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The Journal of Knowledge Economy & Knowledge Management 2009, VolumeIV Spring
GOVERNMENT PURCHASING: A REVIEW OF E-PROCUREMENT SYSTEM IN
MALAYSIA 1
Maniam KALIANNAN 2
Halimah AWANG 3
Murali RAMAN
ABSTRACT
The quest to improve the government service delivery is becoming an important agenda for most governments.
Information and Communication Technology (ICT) and the Internet in particular have opened new possibilities for
the government and the governed, just as it has for the businesses and its customers. Governments of both developed
and developing countries have embraced ICT to improve the quality of public service, increase public access to
information and to energize more participation in civic affairs. This case study examines the overall implementation
of the e-Government initiative in Malaysia, with specific emphasis on the electronic procurement project, also known
as e-Perolehan. The general consensus amongst both the buyer and seller communities is that e-procurement will
become a catalyst towards a new and innovative supply chain management process within our public sector. It is
envisioned that within the next three to five years, more suppliers will grab the opportunity and benefit fully from the
e-procurement initiative in Malaysia. Findings from our factor analysis and correlations indicate that organizational,
environmental, and technological factors influence the adoption of e-Perolehan in Malaysia.
1. Introduction
An important issue in public sector management today is the increasing demand for transparency,
efficiency and effectiveness in service quality (Ancarani, 2005). The advent of the Internet,
digital connectivity, the explosion and use of e-commerce and e-business models in the private
sector are pressuring the public sector to rethink hierarchical, bureaucratic organizational models.
Customers, citizens and businesses are faced every day with new innovative e-business and e-
commerce models implemented by the private sector and made possible by ICT (Information and
Communication Technologies) tools and applications, are requiring the same from governmental
organizations. The introduction of Electronic Government (e-Government) is becoming
increasingly popular in both the developed and developing countries to increase the efficiency
and effectiveness of the government procedures and activities.
E-Government is defined as the use of technology, particularly the Internet, as a means to deliver
services to citizens, businesses and other entities (Hart and Teeter, 2000; Howard, 2001; West,
2004). The common focus is on the application of ICT to improve the internal management of the
government, to offer more flexible and convenient services to the public and to a limited extent,
to enhance public participation and democracy (West, 2004; Seifert & Relyea, 2004; Hazman et
al., 2006; Maniam et al., 2006). Implementation of e-Government bring forth many advantages
such as the reduction in paperwork, the provision of continuous service availability to customers,
a reduction in response time and a reduction in error rate (Maniam, 2005).
E-Government systems are not confined to automation of government service delivery systems
targeted towards citizens’ at large (G2C). E-Government platforms also include the use of ICT to
streamline the procurement processes within public sectors (G2G & G2B). E-procurement refers
to “the use of electronic methods in every stage of the purchasing process from identification of
1 Lecturer, Faculty of Administrative Science & Policy Studies, Universiti Teknologi MARA (UiTM), Selangor,
Malaysia. Phone: 603-55444149, Fax: 603-55444131, e-mail: maniam@salam.uitm.edu.my
2 Associate Professor Dr., Faculty of Economics & Administration, Universiti Malaya, Kuala Lumpur, Malaysia.
e-mail: halima@um.edu.my
3 Dr., School of Business & Economics, Monash University Malaysia.e-mail: murali.raman@buseco.monash.edu.my
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Bilgi Ekonomisi ve Yönetimi Dergisi 2009, Cilt: IV, Sayı:I
requirements through payment, and potentially to contract management” (Chan & Lee, 2002; de
Boer et. al, 2002; Knudsen, 2002; Tonkin, 2003; Davila et. al, 2003; Moon, 2005). There are
significant benefits in adopting e-Procurement technologies (Neef, 2001; Tonkin, 2003; World
Bank, 2003; Vaidya et al, 2006, Maniam et al., 2007).These benefits are expected to accelerate
the rate of adoption of these technologies once the uncertainties that remain are reduced to levels
that encourage significant resource commitments. Organizations that use e-Procurement
technologies report savings of up to 42 percent in purchasing transaction costs (Davila et al.,
2003). This cost reduction is associated with less paperwork, which translates into fewer mistakes
and a more efficient purchasing process.
In this paper, we present our findings about the e-Perolehan project implementation in Malaysia.
Within the e-Government Flagship Application under Malaysia’s Multimedia Super Corridor
initiative, this project is envisioned to leapfrog the civil sector‘s procurement and supply chain
processes into a new dimension. Specifically we highlight the overall objectives of the project
and also report some of the findings from the survey that was conducted in the year 2006.
2. E-Government & E-Perolehan Initiatives in Malaysia
The public sector in Malaysia is going through period of rapid change. The government’s leading
role in spearheading the surge forward into the information rich digital age has compelled the
public sector to lead the way (Hazman & al-Aladin, 2000). In the last several years, the public
sector has become a major investor and user of information technology. The government of
Malaysia launched e-Government as one of the Multimedia Super Corridor (MSC) Flagship
Applications with the aspiration to employ multimedia technologies to re-invent the way the
government operates. E-Government will improve both how the government operates internally
as well as how it delivers services to the people of Malaysia. The e-Government implementation
seeks to improve the convenience, accessibility and quality of interactions with citizens and
businesses; simultaneously it will improve information flows and processes within government to
improve the speed and quality of policy development, coordination and enforcement.
As Malaysia develops, government must keep pace with the changes that are accruing. E-
Government presents a golden opportunity to update all elements of government to ensure that
the public sector continues to meet the evolving needs of the public and the private sectors as the
nation strives towards the goals of Vision 2020 (Sohaimi, 2003).The dual objectives of e-
Government are to reinvent the government in terms of service delivery through the use of IT and
to catalyze the successful development of the MSC with IT as one of the leading sectors of the
economy (Muhammad & Nazariah, 2003). While computerization programmes in both the public
and private sectors had been going for several decades, it was with the MSC that Malaysia caught
the attention of the world with this unique initiative to create an entire ‘cyber-region’ and a base
for a world class technology, multimedia and content industry. The vision of e-Government is a
vision for people in government, business and citizenry working together for the benefit of
Malaysia and all of its citizens (Othman, 1997). The vision calls for reinventing government
using multimedia and IT to improve productivity. It also seeks to create a collaborative
environment that fosters the ongoing development of Malaysia’s multimedia industry. Figure 1
show the model of e-Government that was formulated in the context of Malaysian public sector
administration:
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The Journal of Knowledge Economy & Knowledge Management 2009, VolumeIV Spring
Figure 1: The Malaysia Model of e-Government Development
In the fast globalizing world economy of today, governments the world
Source: www.mdec.com.my
There are eight projects launched to date under the e-Government Flagship since it was started in
1997. All this projects will use ICT and multimedia technologies to transform the way the
government operates, coordination and enforcement. Table 1 summarizes the projects and its
characteristics.
Restructuring &
Reshaping the
public sector.
Developing
National
Information
Infrastructure
(NII)
Developing
National Innovation
System (NIS)
Developing Public
Sector ICT
Strategic Plan
The
Development &
Implementation
of MSC
MSC Malaysia Flagship
Applications:
1. Electronic
Government
2. Multi-Purpose Card
3. Telehealth
4. Smart School
5. R & D Cluster
6. Electronic Commerce
7. Techno
p
reneur
Conducive environment
for the diffusion of E-
Government and E-
Commerce
Vision 2020 – transform
Malaysia into a
Knowledge-
Based Societ
y
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Bilgi Ekonomisi ve Yönetimi Dergisi 2009, Cilt: IV, Sayı:I
Table 1: Main Projects under the E-Government Flagship
Projects Characteristics
Generic Office Environment
(GOE) Provides a new paradigm of working in a collaborative environment where
government agencies communicate, interact and share information
Electronic Procurement (EP) Links the government and suppliers in an online environment. Government
agencies as buyers procure goods/services by browsing catalogues
advertised by suppliers. Aimed at best value for money, timely and accurate
payment
Project Monitoring System (PMS) Provides a new mechanism for monitoring implementation of development
projects, incorporating operational and managerial functions, and
knowledge repository
Human Resource Management
Information System (HRMIS) Provides a single interface for government employees to perform HRD
functions effectively and efficiently in an integrated environment.
Electronic Services (e-Services) Enables direct, online transactions between the public, the government and
large service providers via electronic means
Electronic Labour Exchange
(ELX) A one-stop-centre for labor market information, accessible to government
agencies, the business sector and the citizens.
E-Syariah Introduces administrative reforms that upgrade the quality of services in
Syariah courts. To enhance the Islamic Affairs Department’s effectiveness-
better monitoring and coordination of its agencies and 102 Syariah courts.
E-Land To achieve an updated, effective, efficient and accurate National Land
Administration System via utilization of Information Communication and
Technology (ICT), the e-Tanah project of Ministry of Natural Resources
and Environment encompasses 24 main areas in land administration.
Source: MDeC (www.mdc.com.my)
2.1 The e-Perolehan Facts
Government procurement is perceived as a major function of government and a substantial
amount of money is allocated annually for the purpose of procurement of goods and services
(Thai, 2001; Maniam et al., 2007). The Malaysian government’s allocation of budget for
procurement increased substantially from RM 6.1 million (USD 4.09 million) in 1999 to RM
14.2 million (USD 6.17 million) in 2003 and RM 23.1 million (USD 6.6 million) in 2007
(Maniam & Halimah, 2007). Table 2 shows the total amount of money spent annually by the
government in purchasing goods and services by the government of Malaysia.
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The Journal of Knowledge Economy & Knowledge Management 2009, VolumeIV Spring
Table 2: Malaysian Government Budget on Procurement
Year Total Government
Budget Procurement of services &
Supplies Total Allocation
(RM million)
(RM million) (%)
2007 159 496 14.5 23 151
2006 136 748 15.0 20 553
2005 117 444 16.0 18 790
2004 112 490 15.3 17 215
2003 109 801 13.0 14 253
2002 100 518 12.0 12 065
2001 91 046 11.1 10 078
2000 78 025 9.7 7 564
1999 65 095 9.5 6 188
Source: www.mof.gov.my
The e-Perolehan initiative in Malaysia as mentioned is a project within the e-Government
flagship application area, under the MSC project master plan. The e-Perolehan system
streamlines government procurement activities and improves the quality of service provided. It
was officially launched in 1999 as one of the Electronic Government Flagship projects. E-
Perolehan converts traditional manual procurement processes in the government machinery to
electronic procurement using Internet technology. The new procurement system allows the
Government ministries to electronically select items to be procured from the desktop, initiate an
electronic approval process, and also create, submit, and receive purchase orders, delivery orders,
and other related documents electronically.
2.2 The e-Perolehan Participants
The model that is used for the implementation of e-Perolehan essentially allows the supplier
community and the various government agencies to transact with each other via a single system
platform called the e-Perolehan system (MAMPU, 1997; Maniam et. al, 2006, 2007). In this
model, there are three distinct communities, namely the supplier community, the buyer
community, and the procurement service provider, acting as the core participants of the e-
Perolehan initiative. Figure 2 illustrates the three core entities involved in Malaysia’s e-Perolehan
initiative. Figure 2 – e-Perolehan participants
Buyer
Community
(Government)
Supplier
Community
(MOF-linked)
Service
Provider
(Commerce.Com)
engage in transactions
facilitates transactions
The Suppliers
On the suppliers’ side, e-Perolehan allows them to present their products on the World Wide Web
(www), receive, manage, process purchase orders and receive payments form government
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agencies via the Internet. The supplier community consists of suppliers who have registered with
the Ministry of Finance (MoF) to provide supplies and services to the government. There are
more than 120,000 registered suppliers supplying goods and services under four categories
namely central contract, direct purchase, quotation and tender purchase.
Buyer Community
The government is the buyer community in the e-Perolehan system. The Malaysian government
spent about RM 18,791 million on procurement in the year 2005 and has increased the amount to
RM 21,425 million for 2006 and RM 23,151 million in 2007 (refer to Table 2).
The Service Provider
Incorporated on 21 June 1999 as an e-Commerce service provider, Commerce DotCom Sdn. Bhd.
was granted by the Government of Malaysia the exclusive right to implement and operate the
Government’s electronic procurement system. CDC provides the electronic system which enables
the full transaction of the procurement process between the buyer and the seller.
2.3 The e-Perolehan enablement process
Figure 3 illustrates the complete supplier e-Perolehan enablement process. All the government
suppliers are required to register with the MoF if they wish to do business with the federal
government agencies and departments.
Figure 3: Steps to e-Perolehan enablement
Ministry of Finance registration via e-
Perolehan
Smart Card application (MyKad eP
enabled or MyeP Smart Card)
Participate in e-Perolehan training
Prepare infrastructure (computer equipped
with modem, internet account and smart
card reader)
Prepare electronic catalogue
Source: CDC Interview
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3. Data Collection
A total of 3,000 questionnaires were sent in October 2006 by mail to randomly selected suppliers.
The findings reported here are based on the analysis of 502 completed questionnaires. Table 3
depicts the characteristics of sample surveyed in this study. Most of the firms are Private Limited
(90 percent) and fall within the Small Medium Industries (SMI) definitions. In terms of number
of employees, most of the firms employed less than 20 workers (75 percent). About 50 percent of
the firms have registered as e-Perolehan enabled after the year 2004 compared to about 40
percent of them registered before 2004. About 73 percent of the firms’ annual sales using e-
Perolehan system are within RM 1 million per year; however, only about 25 percent have
recorded annual sales in the range of RM 1 million to RM 5 million per year. Eighty nine percent
of the respondents doing business with both the government and the private sector, and about 11
percent of them solely depend on government business. A total of 266 suppliers (53 percent) out
of 502 firms have used at least one of the e-Perolehan modules, that is, central contract, direct
purchase, tender and quotation, whereas 236 suppliers have not used the e-Perolehan system.
However, about 91 percent of the latter has indicated that they will adopt e-Perolehan in the near
future.
Table 3: Organization’s Profile
Type of Organization
Type of Organization Frequency Percent
Sendirian Berhad / Private Limited 452 90
Berhad / Limited 9 1.8
Sole Proprietor 41 8.2
TOTAL 502
100
Number of Employees
No. of Employees Frequency Percent
Less than 10 workers 259 51.6
11-20 workers 118 23.5
21 – 30 workers 40 8.0
31-40 workers 10 2.0
41-50 workers 23 4.6
more than 50 workers 52 10.4
TOTAL 502
100
Year of e-Perolehan Registration
Year Frequency Percent
2000 49 9.8
2001-2003 151 31.1
2004-2006 296 58.9
2007 6 1.2
TOTAL 502 100
Annual Transaction using e-Perolehan
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Sales Frequency Percent
RM 000’
Less than RM 250 162 32.3
RM 250 – RM 500 93 18.5
RM 500 – RM 750 62 12.4
RM 750- RM 1 million 59 11.8
RM 1 – RM 5 million 94 18.7
More than RM 5 million 32 6.4
TOTAL 502 100
Market Focus
Market Focus Frequency Percent
Only Government 55 11.0
Both Government & Private 447 89.0
TOTAL 502
100
E-Perolehan Users
Number of users / non-users Frequency Percent
Yes 266 53.0
No 236 47.0
TOTAL 502 100
4. Results
Factor analysis was carried out for the purpose of questionnaire content validity and reliability.
The primary purpose of factor analysis is to analyze the interrelationships among large number of
variables that are highly interrelated (Hair, et al., 2006). A total number of 66 items or questions
were used for the purpose of constructing factor analysis and out of this, two items were deleted
and hence 64 items which has loading factor more than five percent was included. Also, the items
were categorized into ten constructs as shown in the following tables. The criteria used for this
study is to adopt a cut-off loading point for factors with eigenvalues greater than 1.0. In
interpreting factors to determine which factor loadings are worth considering, this study adopts
loadings 0.50 as significant.
The independent variables are organized into three sub-groups. The first sub-group describes the
organizational perspective as influencing factors towards the adoption and usage of e-Perolehan
and it consists of four constructs. The second sub-group focuses on technological perspective
with three constructs towards the adoption and usage of e-Perolehan. The third sub-group, that is,
environmental perspective with three constructs explains its influence towards the e-Perolehan
adoption and usage.
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The Journal of Knowledge Economy & Knowledge Management 2009, VolumeIV Spring
Table 4: Factor Analysis – Organizational Perspective
Variable Items Factor
Loading
Organizational
Leadership 1. Management support 0.82
2. Lead role by management 0.84
3. Invested time, effort & money 0.72
4. Proactive about e-Perolehan 0.75
5. Stresses on importance of e-Perolehan 0.71
Organization Perceived
Usefulness 0.66
1. e-P is useful 0.74
2. e-P supports selling requirements 0.81
3. e-P improves selling efficiency 0.81
4. e-P simplifies selling process 0.78
5. e-P reduces financial costs 0.80
6. e-p increases administrative savings 0.80
7. e-P increases overall job performance 0.84
8. e-P increases overall job productivity 0.71
9. e-P is effective than manual system 0.77
10. e-P improves information management 0.54
11. e-P is fast 0.67
12. e-P improves inventory management
Organization Perceived
Ease of Use 1. e-P is easy to use 0.73
2. e-P is flexible to interact with 0.71
3. e-P is easy to learn 0.83
4. e-P is user friendly 0.77
5. e-P can be easily understood 0.84
6. e-P skills can be acquired easily 0.74
Organization Facilitators 1. Sufficient training for IT is provided 0.65
2. Sufficient training for e-P is provided 0.77
3. Sufficient technical support is available 0.77
4. Management encourages use of e-P 0.57
5. Management provides information on e-P 0.70
6. Management rewards staff to use e-P 0.69
Table 4 shows that there are four constructs under the organizational perspective namely,
organizational leadership with five items, organization perceived usefulness with 12 items,
organization perceived ease of use with six items and organization facilitators with six items. All
together there are 29 items measuring organizational perspective.
Table 5: Factor Analysis– Technology Perspective
Variable Items Factor
Loading
IT Infrastructure 1. Has access to telecommunication services 0.72
2. Enough computers to all the staff 0.83
3. Staff can access to Internet services 0.84
4. Internet access is fast 0.73
IT skills 0.66
1. Enough IT qualified staff
0.70
2. IT support for e-P is readily available
0.84
3. IT helpdesk readily available 0.77
4. Staff are well trained to use e-P system
E-Perolehan Capability 1. Less uncertainty about e-P 0.51
2. e-P system can handle multi-task 0.82
3. Supplier-government interaction enhanced 0.80
4. e-P system is secure 0.79
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Bilgi Ekonomisi ve Yönetimi Dergisi 2009, Cilt: IV, Sayı:I
In the case of technology perspective, three constructs was created that is, IT infrastructure with
four item, IT skills with four items and e-Perolehan capability with four items (Table 5) giving a
total of 12 items to be used for further analysis.
Table 6: Factor Analysis – Environmental Perspective
Variable Items Factor
Loading
Government Policy and
Regulations 1. Vision & objectives for e-P is available 0.75
2. Clear operating guidelines is available 0.64
3. Specific agency is responsible for e-P 0.73
Government Advocacy 0.67
1. Common approach across all agencies
0.71
2. Laws/legislation to support e-P
0.72
3. Specific legislation addressing e-P
0.68
4. e-P policy enhances suppliers confidence
0.76
5. Proactive effort to promote use of e-P 0.73
6. Educate suppliers on e-P benefits 0.71
7. Full responsibility in ensuring security 0.68
8. Incentives to e-P enabled suppliers
Industry Acceptance 0.66
1. Suppliers used e-P have benefited greatly 0.65
2. Suppliers used e-P are perceived favorably 0.66
3. Relationships among suppliers improved 0.75
4. Supplier-government relationship improved 0.69
5. e-P promotes healthy competition 0.65
6. e-P is reliable 0.76
7. Transparency of transactions increased 0.78
8. Degree of accountability increased 0.79
9. Degree of transparency increased 0.82
10. e-P gives satisfaction to suppliers 0.76
11. e-P improves organizations image 0.75
12. Suppliers has confidence in e-P system
As shown in Table 6, a total of 23 items was selected from the three constructs for environmental
perspective namely, government policy and regulations with three items, government advocacy
with eight items and industry acceptance with 12 items.
The data collected was tested for reliability and the overall results gave alpha value more than
0.98. Table 7 describes the mean value of the ten factors that were obtained from the factor
analysis. The result indicates that the mean score for all these factors are above three. In other
words, on average the respondents have indicated positive perception about the e-Perolehan
initiative in Malaysia. In the case of organizational factors, the highest mean score is for
organizational leadership (mean = 3.737), followed by organization facilitators (mean = 3.3705),
organization perceived ease of use (mean = 3.5677) and the lowest mean score is for organization
perceived usefulness (mean = 3.4474).
In the case of technology factors, out of the three sub-factors analyzed, IT infrastructure scored
the highest mean (mean = 3.9562). This indicate that most of the organizations have already
invested in IT infrastructure such as having enough computers for the staff, Internet access and
training for the staff on how to use the Internet. This followed by IT skills (mean = 3.4731) and
the lowest mean score is for e-Perolehan capability (mean = 3.4617).
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The last factor analyzed is industry acceptance factors, where there are three sub-factors in this
context. The highest mean score is achieved for government policy and regulations pertaining to
e-Perolehan issues (mean = 3.6965). This shows that the suppliers are generally happy with the
Ministry of Finance as the lead agency in implementing e-Perolehan initiative. In the case of
government advocacy, that is, the extent to which government promotes the initiative, the mean
score is relatively high (mean = 3.3912) indicating proactive attempts by the relevant government
agencies. The lowest mean score is achieved for industry acceptance (mean = 3.3829).
Table 7: Summary of the Descriptive Profile
e-Perolehan Adoption Factors
Mean S.E. Mean Std. Variance
Deviation
Organizational Factors:
3.737 0.031 0.6967 0.485
• Organizational leadership 3.4474 0.0336 0.75284 0.567
• Organization perceived usefulness 3.5677 0.0328 0.73589 0.542
• Organization perceived ease of use 3.3705 0.0312 0.69982 0.490
• Organization facilitators 3.5308 0.0265 0.59385 0.353
Average of Organizational Factors
Technological Factors:
3.9562 0.0308 0.69110 0.478
• IT infrastructure 3.4731 0.0324 0.72610 0.527
• IT Skills 3.4617 0.0295 0.66089 0.437
• e-Perolehan Capability 3.6303 0.0236 0.52898 0.280
Average of Technological Factors
Environmental Factors:
3.6965 0.0273 0.61239 0.375
• Government policy & regulations 3.3912 0.0316 0.70708 0.500
• Government advocacy 3.3829 0.0313 0.70114 0.492
• Industry acceptance 3.4902 0.0265 0.59478 0.354
Average of Environmental Factors
5. Discussions
The e-Perolehan initiative is expected to provide significant benefits to both the buyer
(government) and supplier communities. There are several benefits of e-Perolehan for the
government. The system firstly, offers more effective and efficient procurement process in line
with the country’s transformation to the knowledge based economy (K-Economy). E-Perolehan is
a vehicle for the government to leapfrog into the new economy and promote the widespread
adoption of e-Business in the country. The system also is stated to lower the operational cost for
the government over time. In addition, the government will be able to reduce administration and
operational costs through the usage of e-Perolehan as business processes are reduced and
streamlined. From the government’s perspective, the e-Perolehan system provides latest product
information and pricing available on-line. E-Perolehan will always be up to date with the latest
information that will help the buyer to make a more accurate procurement decision.
It has been six years since Phase 1 of the e-Perolehan initiative was launched. Although there are
about 120,000 government linked suppliers (registered with MoF), only approximately 50,000
suppliers are e-Perolehan enabled, out of which only 6,000 are active users of the system. The
rest are classified as inactive or casual participants of the system. The following points highlight
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Bilgi Ekonomisi ve Yönetimi Dergisi 2009, Cilt: IV, Sayı:I
the key issues inherent within Malaysia’s e-Perolehan initiative that prevents the government and
the service provider from maximizing the value potential of the e-Perolehan system:
5.1 Cost
There are costs involved before a supplier becomes e-Perolehan enabled. Specifically, suppliers
have to bear the cost of purchasing a smartcard for transaction, pay for training, and also any
software renewal cost that occurs. These payments are directed towards Commerce Dot Com
Sdn. Bhd. Given that the majority of the suppliers within the traditional category belong to the
small-medium size operations scale, it is only natural that they are not keen in becoming players
within e-Perolehan because of the costs involved.
5.2 Infrastructure and Skills
As mentioned the majority of the supplier community fall within the small-medium size industry
grouping. Traditionally, this sector has not been well versed with use of the state of the art
information systems. Issues such as lack of bandwidth support, poor computing and information
systems architecture in general, prevent the majority of the suppliers from playing a more active
part in e-Perolehan.
5.3 Business Focus/Change Management
Majority of the suppliers are not keen to do business with the federal government, given the e-
Perolehan requirement. Suppliers prefer to do business with local and state government as they
can use traditional methods for selling their products. Furthermore e-Perolehan still has not gone
into tender and quotation compared to direct purchase and central contract which is small in
volume. This issue is also in line with the need for better change management to convert the
mindset of traditional sellers to embrace change and use technology in the procurement process
in general.
5.4 System Constraints
The feedback received from the survey also suggests that the system in its current incarnation is
not robust on several aspects. For examples, a supplier registered with the system, can only
upload product information for ten different product areas, for free. Additional charges will be
incurred if more product lines are listed within the system. In short, for a company that has a
wide product line, the additional cost involved to market the product via the system might not be
attractive.
5.5 Government Policy
Although the Federal government of Malaysia encourages suppliers to become e-Perolehan
enabled, the government can decide if it is willing to transact with a non e-Perolehan company, as
long as the company is registered with MoF. Stated differently, although in theory the supplier
community must become part of the e-Perolehan system, in practice, this requirement has not
been made mandatory as yet.
Despite the lackluster response by the majority of the seller community, close to 6,000 suppliers
have fully embraced and are active participants of the system. This situation is predominantly
true for suppliers that visualize e-Procurement as an opportunity and given the fact that the
government could make it mandatory for large scale suppliers to use the system actively.
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6. Conclusion
One of the main challenges for an e-Procurement project is the establishment of an appropriate
and context tailored strategy. Every project or initiative needs to be rooted in a very careful,
analytical and dynamic strategy. This seems to be a very difficult task, requiring a focus on many
aspects and processes, a holistic vision, long-term focus and objectives. Many public institutions
limit their activities to a simple transfer of their information and services online without taking
into consideration the re-engineering process needed to grasp the full benefits. The government
must have a clear strategy to overcome the barriers to change. Part of the strategy is to engage in
a rigorous assessment of the current situation, the reality on the ground and the inventory of
projects, articulate costs, impacts and benefits of programme as well as continuously monitor and
evaluate the project upgrading. Borrowing a lesson from the private sector, e-Procurement must
be customer-driven and service oriented. This means that a vision of e-Procurement implies
providing greater access to information as well as better, more equal services and procedures for
public and businesses.
E-procurement, a new avenue for buying direct and indirect goods and services, is an effective
procurement system, making waves in purchasing circles. The service provider plays a crucial
role in offering sourcing and procuring solutions that satisfy customer needs and provide ample
value addition to the service provided. In the past, traditional methods of procurement offered
little transparency and lesser satisfaction of negotiation with suppliers. E-procurement offers the
benefits of greater transparency, wider geographical reach and lesser time of transaction and
better pricing. Also sustained savings can be achieved through automated, easy-to-use
purchasing, invoice management, and supplier enablement capabilities. E Procurement Solution
would help Government capture and settle all spend and readily obtain global user and supplier
adoption. This improves process efficiency, increases compliance, and garners sustainable
savings across the enterprise
The findings suggest that the government should take a more proactive role in promoting e-
Perolehan in Malaysia. This includes among others, making sure that the government’s policy on
procurement avoids any contradiction with the e-Perolehan implementation plan. In addition,
issues such as regulating the cost for training and purchase of the relevant equipment should also
be within the control of the government to ensure the small scale suppliers can be enticed to
become active participants of the system. In terms of the sellers (suppliers) two kinds of e-
Perolehan adopters currently exist. First is the aggressive adopters who are involved fully (6,000
suppliers). These suppliers seem to benefiting from e-Perolehan and are trying to achieve
competitive advantage by using IT in their procurement process. Nevertheless, there are the
conservative adopters (the laggards) – are taking ‘wait and see’ approach, before they are willing
to actively become part of the system. On balance, the general consensus amongst both the buyer
and seller communities is that e-Procurement will become an important management tool to
enhance the performance of supply chain especially in the public sector. In this regard, we expect
that between the next three to five years, more suppliers will grab the opportunity and benefit
fully from the e-Perolehan initiative in Malaysia.
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Bilgi Ekonomisi ve Yönetimi Dergisi 2009, Cilt: IV, Sayı:I
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