Online tools enable better services for public procurement bodies in India  ©Getty Images
Online tools enable better services for public procurement bodies in India ©Getty Images

A high-tech procurement strategy that's reaping rewards

posted by Charlie Hart
9 December 2021

Mandating the use of a single digital system in India has unified public procurement activities to boost efficiency while improving transparency and stamping out fraud

Digitising India’s public sector procurement boosted order values by more than 50% in the past financial year. India’s Government eMarketplace (GeM), a technology-led procurement platform for the public sector, racked up order values of £3.42bn despite significant supply chain bottlenecks caused by the pandemic and the subsequent national lockdowns.

GeM was established in 2016 to update centuries-old procurement policies in India using cutting-edge technologies, such as artificial intelligence (AI), machine learning, natural language processing and blockchain.

In less than five years, the platform has completely replaced an under-performing public procurement ecosystem with a unified and user-friendly e-marketplace that brings competitiveness, accessibility and economies of scale.

Repairing a fragmented landscape

Previously, public procurement processes in India had been conducted manually in an extremely fragmented policy landscape. Buyer organisations in the public sector were limited by uncompetitive prices and unreliable quality of products and services, while suppliers faced protracted payment cycles and inconvenient repetitive processes.

To turn this around, the GeM platform was based on three pillars – transparency, efficiency and inclusiveness. Technology was a critical component for easing the procurement journey for both buyers and suppliers by enabling continuous engagement with key stakeholders.

The complexities involved realigning the procurement systems and procedures of the entire spectrum of central and state government ministries, departments and public sector enterprises across the whole of India. Its scale has made it one of the largest change-management exercises undertaken by a global agency.

To meet the aims of those three pillars, it was crucial to ensure the design and development of GeM was consistently focused on the user. Top digital talent from the private sector was brought in to share expertise and fill the technical gaps in the government. This collaboration was vital to a project of this scale.

Another challenge the platform faced was the onboarding of hundreds of thousands of buyer organisations, suppliers and vendors, especially certain niche sellers that were not online at the time.

Through thoughtful outreach, capacity building and training – and by developing a user-friendly business process and software functionalities – GeM was able to engage organisations to yield long-term positives for all parties.

The technology-led digital platform continuously upgrades its features and functionalities to benefit its wide range of users. These developments help to drive process efficiencies, information sharing, faster procurement cycles and a higher level of trust among stakeholders.

Through the platform, buyer organisations can access a diverse range of products and services at competitive prices, with all information relevant to decision-making digitised, accessible and secure. This has reduced waiting times and prices for buyers across the board.

Also, GeM recently introduced a new functionality that automatically generates receipts and levies penal interest on delayed payments to promote greater discipline and timeliness in payments to vendors.

Other initiatives rolled out over the past five years have included revamped online mechanisms for redressing grievances, an AI-powered virtual assistant and an improved user interface. And initiatives based on user satisfaction have increased daily conversions from 3,000 to several 10s of thousands.

Care was also taken to ensure the platform would cater to the limitations specific to marginalised seller segments, such as small and medium enterprises, women entrepreneurs, startups and artisans.

Using open books

The move to a digital platform has led to more robust audit trails and a wealth of data that was not previously available to public buyers. This information can be used alongside emerging technologies, such as AI and machine learning, to enable stakeholders to make data-driven and informed decisions.

By creating more transparent systems and more visible procurement processes, the platform has boosted competitive pricing and the use of public resources.

An independent assessment of GeM, conducted by the World Bank, reported the platform had enabled average savings of 9.75% on the median price between February 2019 and January 2020, with maximum savings of 23.48% to 60.52%.

GeM has now set a target to almost triple its order book in the upcoming financial year to £10bn by further use of advanced technology. Pilot AI deployments in the proof-of-concept phase will focus on identifying anomalous transactions and deviant behaviour, indicating collusion or fraud among buyers and sellers.

This will be used to develop an anomaly dashboard to identify and track collusion through buying patterns and price variations. A further proof-of-concept project being trialled is the use of hyper-ledger technology to increase traceability and authenticity in the digital supply chain for critical areas, such as medical.

At present, GeM is used by government and state departments, ministries, the public sector and central armed police forces. Earlier this year, finance minister Nirmala Sitharaman noted the rewards of the system and proposed increasing and promoting its services, highlighting GeM’s success in redesigning public procurement in India.

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