, which is related to technical specification to the product or project. Sometimes, procurement or government officers design the project and technical specification in a favour of a particular supplier. In some cases they design an unnecessary complicated tender to hide corruption. Public e-procurement system can play an important role to provide all the project specification into web portal, so that all the bidders can view and evaluate all the project specification, and they can compliance with standard document. Tendering and contract awarding is one of the most vulnerable stages of public procurement process where most corruption occurs in developing countries (Mc Pheraon & Mac Searraigh, 2007). It is a serious problem in developing countries; for example, In Nepal, most of the government contracting processes use paper-based systems, which offers greater potential for corrupt behaviour (Bhattarai,2012 International Public Procurement Conference, August 17-19, Seattle, Washington Neupane, Soar, Vaidya, & Yong 308 2011). The tendency is that the potential contractors, who use their coercive power, get the contract. In some situations, other contractors simply are not able to submit tender document because of perceived coercive threatening from other influential contractors. Government officers can be involved indirectly and abuse their official power for their private benefits. This eventually leads to institutional corruption in public procurement where parties with vested interests have opportunities to „play‟ their roles in public procurement for their own benefits. The accounting and auditing phase is also a vulnerable area for corruption. Audits are not regularly and systematically performed which makes it harder to detect corruption. Government audit reporting mechanisms are not clear, are dependent, and lack co-operation with other relevant agencies and institution to ensure transparent and effective flow of information for the audit. To overcome these problems, public e-procurement can play an important role for minimizing the risk of corruption in public procurement process (OECD, 2008). It improves the transparency and integrity in public service such as tendering, sourcing, ordering, and auctioning. E-procurement has been recognised internationally as an important instrument for checking corruption and in misuse of power (Sohail & Cavill, 2008). Pictet and Bollinger (2008) pointed out that public e-procurement helps to fight against corruption by reducing face-to-face interaction where most requests for bribes take place. , Shahkooh, Saghafi & Abdollahi (2008) study concluded that governments are trying to find solutions for reducing corruption in public agencies. Electronic government is one kind of solution to the problems of corruption which removes the opportunities for arbitrary actions. It helps to reduce cartels, collusions, and riggings to the bidders where public procurement is politically influenced like Nepal, Bangladesh, Iraq, Sudan, and Myanmar. In many of the corrupt countries, public bids are awarded without fair competition (Thai et al. 2005). Recently many least developed countries have focused on e-procurement systems as a key tool to reduce the corruption by opening competition in government procurement processes to the public. There are many case studies in developing and developed countries of the use of public e-procurement system for reducing the risk of corruption. For example, e-procurement systems implemented in Korea (South), Singapore, New Zealand, Denmark, India (Andra Pradesh), and Mexico are some examples that demonstrate the innovative use of information technology to prevent and control corruption in public procurement (OECD 2005). The existing literature has identified the various benefits of using public e-procurement in the public sector. Some of the benefits are as follows:

E-procurement can centralize data in order to improve audit and analysis (Gupta,Jha & Gupta, 2009). 

E-procurement eliminates the direct human interaction on bidding and other work and services, corruption is decreased significantly, and internal efficiency increase in government departments (Ndou, 2004). 

From an e-procurement system, government can monitor all the works and services more easily and efficiently (Aman & Kasimin, 2011; Kaliannan & Awang, 2009). 

E-procurement system provides better status monitoring and tracking of applications.

It increases transparency in works and services and improves better interaction between supplier and vendors and citizens through online system (Adebiyi,Ayo & Adebiyi Marion, 2010).

Online bidding system automatically reduces the cartel, collusion and riggings among the bidders (Pathak et al., 2006).

Adoption of e-procurement system may help all the countries to improve transparency and efficiency, reduce cost, better decision-making, supplier performance monitoring, and quality of service and so on. Based on the potential of public e-procurement technology anti-corruption factors, the figure 2 below presents a conceptual framework. This framework shows three important areas: implementation of public e-procurement in public level, public e-procurement anti-corruption factors, and combat corruption in public procurement. Implementation of public e-procurement technology plays a vital role to reduce corruption in public procurement. The most important perceived anti-corruption factors of public e-procurement technology are: real time access procurement information, automation of procurement system, more completion in public tendering, reduces human interference in public tendering, transparency, efficiency, quality, and accountability in public procurement. Developed countries have already implemented and practiced e-procurement in public and private levels. For example, Singapore, Australia, New Zealand, UK, USA, Denmark, and Japan, have already materialized public e-procurement and received many perceived benefits of e-procurement performance in public and private sectors. In the context of developing countries, adoption of eprocurement in government level is in a preliminary stage. Some of the developing countries‟ governments already have e-procurement and others are in a piloting phase. Some governments have a position of „wait and see‟ for e-procurement performance.