Electronic Procurement Implementation in Malaysia - IEEE Xplore

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vision of the Malaysian government in light of embarking on e-Procurement, suppliers' readiness and perceptions towards the adoption of e-Perolehan and the ...

2010 International Conference on Science and Social Research (CSSR 2010), December 5 - 7, 2010, Kuala Lumpur, Malaysia

Electronic Procurement Implementation in Malaysia: Suppliers’ Readiness Maniam Kaliannan, Suseela Devi Chandran & Rugayah Hashim Faculty of Administrative Science & Policy Studies Universiti Teknologi MARA, Shah Alam, Malaysia Tel: 603-5544149/ Fax: 603-55444161 [email protected]; [email protected] ; [email protected] in enhancing the supply chain management performance by creating a lot of benefits to the buyer, which is government and to the seller, which is the private organizations.

Abstract Electronic Procurement (e-Procurement) or locally known as e-Perolehan was started in Malaysia in 2000 as one of the projects under the Electronic Government Flagship. The aim of the government is to make all the suppliers and federal government agencies become electronic procurement enabled users. This paper presents a case study on Malaysia’s e-Procurement initiative. The case reports among others, the vision of the Malaysian government in light of embarking on e-Procurement, suppliers’ readiness and perceptions towards the adoption of e-Perolehan and the issues therein. 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.

There are significant benefits in adopting eProcurement technologies. 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 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. Rogers (1983) defines innovation as an idea, practice or object that is perceived as new by an individual or other unit of adoption. This suggests that the innovation may not be “new” across the market, but rather represents a change to the adopting unit. In this regard, managerial implications lie not just with the innovation, but also in the process of innovation adoption and diffusion. Information technology has recently infiltrated the fabric of society and business enterprises are adopting these innovative information technologies to their advantage (Runge & Lee, 2000; Chan, 1997).

Key words: Electronic Government, Electronic Procurement, Technology Readiness 1.0 Introduction The advent of Internet Technology has made it possible for governments to transform themselves by offering various traditional services online. The use of Information and Communications Technology (ICT) in general, has also changed government service delivery process, business models and people’s expectations of the quality and efficiency of information sharing and service delivery. Electronic Government (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). Electronic procurement (eProcurement) refers to “the use of electronic methods in every stage of the purchasing process from identification of requirements through payment, and potentially to contract management” (Neef, 2001; Chan & Lee, 2002; de Boer et. al, 2002; Knudsen, 2002; Tonkin, 2003; Davila et. al, 2003; Moon, 2005). It helps

The paper proceeds as follows. Section two presents the background of e-Government and ePerolehan implementation in Malaysia. Section three provides snapshot of the methodology used including the research design and data collection methods. This is followed by the analysis and research findings on the suppliers’ readiness and perception towards technology acceptance. The paper ends with a short discussion and recommendation to the key stakeholders with the intention of ensuring the project achieves its intended objectives.

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2.0 Conceptual Background Over the past four decades, while the private and public organizations have been utilizing systems to streamline and automate their purchasing and other processes, it is only for the past decade that e-Procurement systems have attracted attention. This suggests that there was little history of extensive use of e-Procurement in the public sector and therefore, the academic literature covering early public sector adoption of eProcurement is limited (Tonkin, 2003). Although e-Procurement being one of the key financial and managerial activities in the public sector, public procurement itself has not been well studied (Thai, 2001; Moon, 2005; Vidya et. al 2006). As a result, there has been little research done on eProcurement especially in terms of its adoption and implementation challenges. Another important issue in implementing e-Procurement is the slow rate of adoption or incremental nature of e-Procurement adoption (MacManus, 2002). This could be due to many reasons such as the perception among the government officials as well as suppliers that the current traditional purchasing method is good, thus no need for a change. In addition, slow adoption is could also be due to the “let us wait and see the implementation before we get involve” attitude among the suppliers.

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government agencies, private companies, and foreign country interrelationship. High quality services are expected to be assured. Better processes or systems are also crucial in terms of improving the government services. Create grater transparency and governance. Empowering government officers in the administration as well as the implementation level.

There are eight projects launched to date under the e-Government Flagship since it was started in 1997 i.e. Generic Office Environment (GOE), Electronic Procurement (EP), Project Monitoring System (PMS), Human Resource Management Information System (HRMIS), Electronic Services (e-Services), Electronic Labour Exchange (ELX), E-Syariah and ELand. All these projects will use ICT and multimedia technologies to transform the way the government operates, coordination and enforcement. E-Perolehan is 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. The vision of ePerolehan is to ensure an effective and efficient electronic procurement management system while its mission is to make e-Perolehan as a main procurement mechanism to be used by the government agencies and suppliers. E-Perolehan objectives are (Ratha, 2007; Zaharah ,2007): • To ensure best value for money for Government procurement • To ensure suppliers receive faster and more accurate payment • To ensure accountability and transparency in all Government procurement • To increase collaboration between the business sector and the Government

2.1 e-Government & e-Perolehan Initiatives in Malaysia The vision for Malaysia’s e-Government is one of government, business and citizenry working together for the benefit of the country and its people as a whole. It envisions a future where all components of society can communicate and transact their operations in an effective and efficient manner (Maniam, 2005; Maniam et al. 2006, Maniam & Halimah, 2007). 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. Reinventing government would address the following areas: • Improving connectivity between all parties that deal with government be it public, inter 3.0 Methodology This study involved the registered suppliers with the Ministry of Finance (MOF), who is ePerolehan enabled. The total sample selected for this study is 3000 respondents, where 1,500 questionnaires were sent to transacting ePerolehan enabled suppliers and another 1,500 questionnaires were sent to non-transacting e-

Perolehan enabled suppliers. The reason for doing this is to capture perception regarding technology acceptance for e-Perolehan both from the current users and non-users (potential users). The main constructs of interest to this study are demographic factors which include firm scope and firm size; perception towards technology

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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). 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.

readiness; impact on e-Perolehan measurement; organizational factors; technological factors and environmental factors. All constructs are measured using multiple-item perceptual scales, using pre-validated instruments from prior research wherever possible, and were reworded, where necessary, to relate specifically to the context of e-Perolehan adoption and usage. The aim is to analyze the level technology readiness among the suppliers’. 4.0 Results Table 1 depicts the characteristics of sample surveyed in this study. Most of the firms are

Table: Demographic Profile Type of Organization



452 9 41 502

90 1.8 8.2 100

Private Limited Limited Sole Proprietor TOTAL No. of Employees



259 118 40 10 23 52 502

51.6 23.5 8.0 2.0 4.6 10.4 100

Less than 10 workers 11-20 workers 21 – 30 workers 31-40 workers 41-50 workers more than 50 workers TOTAL Number of users / non-users



266 236

53.0 47.0

Yes No

positive perceptions and knowledge how to use IT. Most studies on IT indicated that, positive perceptions on IT will eventually lead to the adoption of IT as part of the business operations (Davis, 1989; Goodhue, 1995; Gefen & straub, 2000; Dishaw, et al., 2002).

4.1 General Perception on Information Technology In this section, questions were asked to capture the general perceptions among the respondents in relation to Information Technology (IT). The basic or pre-requisite to be e-Perolehan enabled is to have PC and Internet access besides having

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Table 2: General Perception about Information Technology Attributes IT enhances business effectiveness IT enhances business efficiency IT gives organization greater control Using computer as a prestige issue High profile if use computer Computer as a status symbol Organization use IT due to competitive pressure

Strongly Disagree 6 (1.2 %) 5 (1.0) 5 (1.0) 6 (1.2) 11 (2.2) 20 (4.0) 14 (2.8)




4 (0.8) 4 (0.8) 11 (2.2) 46 (9.2) 56 (11.2) 77 (15.3) 53 (10.6)

59 (11.8) 54 (10.8) 130 (25.9) 90 (17.9) 119 (23.7) 122 (24.3) 95 (18.9)

258 (51.4) 266 (53.0) 260 (51.8) 218 (43.4) 232 (46.2) 191 (38.0) 238 (47.4)

Strongly Agree 175 (34.9) 173 (34.5) 96 (19.1) 142 (28.3) 84 (16.7) 92 (18.3) 102 (20.3)

Total 502 (100%) 502 (100%) 502 (100%) 502 (100%) 502 (100%) 502 (100%) 502 (100%)

compared with those firms which have not adopted and use e-Perolehan. For instance, ePerolehan can save the time, increase number of transactions, reduce administrative and communication costs, minimize paper work requirements, improve delivery reliability and more importantly enhance the quality and quantity of goods and services. However, at least about 20 percent of the respondents disagree that there will savings as mentioned earlier. This is due to the fact that, some government agencies and departments still requires the hard copies of invoice and delivery note to supplement the forms that been sent via mail. This is due to the inefficiency at the buyer side, that is, either they are not yet e-Perolehan enabled or not comfortable with the e-Perolehan system yet. Based on the researcher’s observation and discussion with some of the s suppliers, they claim that in many instances the Responsibility Centers are not showing serious interest and enthusiasm in e-Perolehan system. As a result, they prefer the manual procurement transactions which they are very familiar with compared to the e-Perolehan system. Another important aspect to note is that, the e-Perolehan is implanted on stages and this means that some of the departments and agencies are still piloting or at the initial stage of e-Perolehan usage.

Table 2 describes that majority of the firms responded to the survey whether they are transacting using e-Perolehan mode or not, generally have positive perception about IT. This is shown by majority of them have selected either agree or strongly agree options in terms of using IT as a management tool in their day to day operations. This is supported by the literature (Davis, 1989) that two main elements deciding the adoption of IT will be the perceived usefulness and perceived ease of use. The respondents generally agreed that IT will enhance both the effectiveness and efficiency of their business in terms of speed in service delivery, reduction in administrative task and cost etc. Majority of the respondents also agreed that having latest IT infrastructure like PCs and Internet access is viewed as a status symbol. In other words, this will enhance their social standing in the industry as a firm gives importance to IT. Another important feature stated in Table 2 is regarding the usage of IT in an organization due to the competitive pressure. At least about 67.7 percent of the respondents agreed that to be competitive ion the industry, they need to equip themselves with the latest IT gadgets. Majority of the firms agreed that by adopting e-Perolehan, they can benefit greatly

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Table 3: Impact on e-Perolehan Performance Measure Attributes Reduction in cycle time of the selling process Increase in number of transactions Decrease in number of staff Reduction in matching costs like invoice and inventory Reduction in communication costs Reduction in information processing costs Reduction in administrative tasks (paperwork) Improvement in delivery reliability Improvement in the quality of products

Strongly Disagree 18 (3.6%) 14 (2.8) 20 (4.0) 12 (2.4)



Agree 181 (36.1) 183 (36.5) 162 (32.3) 184 (36.7)

Strongly Agree 39 (7.8) 25 (5.0) 31 (6.2) 38 (7.6)

47 (9.4) 56 (11.2) 87 (17.3) 67 (13.3)

217 (43.2) 224 (44.6) 202 (40.2) 201 (40.0)

17 (3.4) 16 (3.2) 18 (3.6)

70 (13.9) 53 (10.6) 62 (12.4)

12 (2.4) 16 (3.2)

42 (8.4) 51 (10.2)

Total 502 (100%) 502 (100%) 502 (100%) 502 (100%)

187 (37.3) 193 (38.4) 175 (34.9)

195 (38.8) 209 (41.6) 201 (40.0)

33 (6.6) 31 (6.2) 46 (9.2)

502 (100%) 502 (100%) 502 (100%)

208 (41.4) 220 (43.8)

203 (40.4) 187 (37.3)

37 (7.4) 28 (5.6)

502 (100%) 502 (100%)

within Malaysia’s e-Perolehan initiative that prevents the government and the suppliers from maximizing the value potential of the system: • Application hiccups • Limited commitment and ownership to support and push e-Perolehan implementation at Ministries/ Agencies • Ministry’s local area network (LAN) and firewall posed additional unexpected dependencies to the rollout team. • Ministry/Agency IT department was not involved directly from the beginning of the implementation. • Successful interfacing to eSPKB for budget check is reliant on external factors – EG*Net, availability of IB Gateway and LFEP servers, etc. • Intermittent EG*Net connectivity issues. • Suppliers are adopting a wait-and-see attitude on e-Perolehan enablement. • Low IT literacy amongst suppliers. • Perceived high cost of enablement (PC, Smartcard, Smartcard Reader, Digital Certificate etc). • Suppliers contact information not up to date.

5.0 Discussions and Conclusions The overall findings indicate that there is a positive attitude among the suppliers in regards to use of e-Perolehan system. Majority of the suppliers agreed that use of technology in their dealings with government will benefits both parties. For the suppliers, they believe that ePerolehan system will enhance then effectiveness and efficiency of the procurement transactions between government and the suppliers from the point of applying for tender till receiving payment form the government upon delivering the goods and services. In addition, the suppliers also provided positive indications about the impact on e-Perolehan performance measure. They believe that use of e-Perolehan can reduce the time cost of communications between the parties involved besides improving the delivery reliability and quality of products. Given the positive indicators on e-Perolehan, there are still many suppliers who have not registered themselves as e-Perolehan users, thus still doing business with government in the traditional approach i.e. over the counter transactions. The research shows this is due to the lack commitment from both parties i.e. suppliers and government agencies. The following points highlight the key issues inherent

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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.

Ignorance over the importance of electronic catalogue. Lack if confidence over information’s security and confidentiality.

Therefore, actions are required by the policy makers to enforce the use of e-Perolehan at every level of government agencies and departments. Until and unless this is made mandatory, there will be pockets of suppliers who will still use the traditional mode of procurement transactions. 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 e-Gov monthly Magazine, CDSMS, New Delhi, India, pp. 8-13, April 2007. [8] K. Maniam, and A. Halimah, “Adoption and Use of E-Government Services: A Case Study on E-Procurement in Malaysia”, WSEAS Transactions on Business and Economics, 7(1), pp. 1-10, ISSN: 11099526, 2010. [9] S.A. MacManus, “Understanding the Incremental Nature of E-Procurement Implementation at the State and Local Levels”, Journal of Public Procurement, 2(1), pp. 5-28, 2002. [10] M.J. Moon, “E-Procurement Management in State Governments: Diffusion of EProcurement Practices and its Determinants”, Journal of Public Procurement, 5(1), pp. 54-72, 2002. [11] E.M. Rogers, Diffusion of Innovations. (3rd Edition), New York: The Free Press, 1983. [12] K.V. Thai, “Public Procurement Reexamined”, Journal of Public Procurement, 1(1), pp. 9-50, 1983 [13] C. Tonkin, “E-Procurement in the Public Sector: Story, Myth and Legend”, A paper presented to the Policy Institute, Trinity College Dublin on 18 November 2003. [14] K. Vaidya, A.S.M. Sajeev, and G. Callender, “Critical Factors that Influence EProcurement Implementation Success in the Public Sector”, Journal of Public Procurement, 6, pp.70 – 100, 2006. [15] A.R. Zaharah, “E-Perolehan: A Breakthrough for E-Commerce in the Malaysian Government”, Public Sector Management Review, 1(1), pp. 20-24, 2007.

References [1] J.K.Y. Chan, and M.K.O. Lee, “SME EProcurement Adoption in Hong Kong: The Roles of Power, Trust and Value. Proceedings of the 36th Hawaii International Conference on System Sciences, 2002. [2] Y.E. Chan, “Business Strategic Orientation, Information Systems Strategic Orientation and Strategic Alignment”, Journal of Information Systems Research, 8 (2), pp. 189211, 1997. [3] S.E. Colesca, and L. Dobrica, “Adoption and Use of E-Government Services: The Case of Romania”, Journal of Applied Research and Technology, 6 (3), pp. 204-217, 2008. [4] A. Davila, M. Gupta, and R. Palmer, “Moving Procurement Systems to the Internet: The Adoption and Use of E-Procurement Technology Models”, European Management Journal, 21 (1), pp. 11-23, 2003. [5] F.D. Davis. “Perceived Usefulness, Perceived Ease of Use and User Acceptance of Information Tehnology”. MIS Quarterly, 13(3), pp. 319-340. 1989. [6] K. Maniam , “E-government in Malaysia”. Paper presented at the e-Gov Conference (Conflux 2005) in New Delhi, India, 17-19 October 2005. [7] K. Maniam, and A. Halimah, “Enhancing Supply Chain Performance: ePerolehan in Malaysia” Paper published in

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