Sri Lanka e-GP Readiness Report

ASIAN DEVELOPMENT BANK
GOVERNMENT OF SRI LANKA
REPORT ON
SURVEY OF READINESS FOR

ELECTRONIC GOVERNMENT
PROCUREMENT (e- GP)
FEBRUARY 2004
CONTENTS
1 EXECUTIVE SUMMARY........................................................................................................ 4
1.1 OVERVIEW ........................................................................................................................ 4
1.2 CONCLUSIONS.................................................................................................................. 5
1.3 RECOMMENDATIONS ..................................................................................................... 9
2 INTRODUCTION.................................................................................................................... 11
2.1 WHAT IS ELECTRONIC GOVERNMENT PROCUREMENT?.................................... 11
2.2 WHY ELECTRONIC GOVERNMENT PROCUREMENT?........................................... 12
3 CONDUCT OF THE SURVEY .............................................................................................. 13
3.1 THE SURVEY................................................................................................................... 13
3.2 SOURCES OF INFORMATION ...................................................................................... 14
3.3 E-READINESS LEVELS .................................................................................................. 15
3.4 AGENCIES CONSULTED / ACKNOWLEDGEMENTS ............................................... 16
3.5 CONTEXT OF THE SURVEY ......................................................................................... 16
4 SURVEY FINDINGS, CONCLUSIONS AND RECOMMENDATIONS.......................... 17
4.1 GOVERNMENT LEADERSHIP AND PLANNING ....................................................... 17
4.2 DIRECT AND SUPPORTING LEGISLATION............................................................... 20
4.3 REGULATION.................................................................................................................. 23
4.4 INFRASTRUCTURE AND TECHNOLOGY .................................................................. 26
4.5 INDUSTRY DEVELOPMENT......................................................................................... 30
4.6 PROCUREMENT MANAGEMENT ................................................................................ 32
4.7 ENVIRONMENTAL INFLUENCES................................................................................ 38
4.8 CURRENT E-PROCUREMENT INITIATIVES.............................................................. 39
4.9 OTHER ISSUES ................................................................................................................ 41
5 RESPONDENTS VIEWS ON ASSISTANCE ..................................................................... 41
6 CONCLUDING COMMENTS............................................................................................... 42
7 ATTACHMENTS .................................................................................................................... 46
8 REFERENCES........................................................................................................................... 46
Sri Lanka: Readiness for e-GP Report-final 2

GLOSSARY
e-Procurement is defined here as the application of technology and infrastructure to the following
aspects of the procurement environment:
a) Tendering: the acquisition of high value, low volume goods, works and services by seeking
bids (proposals) via a public process followed by the evaluation of bids and award of
contracts.
b) Purchasing: the acquisition of low value, high volume, goods, works and consulting services
by direct quote in the open market or from pre-qualified suppliers, and payment for the
purchase.
c) Management of the procurement function: the development and management of contracts,

consolidation of procurement data to provide public information and aid future decision
making, and the evaluation of the achievement of procurement outcomes for business and the
community.
Electronic Government Procurement (e-GP) is defined as the online application of information

technology and infrastructure to the management, processing, evaluation and reporting of
government procurement.
Existing procurement environment is defined as the jurisdictions current procurement approach

as reflected by the key components listed below. Commonly, it would be an integrated, but largely
manually driven approach to procurement, with perhaps limited use of technology in some areas.
GoSL Government of Sri Lanka
Key Components The nine key components were developed from both research of, and experience
with, a range of existing procurement environments in different countries. From an e-GP readiness
perspective, the components represent the key sets of governance, management and technical
requirements that underlay what would be a sustainable approach to e-GP. The key components
used in the survey are:
1) Government leadership and planning

2) Direct and supporting legislation
3) Regulation
4) Infrastructure and technology
5) Industry and business development
6) Procurement management
7) Environmental influences
8) Current e-procurement initiatives
9) Other relevant issues
In most jurisdictions, the existing procurement environment will be characterised by having the first
eight key components in place to varying degrees.
Monetary Values All values are expressed in Rupees unless stated otherwise.
PSB Procurement Support Bureau.

1 EXECUTIVE SUMMARY
1.1 OVERVIEW
Objectives of Study
This e-GP Readiness Survey was conducted in Sri Lanka in July 2003 as part of a Study of
Electronic Procurement commissioned by the Asian Development Bank (ADB). The
objectives of this study were to:
1) Develop an Electronic Government Procurement (e-GP) Strategy for use by the ADB as
a potential funder and supporter of the development of e-GP in its member countries.
2) Develop a roadmap for the strategic implementation of e-GP for use by the ADBs
member countries.
3) Conduct e-GP Readiness Surveys in three selected member countries and a desk review
of best practice in e-GP that will provide the ADB with information to contribute to
objectives 1) and 2).
Survey Methodology
The methodology underlying the survey is as follows:
a) This survey focuses on the level of readiness for making the transition to e-GP. It does
this by focussing on what currently exists, and what does not exist, within the existing,
largely manual, government procurement environment, which would contribute to
making the transition to e-GP. The survey asks respondents to comment on nine key
components and associated sub-components in the existing procurement environment,
which are relevant to the adoption of e-GP. The level of readiness has been constructed
by reference to international practice with respect to these components. The premise is
that if the existing procurement environment demonstrates a significant level of
readiness on these components, then the jurisdiction is in a good position to adopt e-GP.
Conversely, if the readiness level is low, then the adoption of e-GP is going to require
some initial building of the key components, and will mean that the implementation
strategy used will be different and probably require a longer time.
b) The survey (see Attachment 1) focussed on nine key components that support the
introduction of e-GP.

3) Regulation
A tenth area, participants opinions on what they considered is required to best support e-GP
in Sri Lanka, was also canvassed.
c) In assessing the level of readiness on the key components, a four level descriptor of
readiness was used, which is generically described as follows:
Level of Generic Descriptor

Readiness
1 The component is not currently being addressed to any real degree.
2 The component is being addressed to a small degree.
3 The component is being addressed to some degree.
4 The component is being addressed to an adequate degree.
These levels of readiness are more fully described in Section 3.1.2 in the report.
d) The survey methodology was to distribute the survey to each participating organisation
two weeks beforehand so they could obtain a number of responses from appropriate
staff. This was followed up by a meeting between the consultant and participants to
work through the survey and the opinions expressed. In this way, the complexity of the
issue and the differing perceptions and opinions could be resolved.
e) This survey was aimed at identifying broad readiness issues in the existing government
procurement environment that may assist Sri Lanka to evolve to an electronically based
approach. It and the subsequent report, provide a snapshot of the procurement
environment in the capital city of Colombo.
f) The World Bank, Asian Development Bank and the Japan Bank for International
Cooperation had previously collaborated on a Country Procurement Assessment Report
(CPAR), which was based on a review of the public procurement system conducted
during the period April to November 2002. It comprehensively reviews the existing
procurement system, including some initial discussion on e-GP. The CPAR provided a
good starting basis for the e-GP study, especially in the areas of leadership, legislation,
and procurement management. This report acknowledges and compliments many of the
CPAR recommendations. It comments specifically on current procurement practices
that would assist a transition to e-GP, broadens the discussion on e-GP, and addressing
implementation issues related to transitioning to e-GP. It is hoped that the two reports
will contribute to general procurement reform and more specifically, the development of
e-GP.
1.2 CONCLUSIONS
The key conclusions are summarised below.
The levels of readiness for Sri Lanka to transition e-GP, as determined in this report, are
summarised in Table 3.

TABLE 3
SRI LANKA: LEVELS OF READINESS FOR E-GOVERNMENT PROCUREMENT
No COMPONENT LEVEL OF READINESS (2003)

1 Government leadership and planning 3
2 Direct and supporting legislation 3
3 Regulation 2
4 Infrastructure and technology 2
5 Industry development 2
6 Procurement management 2
7 Environmental influences Not applicable
8 Current e-procurement initiatives 2
The levels or readiness are based on the fact that some of the basic structural sub-components
of the existing procurement environment, necessary for a transition to e-GP, are in place.
These include:
a) A lead agency (PSB) to manage government procurement issues and some support from
the Ministry of Finance and Planning are in place.
b) A raft of GoSL preliminary planning has been completed on e-Government and e-
Commerce that could encompass e-GP.
c) The new ICT Agency of Sri Lanka, which can drive the electronic agenda, was established
in July 2003.
d) Procurement guidelines that focus on the tendering process are used across government
agencies.
e) An appropriate legislative structure is partly established, which, with some revision, could
support e-GP.
f) Some supporting legislation in relation to corruption and the behaviour of public servants
has been established.
g) Annual external audits of government agencies are conducted by the Auditor General, but
have a limited focus on procurement.
h) An evaluation and management system using Tender Boards at different procurement
levels is in operation.
i) The development of the LkDG as a portal is providing support to industry and some
limited advertising of tender opportunities.
j) Some limited, centralised, management support of government procurement, including
agency support, project monitoring, policy development and capacity building is available
via the PSB.
k) The introduction of a web-based portal that could support e-procurement is being
sponsored by the PSB.
The above structural sub-components are not enough in themselves to provide an existing
procurement environment at a level that could easily be transitioned to a sustainable e-GP
environment. Many of the management and functional subcomponents necessary to provide a
viable existing procurement environment are not in place. These sub-components would need
to be addressed to ensure there is a viable existing procurement environment in which to
develop e-GP. Substantial benefits can accrue to the GoSL from both reforming the existing
procurement environment and then gaining the additional transparency, efficiency,
effectiveness and access from the implementation of e-GP.
The sub-components that need to be addressed include:
a) The PSB would need wider responsibilities and more resources with appropriate expertise
to be effective and deal with the changes required in the existing procurement environment.
This resource could also be used to support the transition to e-GP.
b) Procurement policy needs to be broader in scope, formalised, directly linked to the
guidelines, and widely promoted to government agencies and industry.
c) The current procurement guidelines focus on the tendering process and need to be widened
in their scope to include procurement planning, contract development and contract
management. For example, the existing Conditions of Contract drafted by the construction
industry and published by the Institute for Construction Training and Development
(ICTAD) do not relate well to the current procurement guidelines.
d) The content of the procurement guidelines needs to be reviewed in terms of its clarity and
comprehensiveness; they should be interpreted more consistently by agencies, and agency
compliance with them needs to be more robustly enforced.
e) The direct and supporting legislation needs to be more formalised from a procurement
point of view and more strongly enforced.
f) The regulatory framework is insufficient to be effective in its current state, and should be
widened to include the development of management controls, agency accountability
mechanisms, and to improve the expertise of procurement managers and staff.
g) It needs to be accepted that development of the national infrastructure will take time and
that interim strategies such as the VGK (Internet Centres) will need to be used to address
the issues that restrict access to the internet.
h) The procurement process needs an overhauled in terms of its complexity, lack of
transparency and efficiency, provision of stronger accountability mechanisms and to meet
the concerns raised by suppliers.
i) The decision making process within the procurement process needs to be reviewed in terms
of delays, undue influence of Ministers, and the need for more autonomy for Tender
Boards at all levels.
j) Specific attention needs to be given to improving the writing of specification and
evaluation criteria, standardised documentation, pre-procurement planning, contract
management, and the development of a comprehensive procurement database.
k) Industry needs to be more involved in government procurement by increased
representation on Tender Boards, participating in industry forums and by being given
better access to training and procurement information.
l) Preplanning for the adoption of e-procurement needs to be progressed by identifying the
required legislative changes (if any), resourcing a lead agency, defining an e-GP strategy,
setting standards and identifying possible pilot opportunities for e-procurement systems.
The majority of recommendations (1 to 10) in this report focus on bringing the existing
procurement environment up to a level where a transition to e-GP would be both manageable
and sustainable. A well-managed existing procurement system provides a base for the effective

application of e-procurement process and technology. Recommendations 5, 11 and 12 are
aimed at making a cautious start to e-procurement in the government procurement market.
Recommendation 12, the development of an e-GP Strategy, should be done early but does not
preclude the issues in the other recommendations being addressed in tandem. The development
of a comprehensive e-GP strategy will undoubtedly lead to specific additional
recommendations regarding sub components raised in this report.
Indicative Costs of Implementation
Based on observations in countries that have implemented e-GP, the preliminary estimated
costs to resource and implement the recommendations of this report in Sri Lanka, over a four-
year period, are shown in Table 4. The assumption is that all key components would be
addressed and a fully functional e-Tendering system would be put in place. The
implementation of e-Purchasing and e-Contract Management systems would involve additional
cost. At this stage, these cost estimates are indicative rather than actual. The staff numbers
have been estimated, by scaling up the numbers of staff actually deployed to implement and
support e-Tendering only in the smaller jurisdiction of Western Australia. A full analysis
would be required to determine the actual costs, as they are highly influenced by factors such
as the scope of change to be attempted, the ability of agencies to absorb costs and transfer
resources, the arrangements made to acquire e-systems, and policy issues such as whether the
services will be free to users.
TABLE 4
ESTIMATED COSTS TO IMPLEMENT REPORT RECOMMENDATIONS

OVER 4 YEARS
Activity Assumptions Est. Costs

(over 4 years)
Wider PSB support and 60 new staff, salary Rs 380,000 pa, Rs 228,000,000
management (develop a lead associated on-costs Rs 570,000 pa. with
agency) some reduction in costs as activities are
completed
Expertise support to PSB Development of expertise, training, Rs 40,000,000
implementation advice etc.
Changes made by other Use existing staff levels but allow Rs 32,000,000
central agencies RS 8,000,000 pa for additional
implementation costs
Other government agencies Assume costs to support e-GP is 0
implementation and support absorbed into current budgets of each
costs (eg Auditor General) agency
Annual maintenance and Rs 4,000,000 pa Rs 16,000,000
support of e-Tendering
system only.
Obtain licence for and Licence for existing system modified for Rs 24,000,000
implement an fully functional Sri Lanka
e-Tendering system only.
TOTAL COSTS Rs 340,000,000
The draft CPAR, conducted by the three key donors, has indicated that some USD 0.75 million
(RS 94,615,000) should be donated as technical assistance to address issues in relation to the
development of legislation, training, curriculum development, standardised documents, e-
governance and e-commerce. This funding would compliment and overlap the costs estimated
to implement the recommendations of this report.
1.3 RECOMMENDATIONS
1) That the lead role of the Ministry of Finance and Planning and its Procurement Support
Bureau be expanded and strengthened in the areas of, procurement policy and guideline
development, procurement strategy development and implementation, provision of
support to agencies, monitoring of agency accountability, and the management of
procurement information from a government perspective.
2) That the current legislative situation be reviewed by the Ministry of Finance and Planning
to:
a) Incorporate the ability to set procurement policy and provide guidance to CEOs into
the financial management legislation being developed.
b) Widen the scope of the procurement guidelines to include procurement planning,
contract development and management of contract performance.
c) Amend the existing content of the procurement guidelines as outlined in the report.
d) Identify the future security and legislative requirements for e-procurement.
3) That a regulatory framework be established and managed by:
a) Considering the formation of a separate, independent, regulatory body that is

responsible for policy development and compliance, monitoring of agency
performance, and reporting to government on procurement issues and trends.
b) Ensuring that as the legislation, policy and guidelines are reviewed and developed,
appropriate methods to ensure compliance are put in place.
c) Addressing the related management issues of provision of advice, training, reporting
requirements, provision of information, and the development of management
controls to better support agencies in meeting their procurement responsibilities.
4) That the current plans for GoSL to develop a comprehensive National ICT strategy,
which will cater for the long-term development of sustainable e-Government and e-
Commerce strategies, including the introduction of e-procurement, be advanced as a
matter of priority.
5) That an initial study be commissioned by the selected lead agency, to identify a situation
with a viable network for government agencies and key suppliers, which could be used to
introduce an e-procurement system on a pilot basis.
6) That, for the purpose of stimulating further industry involvement, the PSB survey and
publish the attitudes of industry to the current procurement environment.
7) That industry representation from major industry sectors is included on Ministry and
Cabinet Appointed Tender Boards and key procurement decision groups as part of
developing an industry forum on procurement issues.

8) That in conjunction with Recommendation 1, the role, functions, and resources of the
Procurement Support Bureau be reviewed by a project group, with MOF&P and PSB
representatives, and government agency and industry representatives, in relation to:
a) Widening and strengthening its role and authority in policy development, the
management of key procurement process issues, and the reporting and monitoring of
agency performance in meeting their procurement responsibilities.
b) Providing for the required education and training of its staff and suppliers.
c) Providing advice and support to tender boards.
d) Widening its mandate to seek industry advice and representation in developing
procurement policy and issues.
e) Providing advice and support to improve the levels of procurement planning, contract
management and internal management controls at the agency level.
f) Ensuring that it has the expertise requirements to carry out its wider role.
g) Providing more comprehensive procurement information and advice to government.
9) That a project group, with PSB, government agency and industry representation, review
the existing procurement process in relation to streamlining the decision process and
improving its transparency and integrity, based on the findings and conclusions of this
report and the recommendations of the CPAR conducted in 2002.
10) That the Ministry of Finance and Planning review the role of the Tender Boards at each
level in relation to:
a) Identifying their role and responsibilities.

b) The relationships between tender Boards and their project managers.
c) Increasing their autonomy to make decisions on tendering outcomes.
d) Including industry representation in Ministry and Cabinet appointed Boards.
11) That three suitably qualified persons be given support by the Ministry for Finance and
Planning, to visit and work in e-GP functions in advanced countries to raise the standard
of expertise to further support procurement development within Sri Lanka.
12) That the GoSL make use of the proposed Multilateral Development Banksharmonised
documentation on the strategic planning and implementation of e-GP, which is expected
to be available in early 2004. This documentation could be used as a basis for continuing
the process of procurement reform and planning a pilot implementation of e-procurement
systems.

2 INTRODUCTION
2.1 WHAT IS ELECTRONIC GOVERNMENT PROCUREMENT?
Electronic Government Procurement (e-GP) is defined as the online application of information

technology and infrastructure to the management, processing, evaluation and reporting of
government procurement. For most jurisdictions, it represents both an opportunity for procurement
reform and changing the way procurement is conducted. The development of e-GP depends more
on getting the policy, strategic planning, management and governance components in place, rather
than the actual application of the technology.
A schematic representation of a mature example of e-GP is shown in Diagram 1.
DIAGRAM 1
e-GP SCHEMATIC OVERVIEW

Government Public Website & Portal
Supplier & Buyer Registry. Access to opportunities, online process,
information & outcomes. Public access to information.
G
B O
U e-Tendering e-Purchasing
Online Public Tendering Online Purchasing V
S E
e-Contract Management
I Online Contract Management R
N N
E Administrative Processes M
S FMIS, Asset Mgt, etc E
S N
Data Warehouse T
Procurement Analysis & Government & Business Intelligence
Key Components Supporting e-GP

Government Leadership & Planning, Direct & Supporting Legislation, Policy,
Regulation, Infrastructure & Technology, Industry Development, Procurement
Management, Environmental Influences, Current e-GP Initiatives
e-GP is aimed at providing an online, transparent, efficient and effective process between
government and business while allowing the community to access procurement information and
outcomes.
e-GP is conducted through a common web site that allows registration of suppliers and buyers, and
public access to procurement policy, guidelines, procurement opportunities, process stages and
procurement outcomes (i.e. who won the contracts, cost, duration). The systems on the website can
be accessed by both buyers and suppliers. These systems allow the procurement process to be
conducted on line. The systems usually cover public tendering for works, goods and services, and
for the purchasing of high volume, low value, goods such as stationery. The contract development
and management systems assist managers to provide good quality documentation, and manage more
effectively the quality of the procurement outcomes, timelines and costs. There may also be other

systems to provide information and management support (e.g. document templates, advice) to
assist in the operation of the process.
The procurement systems are usually integrated with government administrative systems so that
payments can be made online, and issues such as asset planning can be linked to the procurement
cycle. The procurement systems may also be linked to a data warehouse so that procurement
trends, and information and analysis can be undertaken by both government and business to assist
improved decision-making.
The e-GP systems (within the dashed rectangle in Diagram 1) are supported by a number of critical
key components. For example, having a viable information and communication infrastructure
would provide suppliers and buyers with good quality, inexpensive access to the Internet.
There is also strong support from the components of:

government policy and strategic planning that sets the direction for e-GP;
legislation and regulatory process that are consistently applied and monitored;
comprehensive procurement management in both the lead agency and in agencies across
government that supports the integrity ,transparency, efficiency and effectiveness of the
government procurement market; and
industry (business) development to support increased access to procurement opportunities, a
fair competitive market, and a more streamlined and consistent processes.
The e-GP Readiness Survey looks closely at the extent to which the key components are in place to
support the transition to e-GP.
2.2 WHY ELECTRONIC GOVERNMENT PROCUREMENT?
Many advanced countries, including Australia, Canada, Denmark, Finland, the United
Kingdom and the United States of America, have developed strategies and established e-
procurement systems to modernise their government procurement function over the last ten
years (see Reference 1). The purpose of this modernisation was to achieve:
a) Improved domestic and international confidence in the integrity, transparency and

fairness of the procurement process.
b) Improved value for money in government procurement by providing better services and
facilities to the community.
c) Improved efficiency of the procurement process, in terms of lower costs for both
government and business and a shorter process duration.
d) Improved management of procurement through a more strategic approach to

procurement, devolution of management controls to agencies coupled with performance
monitoring, better availability of information on procurement issues and trends,
improved decision making, and the development of the procurement profession at all
levels.
e) Better outcomes for business via consistency and streamlining of the process, and wider
access to opportunities for SMEs.

f) Meeting the obligations for, and accessing the benefits of, international trade and
investment agreements.
Based on the above outcomes, many countries, including Argentina, Brazil, Chile, China,
Mexico, New Zealand, Singapore and Thailand either have, or are now involved in,
developing, e-GP strategies and systems to reform government procurement.
The savings achieved in some of the advanced countries is in the order of 5-15% of the total
procurement budget. The estimated value of government procurement in Sri Lanka in 2002
was USD 0.65 billion, so there is an opportunity to self-fund procurement reform in the longer
term. The estimated cost, of implementing the required reforms and putting a fully functional
e-Tendering system only in place, based on costs incurred in other countries, would be in the
order of USD 3.25 to 5.0 million over 3-4 years. The costs would be very dependent on the
state of readiness to make the transition to e-GP, the type and source of the systems acquired,
and the degree to which existing resources can be utilised. If e-Purchasing and e-Contract
Management systems were added to provide a fully functional approach to e-GP, the additional
cost could be in the order of USD 6.0 to 9.0 million. The costs of on-going management, the
operation of a fully e-procurement function, and further system upgrading, maintenance and
support costs would all depend on the size and complexity of the jurisdiction involved.
3 CONDUCT OF THE SURVEY
3.1 THE SURVEY
This e-GP Readiness Survey was conducted in July 2003 as part of a Study of Electronic
Procurement commissioned by the Asian Development Bank (ADB). The objectives of this
study were to:
a) Develop an Electronic Government Procurement (e-GP) Strategy for use by the ADB as
a funder and supporter of the development of e-GP in its member countries.
b) Develop a roadmap for the strategic implementation of e-GP for use by the ADBs
member countries.
c) Conduct e-GP Readiness Surveys in three selected member countries and a desk review
of best practice in e-GP that will provide the ADB with information to contribute to
objectives a) and b).
To validate the survey three countries were selected: the Peoples Republic of China, the
Republic of the Fiji Islands and the Democratic Socialist Republic of Sri Lanka. These
countries potentially represented a range of e-readiness levels. Sri Lanka was selected to
survey because it is a medium sized country with an expanding industry base and appeared
to have an existing procurement environment that was largely manually based and with little
development of technology.
The three surveys will be used to assist the further fine-tuning of the survey and the
development of an e-GP Strategic Planning Guide.
The survey is aimed at obtaining a current view of the degree to which a country is ready to
undertake and implement e-GP on a significant scale. E-GP readiness mainly focuses on the
current (existing, mainly manual) state of government procurement. The initial transition to
e-GP is largely about moving to supporting the current process on-line and modifying the
existing legislation, policies, strategies, regulations, processes and all the supporting
components, such as training, to accommodate that change. Additionally, there are specific
issues that must be dealt with in relation to legislation, policy, infrastructure, web access, the
application of e-procurement systems and education, which are a direct consequence of
moving to on-line systems. Once e-GP is established, there are opportunities to make
fundamental changes to how procurement is managed and operated in the future.
If a country already has an existing well-supported, comprehensive, procurement approach

and has progressed in e-enabling business and the community, then it is in a good position to
make the transition. If this is not the case then the degree of readiness will be lower and any
subsequent implementation strategy will need to consider how to deal with this readiness
gap. The survey, ideally, should be seen as an activity that precedes the development of an
integrated strategic implementation strategy. Alternatively, it could be used as a checklist
for the achievement of outcomes from existing strategies.
The survey (see Attachment 1) focussed on the following key components that support the
introduction of e-GP.

3) Regulation
A tenth area, participants opinions on what they consider is required to best support e-GP in
Sri Lanka, was also canvassed.
It is accepted that most countries will not be uniformly ready across all components or even
within components. There is no ideal state of readiness; the key issue is to recognise where
the country is starting from in each area so that appropriate strategies and implementation
plans are developed.
It is recognised that there is some overlap between the key components above in that
recommendations made in respect to one component will affect other components. This is a
key reason why an integrated implementation strategy should be used by jurisdictions
making the transition to e-GP.
3.2 SOURCES OF INFORMATION
This survey relates to readiness for e-procurement and examines the existing procurement
from that point of view. It sources its information from the survey responses, interviews
with respondents, research on international procurement practice, and available current
reports that cover any of the key components that support e-procurement. There is often
some detail in these reports that may not be covered in the broad approach taken by the e-
readiness survey. These reports are acknowledged and key recommendations and findings
are included in this report where they are relevant.
In particular, The World Bank, in association with Government of Sri Lanka (GoSL), had
carried out a Country Procurement Assessment Review during the period April to November
2002. The draft report of the CPAR covered some aspects of the e-readiness survey
components of legislation, regulation and procurement management. Recommendations
from the CPAR that are relevant, and add to the coverage of this report, have been
acknowledged. The Sri Lanka Development Gateway, e-Readiness and e-Needs Assessment
Report 2002 provided some valuable data on infrastructure and public access.
3.3 E-READINESS LEVELS
Respondents were asked to identify, from their perspective, the degree (level) to which they
considered each component and sub-component was being addressed with respect to the
generic readiness levels shown in Table 1.
TABLE 1
GENERIC DESCRIPTORS OF READINESS LEVELS
Level of Generic Descriptors of Existing Procurement Environment
Readiness
(Degree to which the component is being addressed)
1 The issue is currently not being addressed or supported to any real degree. No apparent
leadership, planning, implementation, regulation or monitoring is in place. Very few people with
Little or
appropriate skills and incentives and other resources are being applied to the issue. The future
none implications for e-GP have not been considered. Little or no technology or infrastructure is available to
support procurement. Generally, access to the processes by the users and the public is very limited.
Communication regarding the issue is non-existent or poor. No measures of procurement effectiveness
or efficiency are monitored and reported. Where components or sub-components require supporting
management strategies, training and education approaches, dissemination and application of sanctions
or incentives, they are not evidenced to any real degree.
2 The issue is being addressed and supported to a small degree. Very limited leadership, planning,
implementation, regulation and monitoring are in place. A few people with appropriate skills and
Small
incentives and other resources are being applied to the issue. Very limited technology or infrastructure
degree
is available to support procurement. A few of the implications for e-GP are starting to be considered.
Generally, access to the processes by the users and the public is very limited. Little communication
regarding the issue is taking place. Very few measures of procurement effectiveness or efficiency are
monitored and reported. Where components or sub-components require supporting management
strategies, training and education approaches, dissemination and application of sanctions or incentives,
they are evidenced to a small degree.
3 The issue is being addressed and supported to some degree. Some leadership, planning,
implementation, regulation and monitoring are in place. Some people with appropriate skills and
Some degree
incentives and other resources are being applied to the issue. Some of the future implications for e-GP
have been considered. Some technology and infrastructure is widely available to support procurement.
Generally, access to the processes by the users and the public has broadened. Some formal and regular
communication regarding the issue is taking place. A few measures of procurement effectiveness or
efficiency are monitored and reported. Where components or sub-components require supporting
or incentives, they are evidenced to some degree
4 The issue is being addressed and supported to an adequate degree. Ongoing leadership, planning,
implementation regulation and monitoring are in place. Sufficient people with appropriate skills and
Adequate
incentives and other resources are being applied to the issue. Many of the future implications for e-GP
degree
have been considered. The technology and infrastructure is widely available to support procurement.
Generally, access to the processes by the users and the public has few restrictions. Formal and regular
communication regarding the issue is established. Some measures of procurement effectiveness or
efficiency are monitored and reported. Where components or sub-components require supporting
or incentives, they are evidenced to an adequate degree

Respondents were requested to consider the survey before the ADBs consultant, Mr David
McDermont, arrived to discuss it with them. It was recognised that individual respondents may
not have had knowledge of or involvement in, some of the components presented in the survey.
Consequently, most meetings were with the key respondent supported by other staff from that
organisation. Almost all respondents had considered the survey before the meetings were
conducted, and most returned their final response within a few weeks of the conduct of the
survey.
The meetings were conducted over a period of 12 days and involved responses from the
organisations listed in Section 3.4.
3.4 AGENCIES CONSULTED / ACKNOWLEDGEMENTS
Some thirty senior executives and managers from the following agencies took part in the
survey and discussion meetings.
Ministry of Finance and Planning (Procurement Support Bureau)

Ministry of Finance and Planning (Treasury)
Ministry of Finance and Planning (National Planning Department)
Ministry of Finance and Planning (National Budget)
Ministry of Highways
Japan Bank for International Cooperation
Asian Development Bank
The World Bank
SAARC Construction Industry Council
Chamber of Construction Industries
Information and Communication Technology Agency of Sri Lanka
Commission to Investigate Allegations of Bribery or Corruption
Auditor General
Attorney General
Office of the Prime Minister
Ministry of Home Affairs, Provincial Councils and Local Government
The consultant wishes to thank all the people from the above agencies for their time and
effort in responding to the survey, their input at the individual meetings and their very
helpful comments on the draft report. Special thanks go to the Hon. K.N. Choksy, Minister
of Finance and Planning, for his support and facilitation of the survey. Mr K.M.
Tilakaratne and Ms Felicia McShane, of the ADB Mission in Colombo, are sincerely
thanked for their work in scheduling the meetings and supporting the consultant during the
project.
3.5 CONTEXT OF THE SURVEY
Sri Lanka is a relatively small country both in size (65,610 sq km) and population (17.9
million, 1996 census). The nine major cities, including the capital Colombo (1,250,000)
contain some 15% of the total population. The remaining 85% are distributed over several
small towns and some 2000 village communities. The rate and extent of economic growth
(4.45% during the period 1985-1997) is low by regional standards. This has been partly due to
a lack of domestic political stability and prolonged internal conflict, which is yet to be resolved.
According to the Government of Sri Lanka report, Regaining Sri Lanka: Vision and Strategy
for Accelerated Development (Reference 2) the economy faces four major challenges, in that
there is a need to:
increase full time employment by creating two million jobs;

reduce public debt, which is currently larger than the countrys GDP;
establish lasting peace within the country and reconstruct the social fabric, the
infrastructure and essential public services; and
improve income levels via increased productivity in all industry sectors and the public
sector.
These challenges have direct implications for government procurement reform. They would
require that the GoSL achieved more effective procurement outcomes and there was a more
efficient and effective use of resources in the procurement process by both government and
business.
The growth and planning of ITC infrastructure to support e-Government and e-Commerce is in
its early stages. A new ICT Agency, with its own legislation, commenced activities on 1 July
2003. It will have a lead agency role in the development of e-Government, e-Commerce and
the development of the national infrastructure.
4 SURVEY FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
Each key component that influences the existing procurement environment is addressed in this
section. Firstly, a brief overview is provided, of how each component would appear, if the
jurisdiction had a mature, self sustaining, approach to e-GP in place. Secondly, the findings on the
current situation with respect to each component are summarised. Thirdly, any relevant conclusions
are drawn and then recommendations are made where necessary.
4.1 GOVERNMENT LEADERSHIP AND PLANNING
4.1.1 COMPONENT
In most countries that have successfully adopted e-GP, there has been significant
government funding, leadership, planning and implementation to create an environment
where procurement reform and change is supported. The incentives for governments to lead
this process have included improved outcomes for business and the community, improved
process integrity, transparency, efficiency and effectiveness, and higher domestic and
international confidence in the procurement situation.
Government leadership and planning is evidenced by the degree to which:
a national vision and objectives for procurement have been articulated;
a lead agency(s) is in place with responsibility for procurement policy and
guidelines, an integrated implementation strategy for procurement reform and
change, procurement career development and education, and the provision of
procurement advice to agencies;
an integrated and common approach is consistently applied across government
agencies at all levels;
industry is actively involved in the formation and evaluation of procurement policy
and guidelines and there is a high level of confidence in government procurement;
and
independent agencies are available to process unresolved complaints from suppliers.
4.1.2 FINDINGS
a) Vision and Objectives: The Government of Sri Lanka, under its E-Sri Lanka: Policy on
e-Government (see Reference 3), is in the process of setting a vision and policy
objectives and identifying specific implementation strategies in relation to e-
Government. From a government leadership point of view, strategies in relation to
political support and leadership, administrative reform, public awareness and
participation, delivery of e-Services, inter-operability and standards formulation have
been identified. The Government has already taken the key action of establishing a new
ICT Agency and appointing its inaugural CEO, who will be responsible for strategy
implementation.
The GoSL has not yet set a vision and national strategy for government procurement.
The Guidelines on Government Tender Procedure outlines objectives to be achieved in
conducting the tendering process, and the PSB has set procurement objectives in its
annual Corporate Plans. The GoSL has also recognised a number of key problems in
government procurement, including a lack of transparency and integrity, the long time
taken for the process, the need for different guidelines for simple and complex projects,
and the need to achieve advantageous services and products for the country (i.e.
effective procurement outcomes).
b) Stakeholders: The key stakeholders in procurement from the government side are well
identified and include the central Ministries of Finance and Planning, Public
Administration, Management and Reform, Policy Development and Implementation,
and Enterprise Development. The decentralised nature of Sri Lankan procurement, with
all Ministries and Departments being able to establish Tender Boards with significant
financial approval limits means they play an active part in the procurement environment.
On the institutional side the Asian Development Bank, The World Bank, and the Japan
Bank for International Cooperation have already played a significant role in procurement
reform. Additionally, the University of Colombo and some of the training institutes
have had some involvement. On the industry, side there is far less involvement. The
Construction Industry provides contractors with bond guarantees and contributes to
procurement training.
c) Government Lead Agencies: The Ministry of Finance and Planning has provided
government leadership in procurement in providing some policy direction, and providing
procurement guidelines for the use of all government agencies, provincial councils, local
authorities, statutory bodies and fully owned government companies. The Ministry has
also set up the Procurement Support Bureau (PSB) to provide training, monitoring,
secretariat and reporting support to agencies and tender boards and procurement
planning committees.
A specific lead agency with responsibility for managing the procurement process is in
place. The Procurement Support Bureau, within the Ministry of Finance and Planning,
has the following roles:
capacity building for government procurement via training, support to agencies

and the early establishment of a web site to publicise procurement guidelines,
training modules and some standard documentation;
provision of support to the various levels of Tender Boards and the Procurement
Planning Committee (see below);
monitoring major foreign financed procurement tenders and reporting to the
Permanent Secretary of the Ministry of Finance and Planning; and
developing procurement policy and guidelines.
Generally, respondents saw a need to expand the role of the PCB further into the area of
policy development, as well as auditing the degree to which agencies met their
procurement responsibilities, and the provision of high level expertise to support
complex procurement.
Procurement guidelines (see References 4 and 5), based on World Bank/Asian

Development Bank guidelines, are available and apply to all government agencies at the
national and provincial levels. Some policy statements are also included.
d) Procurement strategy: A coordinated, integrated, national strategy on procurement is

not yet in place. However, the draft Policy on E-Government identifies both promoting
e-procurement as part of the re-engineering of government functions and the creation of
a secure electronic environment, as future strategies to be implemented.
e) Expertise: The range of expertise required at the executive and management levels to
develop and implement a strategic approach to procurement does not appear to be
currently available. This probably reflects the lack of educational opportunities at this
level and the fact that it is only recently that procurement has started to be viewed as a
key management function rather than an operational process.
f) Common approach: A common approach, based on a set of procurement guidelines, is

used across the public sector. The approach is not adhered to by all agencies as the
monitoring, information assistance, internal management controls and reporting are not
adequately in place (see later components).
4.1.3 CONCLUSIONS
The formation of a national vision and objectives for government procurement are in the pre
planning stages and are being considered within the policy framework of e-Government and
e-Commerce. A number of key government stakeholders in procurement can be identified
but there is a need to develop the stakeholder base in industry. The new ICT Agency of Sri
Lanka is a key stakeholder in the provision of ICT network to support the transition to e-
procurement.
There is a key lead agency in place to manage government procurement in the form of the
Ministry of Finance and Planning and its Procurement Support Bureau. The PSB could take
up the lead agency functions either as a bureau within the MOF&P, as is the case now, or as
a separate department reporting to the Minister for Finance and Planning. The links
between government financial policy and the management of procurement need to be
strengthened, which in the opinion of this report would favour the PSB remaining part of the
MOF&P. The functions of this lead agency need to be widened and strengthened in the
areas of:
the current function of policy and guideline development and implementation;

development of a national strategy for government procurement and e-GP;
provision of management and reporting tools, systems, high level advice,
comparative information and training to assist agencies to meet their devolved
procurement responsibilities and exercise a more consistent approach;
management of a comprehensive database to assist government decision making in
procurement; and
development of methodologies for measuring performance in government
procurement.
The last three points are further enlarged upon in Sections 4.2 to 4.8.
Additionally the formation of the new ICT Agency of Sri Lanka could assist the lead agency
to implement the technical aspects of e-GP. This would see the lead agency taking up the
management and co-ordination of the implementation of e-GP. The ICT Agency of Sri
Lanka would work closely with the lead agency, in providing technical advice on
infrastructure issues and overseeing the development or acquisition of e-procurement
systems, and their implementation and long term support.
Overall, the basic structure for the Government to lead and plan for effective procurement is
in place. However, the Government needs to ensure that its policies and guidelines are
understood, supported and enforced, and that agencies do meet their responsibilities for
procurement.
Sri Lanka has a readiness level consistent with Level 3 on most of the component of
Government Leadership and Planning.
4.1.4 RECOMMENDATIONS
1) That the lead role of the Ministry of Finance and Planning and its Procurement Support
Bureau be expanded and strengthened in the areas of, procurement policy and guideline
development, procurement strategy development and implementation, provision of
support to agencies, monitoring of agency accountability, and management of
procurement information from a government perspective.
4.2 DIRECT AND SUPPORTING LEGISLATION
4.2.1 COMPONENT
In most countries that have an mature procurement situation in place, a raft of direct and
supporting legislation has been enacted and managed to provide laws that support
transparency, efficiency, integrity and consistency throughout the procurement process,
while providing realistic disincentives for those who transgress. The application of the law
may be in the form of specific procurement legislation or via other legislation relating to
financial management, public sector management, and consumer rights. Legislation that
allows for policy to be developed and changed without requiring major change to the
legislation appears to have some advantage in dealing with the evolving issues in
procurement. Some specific legislation may have been enacted in relation to electronic
commerce including digital identification, privacy and security of data.

4.2.2 FINDINGS
a) Procurement Legislation: There is no specific legislation relating to procurement.

Under the Constitution, the President has assigned the power to the Minister of Finance
and Planning to set financial regulations, interpretations and amendments based on the
Financial Regulations 1992 (see Reference 6). Thus, Chapter X111 of these regulations
laid down the guidelines for government procurement.
Agencies found that the Financial Regulations 1992 were unsatisfactory when dealing
with the complexity of large projects. Partly as a response to this, in 1996 and again in
1997, a set of procurement guidelines were developed based mainly on existing donor
guidelines. The guidelines specifically tried to address the issues of:
reducing delays in projects, particularly foreign funded projects;

providing more specific guidelines for boo/bot projects;
equal treatment of foreign bidders;
mandatory contractor registration for works programs beyond Rs 5 million;
using standard bidding documents for donor funded projects;
establishment of project tender boards;
introduction of bid opening committees;
allowances for members serving on technical evaluation committees and tender
boards;
acceptance of guarantees by authorised insurance companies; and
the general streamlining of the process.
These guidelines are admissible as law and are applied to all levels of the public sector.
As you would expect, the guidelines have not successfully addressed all the above
issues and the delays in process is still a major problem. A number of specific changes
to the guidelines have been suggested by a number of sources (see Section 4.6).
The linkage between procurement policy direction and statement and the guidelines is
not strong. The guidelines contain some very brief quasi policy statements but are
essentially guidelines for the tendering phase of the procurement process with little
emphasis on procurement planning or contract management. Policy statements as they
exist need to be more fully illustrated and broadened. Additionally, the responsibilities
of agency CEOs and various Tender Boards in achieving procurement outcomes are not
covered.
b) Supporting legislation: There is some supporting legislation. The Commission to

Investigate Allegations of Bribery or Corruption Act 1994 (see Reference 7) was used to
set up The Commission to Investigate Allegations of Bribery or Corruption in 1999...
The Commission can investigate and prosecute offences under the Bribery Act 1954 (see
Reference 8) and its subsequent amendments, and reports directly to Parliament.
The Commission, at the time of its Annual Report 2000 (see Reference 9), stated it had
not completed many investigations, largely due to difficulties in acquiring the right
resources, the reluctance of people to make complaints for fear of retribution, and the
need to change social norms in relation to corruption. Very few cases in relation to
procurement have been investigated. In 2003, some 30% of people were identifying
themselves when they made complaints.

Generally, respondents to the survey had the view that the Commission was having little
impact on corruption in procurement.
Other supporting legislation is available via the Public Service Act (disciplinary action)
the Penal Code (breach of trust) and the Public Property Act.
There are probably aspects of commercial law that support procurement but this was not
identified in the responses.
c) E-procurement legislation: There is no specific legislation that would affect e-

procurement at this stage.
d) Linking procurement legislation and international arrangements: no evidence of

this link was found.
e) Projects to modernise relevant legislation: A new Audit Act is being developed but
the full extent of the development of other legislation could not be determined.
4.2.3 CONCLUSIONS
Essentially, Sri Lanka has a set of quasi policy statements and well structured procurement
guidelines that are enforceable under the law. The Minister for Finance and Planning has
the assigned power to amend the policy statements and guidelines as the approach to
government procurement changes over time.
The draft CPAR has recommended that the GoSL consider whether or not, to develop a
Procurement Law based on the United Nations Commission on International Trade Law
(UNCITRAL) for works, goods and services. A number of countries use this approach.
This issue needs careful consideration The alternative approach, used by some countries, is
to strengthen the legislation (usually in the financial areas) to allow the Minister to set and
amend procurement policy and guidelines and the consequent responsibilities of CEO of
government agencies. It is aimed at strengthening management control as an essential part
of legislative control.
This report favours the latter approach, given the current legislative situation, the common
law base in Sri Lanka and the flexibility it gives to the procurement reform process. This
aspect of flexibility is important in managing procurement change and ensuring that
appropriate management decisions are taken for the procurement situation involved. The
current approach to legislation should be retained but there needs to be some substantial
tailoring of its scope and content. The key changes suggested are:
a) When the opportunity presents itself, the guidelines should be linked back to financial
management legislation. The legislation should (if it does not already do so) empower
the Minister for Finance and Planning to develop and amend policy and associated
guidelines, and outline the policy principles for which agency CEOs are responsible.
b) The structure of the guidelines needs to be changed to clearly identify policy statements
and link them to the guidelines.
c) Extend the scope of the guidelines to cover the areas of procurement planning, contract
development and the management of contract performance.

d) Amend the content of the existing guidelines as recommended in the draft CPAR.
The supporting legislation currently in place, or being developed with respect to audit, and
the behaviour of public servants, will not be effective unless it is enforced through the law
and by monitoring and reporting agency performance on these issues.
While the electronic commerce issues of security, identity and standards are not yet an issue,
they will be soon. These issues need to be addressed as a forerunner to the introduction of
e-GP. This is also consistent with the strategies stated in e-Sri Lanka: Policy on e-
Government.
While enabling legislation is important, it is important that addressing it does not bog down
the transition to e-GP.
Sri Lanka has a readiness level consistent with Level 3 on the component of Direct and
Supporting Legislation.
2) That the current legislative situation be reviewed by the Ministry of Finance and
Planning to:
a) Incorporate the ability to set procurement policy and provide guidance to CEOs
into the financial management legislation being developed.
b) Widen the scope of the procurement guidelines to include procurement planning,
contract development and management of contract performance.
c) Amend the existing content of the procurement guidelines as outlined in the report.
d) Identify the future security and legislative requirements for e-procurement.
4.3 REGULATION
4.3.1 COMPONENT
Most of the countries with well developed procurement approaches have independent
regulatory agencies in place with supporting legislative powers to set policies and
guidelines, regulate both compliance and performance, handle complaints, and monitor the
conduct of procurement processes. Regulation of procurement is achieved by having
appropriate legislation in place that defines responsibilities for outcomes as well as
compliance with the process, together with external and internal performance and
compliance audit mechanisms and the devolution of management of the process. The
regulators or agencies also have powers to audit government agencies and ensure standards
are adopted for procurement. The regulatory agency may also cover a range of government
functions outside procurement. Overall, effective regulation means that the management
and delivery of procurement by all agencies is regularly reviewed from a number of
standpoints and any problems are addressed in their early stages. Regulatory agencies and
the lead agency have access to integrated procurement data bases to monitor trends and the
impact of decisions made.

4.3.2 FINDINGS
a) Independent regulator(s): There is not an agency in place that has enforceable powers
to regulate in relation to the procurement legislation and the conduct of procurement.
There is not a specific, independent, lead agency that can handle complaints from
suppliers. The PSB has limited facility to monitor large projects and The Commission to
Investigate Allegations of Bribery or Corruption has the powers to investigate corruption
but reported that it rarely received complaints in relation to procurement.
b) Legislation to support regulators: As a consequence of a) above, there is little

legislation to support the regulation of procurement nor is there evidence that the
Ministry of Finance and Planning enforces its procurement guidelines to any great extent
c) Resources to support the regulator(s): The agencies that have responsibilities for
procurement appear to be under-resourced now and additional resources may be required
if a comprehensive approach to regulation were taken.
d) Independent audits: The Auditor General conducts external, financial and process,
compliance audits, which only obliquely deal with procurement issues. There was no
evidence of any internal procurement audit procedures in agencies.
e) Procurement information: The GoSL does not have comprehensive procurement

information available that could identify procurement trends, or provide comparative
agency data on activities and performance. Some data on the progress of large projects
is available via the PSB.
f) Procurement standards: This issue has not as yet been addressed to any great degree.
g) Other supporting regulatory mechanisms: Sri Lanka has largely devolved

responsibility for procurement to agencies and the associated levels of tender boards.
This devolution of responsibility to agencies does not appear to be adequately supported
by access to high level procurement advice, training for managers and the availability of
comprehensive policies and guidelines. There is a lack of comprehensive agency
reporting and management controls to ensure the responsibilities are met.
h) Regulation of e-procurement: As e-procurement is not established, the sub component

has not been addressed. Regulation here is partly through legislation (if required) to
legitimise electronic identification and system security, and partly by monitoring the
process and complaints from the public and suppliers.
4.3.3 CONCLUSIONS
The range of activities that should combine to provide good regulation of procurement is not
in place. Good regulation of procurement requires that the following elements work in
concert:
procurement legislation and the policies and guidelines are well understood and
enforced;
corrective actions are taken as a result of internal and external audits;
competent high level advice is available to agencies;
managers and staff are well trained, educated and competent;
procurement has a viable career structure and can attract well educated young
people;
agencies have management controls and reporting mechanisms in place so they can
monitor and report their own performance in meeting their procurement
responsibilities;
there is public and industry access to procurement information and outcomes;
comprehensive procurement information is available to support decision making;
an independent process for handling complaints is available; and
there is a lead agency(s) that is resourced to carry out a regulatory role.
Good legislation in itself does not ensure effective regulation. Many of the regulatory
mechanisms are management issues, and there is a strong link between this Section on
regulation and Section 4.6 on procurement management.
Overall, Sri Lanka only has part of the sub-components in place. There is some legislation
and a set of procurement guidelines, some low level training, limited information on major
projects, and external compliance audits via the Auditor General, which have little focus on
procurement. The lack of effective regulation (and management) is the key reason why the
critical procurement outcomes of cost to government, timeliness, and the ability to take
corrective actions are not being met. A lack of regulatory mechanisms also means that the
devolution of responsibility to agencies is difficult to manage and many inconsistencies in
the approach to procurement will result.
Regulation is such an important issue that some countries, for example the United Kingdom,
and some Australian States, have set up independent regulatory bodies that are separate from
the government agencies responsible for managing procurement. The CPAR has also
recommended that a Procurement Regulatory Agency be set up to oversee a legal and policy
framework for public procurement.
The setting up of a separate regulatory agency should be evaluated after the role and
function of the PSB is considered (see Recommendation 1). The PSB may become the
manager of the governments procurement approach and provide support to agencies. The
separate, independent, regulator would define policy, administer procurement legislation and
provide an independent arbiter and review function when required. Some countries have
combined these two roles under one organisation, while others have established varying
degrees of separation of the two roles. This report favours the separation of the roles so that
specific resources and attention can be given to establishing effective regulatory practices.
Sri Lanka has a readiness level consistent with Level 2 on the component of Regulation.
4) That a regulatory framework be established and managed by:
d) Considering the formation of a separate, independent, regulatory body that is

responsible for policy development and compliance, monitoring of agency
performance, and reporting to government on procurement issues and trends.
e) Ensuring that as the legislation, policy and guidelines are reviewed and developed,
appropriate methods to ensure compliance are put in place.

f) Addressing the related management issues of provision of advice, training, reporting
requirements, provision of information, and the development of management
controls to better support agencies in meeting their procurement responsibilities.
4.4 INFRASTRUCTURE AND TECHNOLOGY
4.4.1 COMPONENT
In most countries that have successfully moved to e-GP, there is an adequate information
and communication infrastructure. This infrastructure is typified by access to a range of
voice and data services over a network that services both city and regional users. Access to
the Internet is not overly constrained; a number of Internet Service Providers (ISPs) are
available to support users with distributed user access points (e.g. net cafes) and the services
are reasonably affordable to users. The speed and quality of the network is sufficient to
encourage growth in its usage, there is a viable hardware and software market and sufficient
technical expertise is available to government to support and maintain the infrastructure.
The government has access to a suitable government ICT agency that can assist it to manage
the technical issues underlying e-GP, and contract for the provision of services by private
sector providers.
4.4.2 FINDINGS
A summary of Sri Lankas current state of readiness of the infrastructure and technology
sub-components, required to support a move to e-procurement, is shown in Table 2.
The measures and levels in the table have been developed form a number of APEC reports,
the Sri Lanka Development Gateway, e-Readiness and e-Needs Assessment Report 2002 (see
Reference 10) individual reports on the state of ICT in a number of countries, the Harvard
University Readiness for the Networked World Guide (see Reference 11), advice from the
PSB, and responses to this survey. The figures have been set on the basis that Level 4 is a
level of infrastructure that is adequate for e-GP to be implemented in a phased and
sustainable way. All the figures are partly subjective in that they do not take into account
issues such as population distribution effects. The Level 4 figures are often well below what
currently exists in developed countries, where, for example, PC and Internet penetration
may be available to 40% or more of the population.

TABLE 2
READINESS LEVELS ON INDICATORS OF THE DEVELOPMENT OF

INFRASTRUCTURE AND TECHNOLOGY TO SUPPORT e-GP.
Level of Readiness
No Measure(2001-2003) L1 L2 L3 L4 Sri Lanka
none/little small some adequate 2002/03
1. Internet subscribers <0.05 <1.0 <10.0 >10.0 0.035
(% pop)
2. Internet users (% <1.0 1-3.0 4-10.0 >10.0 1.2
pop)
3. Number of ISP 0 1.0 2-3 >3 2.15
providers /million
people
4. Number of internet <1.0 1-5 6-10 >10.0 6-10
hosts/10,000 people
5. PC penetration <1.0 <3.0 <10.0 >10.0 4%
(%pop)
6. Modem transfer e-mail only 9.6-14.4 14.4-28.8 28.8-56.0 28.8-64.0
speeds generally Kbps Kbps Kbps
available
7. Availability of data Little or no A few Networks Networks A few
network network agencies in major link many agencies
with LAN centres centres with LAN
8. Availability of public None Few in Few in Some in Few in large
internet centres large most most locations
locations locations centres
9. Comparative Very high High Marginally Comparable High
(regional)cost of above
internet access
10. Telephone line <2% <8% <40% >40% 4.70%
penetration (% pop)
11. Mobile phone <0.5% <5% <14% >14% 6.60%
penetration (% pop)
12. Coverage of <10% 10-30% 31-50% >50% 80%
telephone service
(%pop)
13. Quality of service >100 50-100 10-50 <10
40% have
(faults /100 lines) problems
14. Service and support 4 years/ 6 mths/ 1 mth/ Few days/ 3-5 days
to install service/fix 6 mths 1 mth 1 week <48 hrs Colombo
problems only
15. Availability of All Many Some Few Many
hardware components components components components Components
imported imported imported imported imported
16. Availability of 0 1-10 10-50 50+ 50+
software providers

The information presented in Table 2, was further expanded upon during the interviews with
the respondents as follows:
a) Network availability: Voice and data networks are mainly restricted to urban areas,
which make up 15% of the population. The penetration of telephone and internet
services is low by international standards.
b) Telecommunications access: Overall, both buyers and suppliers in urban areas have
good access both domestically and internationally to these systems. This is not the case
in rural areas where access is very low. The incidence of service faults is very high but
the availability of service support in urban areas is reasonable by international standards.
c) Internet access: Overall, less than 3% of the population access the Internet. Public
sector agencies (as potential buyers) are networked but access is often only available to
people at management levels. Business, particularly SMEs, and other institutions, have
very limited access to the network. Some pilot projects to establish ICT Access Centres
(Vishva Gnana Kendras) in rural villages are in the planning stage. The GoSL plans to
establish in the longer term some 2500 of these centres based on the outcomes of the
pilot projects. They could provide business with an access point to e-procurement
systems in the future. Another issue that affects supplier access is the high cost of PCs,
which currently cost approximately 25% of the average annual salary.
d) Access affordability: The respondents views on the cost of access to the Internet varied
widely. The Sri Lanka Development Gateway, e-Readiness and e-Needs Assessment
Report 2002 quoted the cost of internet access as 2.17 USD per hour, with the perception
of users that the cost of access was moderate to high. These users would represent less
than 3% of the population and are probably comparatively well-off. Overall, the cost
would be an inhibiting factor in the adoption of e-GP.
e) Network speed and quality: The network speeds available vary in the range 28.8 to
56.0 Kbps but the quality of the services from the 43 Internet Service Providers varies
widely. Respondents held widely different views on this issue.
f) Hardware and software availability: Hardware is nearly all imported and expensive
by international standards. A growing range of software providers exist (over fifty).
g) Available expertise: The GoSL has difficulties in retaining competent IT staff because
of opportunities outside Sri Lanka. The private sector has similar problems. This factor
is reducing in impact as the number of companies in the software market continues to
grow. The new ICT Agency of Sri Lanka should be able to provide policy advice and
technical assistance when fully established.
h) Government planning: Through its e-Sri Lanka: Policy on e-Government draft paper,
the GoSL has indicated future strategies to build up the government wide area network,
provide a secure electronic environment, build up the government Internet portal, and
build the ICT infrastructure for the application deployment and sustainability of
initiatives.
The World Bank has worked with GoSL to develop a portal, the Sri Lanka Development
Gateway (LkDG), to assist industry development. It includes a limited facility on access
to tender information on internationally funded projects.

4.4.3 CONCLUSIONS
The Sri Lanka Development Gateway: e-Readiness and e-Needs Assessment Report 2002
considered readiness levels on the following five factors:
ICT infrastructure;
development of ICT policy; and
the utilisation of ICT in learning, society and the economy.
The report rated the readiness of Sri Lanka on the five factors at 2.2 to 2.3 on a 0 to 4.0
HUG scale. The report is consistent with the findings from this survey. Generally, in
relation to the ability of the current infrastructure to support a transition to e-GP, there is not
sufficient access by public sector agencies (buyers) and suppliers to the internet to create a
viable government procurement market structure and size. There are also barriers in relation
to access affordability, quality of transmission and the cost of PCs. These barriers may
particularly affect SMEs.
Recent developments, such as the further development of the Sri Lanka Development
Gateway (LkDG) have introduced the publishing of information on some internationally
funded tenders. Additionally, the new ICT Agency of Sri Lanka, established in July 2003
should be able to provide a coordinated approach to infrastructure and technology
development and oversee the development, implementation and long term support of e-
procurement systems.
It make take some considerable time for the GoSL to develop a national ICT infrastructure
and this may unnecessarily delay the introduction of e-procurement systems to support e-
GP. Many countries have initiated the transition to e-GP by introducing e-Tendering
systems on a pilot basis, in restricted situations with adequate access for users. This has the
advantage of increasing knowledge and experience with electronic procurement for both
buyers and suppliers, keeping risk levels low and manageable and demonstrating the
benefits of such systems.
Sri Lanka was assessed as having a readiness level consistent with Level 2 on the
component of Infrastructure and Technology.
5) That the current plans for GoSL to develop a comprehensive national ICT strategy,
which will cater for the long-term development of sustainable e-Government and e-
Commerce strategies, including the introduction of e-procurement, be advanced as a
matter of priority.
6) That an initial study be commissioned by the selected lead agency, to identify a

situation with a viable network for government agencies and key suppliers, which
could be used to introduce an e-procurement system on a pilot basis.

4.5 INDUSTRY AND BUSINESS DEVELOPMENT
4.5.1 COMPONENT
In many jurisdictions procurement policy, strategy and process management aims to assist
industry and business development. There are benefits to industry if there is confidence in
the integrity, fairness, transparency and efficiency of the procurement process, and if open
access to a wider range of business opportunities and training and advisory support is
available. There is a consistency to the management of government procurement across
government agencies. This is achieved by ensuring industry is represented on government
decision-making bodies dealing with procurement strategy and process. It has ready access
to information and advice on government policy, regulations and procedures. Both feedback
for unsuccessful bidders, and an independent appeal mechanism to deal with industry and
public complaints, is available. Industry already has some experience with electronic
business. The cost of engaging in government procurement is not a deterrent for small to
medium enterprises and they are not disadvantaged by the procurement process. Training
and education on procurement is readily available.
4.5.2 FINDINGS
a) Industry participation: There is some involvement by various Chambers of Commerce

in providing feedback to government on the procurement process. The Sri Lanka
Economic Association, which has government, institution and industry membership, was
established in April 2000. As yet, it has not considered the issue of government
procurement There are sector institutions, such as the SAARC Construction Industry
Council, which support the procurement process in providing bonds and guarantees for
contractors in the industry and the development of training for the construction sector.
The construction industry, through its Institute for Construction training and
Development (ICTAD), has published its own Conditions of Contract but there is some
lack of unison with the current government procurement guidelines.
There was little evidence of formal participation by industry on Tender Boards at all
levels and procurement committees.
b) Availability of procurement information: The procurement guidelines are available

and specific procurement advice is available within the very large industry sectors only.
c) Feedback on bids: Feedback from Tender Boards is available for those who seek it.
d) Independent appeal mechanism: There is not a specific appeal mechanism available

for procurement issues and there are few other effective paths for this process.
e) Costs: Industry sees the costs of the protracted procurement process, and the uncertainty
it produces with respect to pricing, as an inhibitor in government procurement.
f) Confidence in government procurement: A number of respondents saw industry

confidence in the existing procurement approach as very low. Many agencies have
interpreted the procurement guidelines in specific ways so there is little consistency of
approach across agencies. Specifications and requirements were often ambiguous and
incomplete. The protracted time for the process (averaging two years for large
contracts), makes pricing and planning the availability of resources difficult. The
emphasis placed on lowest price means some companies quote low and recover the
loss via variations and protracted negotiation. This may partly explain why many large
contracts are over time and over budget. Examples of cost blowouts of up to 120% in
some large contracts were provided by agencies.
g) Disadvantage to SMEs: These businesses are disadvantaged in a number of ways.

They have fewer resources to assist them to deal with the protracted time and complexity
of the process. Rural SMEs have significant technical and communication access
problems.
h) Training and education: Training for suppliers is available on a fee for service basis, in
some of the large industry sectors. Overall industry does not have good access to
training.
i) E-procurement in industry: There was little evidence as yet of any large scale e-
procurement systems being used in industry. The Sri Lanka Development Gateway
(LkDG) http://www.developmentgateway.org/node/171482/ has further developed as a
portal to assist industry development. It has identified twelve industry clusters in Sri
Lanka with the intention of supporting them in accessing large scale international
projects. The portal provides information on internationally funded tenders in Sri Lanka.
Users are required to pay up to 500 USD per annum for access to the details of tenders
and can be sent targeted information. There was no information available of the impact
on usage by industry because of the annual fees charged. The PSB has its own website,
which provides information on procurement (see Section 4.8.2.)
j) Other: Some industry sectors, such as the construction industry, are in the process of
developing legislation, for approval by the government, to enable its Institute for
Construction Training and Development to develop policy, and monitor and audit
procurement in the construction industry.
4.5.3 CONCLUSIONS
There is a wide consensus that the development of industry and its involvement in
international commerce is critical to improving Sri Lankas economic position.
In relation to government procurement there is some limited industry involvement in support

processes in areas such as such as training and the development of contract documentation.
A number of industry forums are in place to consider industry issues but as yet have not
considered procurement. Overall, there needs to be a substantial raising of the level of
industry input into procurement policy, the procurement guidelines, procurement regulation,
and the conduct of the procurement process. There also needs to be direct industry
representation from major industry sectors on tender boards and other advisory committees
to government.
In some countries, such as Australia and the UK, industry representatives are members of
tender boards for major projects. They usually provide a general industry view rather than
that of a specific industry sector. Specialists on evaluation panels would provide a specific
industry view.
Some representative government buyers and industry suppliers were critical of the existing
procurement approach. They cited issues such as:
the extended duration of the procurement process and the uncertainty it produces;
unclear and ambiguous specification and requirements and evaluation criteria;
lack of consistency in the process and compliance with the guidelines across
agencies;
lack of government expertise;
the poor performance of some large contracts related to cost and time overruns;
the difficulties for suppliers in dealing with a complex and uncertain process, and;
a need to streamline and harmonise the procurement process used by the GoSL and
the Multilateral Development Banks.
The government should encourage initiatives, by large industry sectors such as the
construction industry that give legislative support to the self regulation of procurement in
those sectors. However, this should be balanced by developing complimentary regulatory
mechanisms at the government level, to ensure some consistency of approach across
industry sectors.
Sri Lanka has a readiness level consistent with Level 2on the component of Industry
Involvement.
7) That, for the purpose of stimulating further industry involvement, the PSB survey and
publish the attitudes of industry to the current procurement environment.
8) That industry representation from major industry sectors is included on Ministry and
Cabinet Appointed Tender Boards and key procurement decision groups as part of
developing an industry forum on procurement issues.
4.6 PROCUREMENT MANAGEMENT
4.6.1 COMPONENT
If the current procurement function is well managed, then this will probably provide a very
good basis for moving to e-Procurement. E-procurement will assist a well-managed
process, not provide a substitute for it. Procurement management covers a wide area and, as
expected, there is some overlap between this key component and most of the others. Efforts
have been made to reduce this overlap as far as possible.
A well-managed procurement system has a lead agency in place to manage procurement

issues and support agencies in meeting their responsibilities. Clear policies and associated
regulations, and guidelines and procedures that can be translated into consistent
management actions and outcomes are in place. Procurement regulations, guidelines and the
process are well documented to assist users to learn and check their understanding as
required. Procurement planning is carried out to assess the feasibility and risks associated
with procurement proposals. There are specialised procurement processes to cover a range
of situations including building major assets, purchasing specialised services and products
in areas such as the IT and Health industries and consolidated purchases for common goods
such as stationery. Standardised documents and templates are available for tendering,
contracting and reporting purposes. Contract outcomes are managed and reported and
appropriate action is taken where required. Consolidated procurement data is available to
support current understanding of the market and to support future decisions on government
procurement. Some procurement efficiency and effectiveness measures are monitored and
reported on.
Some technology has been used to support the procurement process. Public information on
the process and procurement decisions is available. Sufficient management controls are
embedded in the process to ensure effective compliance, risk management, probity auditing
and quality management so that corrective action can be taken. Independent external audits
can be carried out on any agency, which has responsibilities for government procurement.
A formal national or regional procurement education and training strategy is in place.

Procurement staff are well educated and trained, have confidence in the processes used, and
see procurement as a worthwhile career that can deliver benefits to themselves and to the
community. An enforceable staff code of ethics is in place and supported by education and
management practices. Procurement staff have access to appropriate competent advice on
procurement issues. Some level of procurement responsibility is devolved to government
agencies together with a mechanism (such as accreditation) to demonstrate that they can
meet the standards required. A significant percentage of suppliers participate in government
work.
4.6.2 FINDINGS
Based on the views of respondents the following findings were made:
a) Lead management agency: The Procurement Support Bureau manages a number of

procurement issues including capacity building, provision of support to the various
levels of Tender Boards and the Procurement Planning Committee, monitoring the
progress of major foreign financed procurement tenders and developing procurement
policy and guidelines. Respondents saw a need to enlarge and extend this role
particularly in the areas of policy development, provision of expert advice, and
providing support mechanisms so agencies could better manage their procurement
responsibilities.
b) Policies and guidelines: Some development of procurement policy is evident in the

directions given in the various procurement guidelines that have been issued.
Respondents, generally, were of the opinion that procurement policy needed a higher
profile and to provide clearer direction. Policy development should be more identified
with a specific lead agency. This opinion is also shared by the Sri Lanka Country
Procurement Assessment Draft Report commissioned by the The World Bank (see
Reference 12)
Procurement guidelines were revised in 1996 and again in 1997 and superseded the
existing the Financial Regulations (1992) and various Government Circulars that had
previously been issued. A version of the guidelines for projects assisted by foreign
financing agencies was produced in 2000. These guidelines are the basis of a common
approach across the public sector at the national and provincial levels. The guidelines
are comprehensive in their coverage, are stated in simple clear language and are not
overly prescriptive. The procurement guidelines are available in hard copy and on the
PSB web site. There was a strong perception that the guidelines were not effective in
that there was little support available to agencies on their interpretation and a general
lack of monitoring and enforcement. This has contributed to a lack of consistency of
approach across agencies.
c) Procurement planning: A number of procurement planning and monitoring mechanisms

are in place. The PSB supports a Procurement Planning Committee, which is responsible
for planning and scheduling procurement projects. Tender Boards, responsible for the
conduct of the procurement process, can be set up on a project-by-project basis, at the
Minor (Regional Office), Departmental, Ministry and Cabinet levels. The level of board
used depends on the complexity, scope, urgency and impact of the procurement process
involved. In extraordinary circumstances, a Cabinet Appointed Standing Committee can
be established. These boards have respective budget limits ranging from 10 Million R at
the Departmental level to over 20 million R at the Cabinet level. Far higher limits apply
to foreign funded projects; for example, Ministry Boards have limits of 100 to 250
million R. The boards are usually advised by a Technical Evaluation Committee selected
for the particular project.
Despite the structure above, some of the key outcomes of procurement planning do not
seem to be achieved. For example, complex procurement processes on average often take
more than two years to complete. Part of the reasons offered for this, at the Ministry and
Cabinet level projects, appeared to be the time taken for boards to make decisions and the
high level of involvement expected from senior public sector secretaries, senior managers
and Cabinet. Two major agencies, involved in such projects, indicated that 95% of their
projects were over budget and exceeding the period set for the contract. Respondents
commented that there was too little emphasis on preliminary planning and risk assessment
and therefore many problems had to be dealt with during the process. The flow chart of
the generic procurement process shown in the guidelines focuses almost entirely on the
tendering component of the procurement process. There is very little information on the
procurement planning and contract management components. This latter observation may
also explain why many contracts are over budget and have exceeded the time set for the
contract.
d) Specialised processes: Separate procurement guidelines have been established for the
domestically and foreign funded procurement processes and for military procurement.
e) Standardised documents: Some standardised documentation, developed by the

Institute of Construction Training and Development, was available for the purchase of
goods. Respondents strongly supported an increase in the availability of standardised
documents for each industry sector and specific phases of the procurement process.
Some standard documentation was available on the PSB website.
f) Contract outcomes: The issue of contract outcomes being delivered was looked at
briefly. Almost all respondents cited contract management as an area that needed much
more support and monitoring. Large scale cost and time overruns have already been
cited.

g) Consolidated data: Some consolidated data is available for large-scale tenders through
the PSB database but generally, this is an area for development. It is a key issue for the
future introduction of e-procurement systems.
h) Application of technology: Little technology as yet has been applied to the existing
procurement process and this is probably a contributing factor in the extended time the
process takes. There is some advertising of internationally funded opportunities in Sri
Lanka published on the LkDG site. A key issue is the slow progress to modernise the
public sector financial management systems. Any approach to e-GP would have to look
at the link between procurement and other back office systems such as financial
management, budgeting and asset management. Currently, the PSB and the ITC Agency
of Sri Lanka would appear to have little expertise in e-GP so they will need to develop
that expertise using mechanisms such as development courses, study tours, work
experience and the use of consultants.
i) Public information: There is little direct public access to procurement information and
decisions. Currently access to specific information can be requested by the public via
the Permanent Secretaries.
j) Management controls: There was little evidence that agencies, at any level, had
developed management controls and performance monitoring of the process and
outcomes.
k) External Audit: Annual external audits of public sector agencies are carried out by the
Auditor General. The audits are very much financial compliance audits and only
obliquely refer to procurement. The Auditor General currently acts under the Finance
Act, which does not give it a comprehensive audit framework within which to operate.
As part of capacity building of the Auditor General, a new Public Audit Act is being
prepared.
The Report of the Auditor General for the Year 2002, First Instalment-Volume 1 (see
Reference 13) made the following observations that relate to procurement.
There were many instances, in a range of agencies, of the undersupply of

products and services, contract price overruns and projects not being completed
on time, which reflected on poor procurement planning and contract
management, and had cost hundreds of millions of rupees.
Asset registers were generally incomplete and this would mean that calculation
of the full cost of ownership for capital works would be difficult.
l) Education and training: The PSB has conducted a training analysis and in conjunction
with various training institutes and professional associations has constructed some
twenty training modules at the procurement officer level. The PSB provides the training
on a fee-for-service basis to agencies. There is no available formal training at the
manager and executive levels. An education program for e-GP would need to be
developed.
m) Career structure: A procurement career structure does not appear to be in place.
n) Code of ethics: The Public Service Commission is developing a Code of Ethics for
Public Servants.

o) Procurement advice: There were wide differences in opinion as to the extent that high
quality procurement advice was available to procurement staff in agencies.
p) Devolution of responsibilities: Devolution of procurement responsibilities to agencies

has occurred to some extent. Procurement financial authority limits are assigned for
foreign funded projects as follows:
Head of Department up to 200,000 R

Project Tender Board up to 25 million R
Departmental Tender Boards up to 100 million R
Ministry Tender Boards up to 250 million R
Cabinet Appointed Tender Boards above 250 million R
Relatively lower limits, as outlined in Section 4.6.2 b), apply to government funded
projects.
It is interesting to note that financial authority is assigned on a government structural

basis, rather than on the proven ability and experience of the particular agencies
involved. Devolution of responsibility does not appear to be supported by effective
agency accountability mechanisms or by access to comprehensive data on government
procurement.
q) Performance reporting: There is no reporting of performance measures in relation to

government procurement.
This survey was not designed to look at the procurement process in detail but rather
comment on broad process areas. However, Country Procurement Assessment Review
(CPAR) conducted during the period April-November 2002, covered, among other issues,
the procurement process. In summary, the draft CPAR report, in relation to the procurement
process, recommended:
The wider development of standardised tender and contract documentation.

The removal of the need for contractor registration for works of a value of more than
5 million R.
An increase the decision making powers of the Tender Boards and streamline the
approval process to reduce the time taken for the process.
Negotiations with preferred respondents should only be allowed in exceptional
circumstances.
The development of standard functional specifications.
A respondents capacity to fulfil the tender requirements be a mandatory criteria for
the awarding of contracts.
Electronic Tendering should be introduced in selected agencies.
The guidelines for government funded procurement are clarified on the issue of
hiring individual consultants.
The current procurement guidelines be revised to strengthen and clarify a number of
issues (details in the report)
With the exception of the recommendations on procurement law, this report is highly
supportive of the above recommendations in the CPAR. The recommendations of this
report should be considered in conjunction with those of the CPAR.

4.6.3 CONCLUSIONS
A lead agency, the Procurement Support Bureau, is in place. It provides management

support in some key areas but its resourcing and scope needs to be significantly widened.
This would enable it to focus more on areas such as procurement policy, provision of expert
advice, more comprehensive support to and monitoring of how agencies meet their
procurement responsibilities, and support of government and industry training and
education.
The current procurement guidelines are useful but need to be revised to widen their scope to
include a more comprehensive approach to procurement planning, tender development and
contract management. This revision needs to be supported with training and the provision
of ongoing advice to ensure a more consistent interpretation of the guidelines by agencies.
The internal and external audit procedures need to focus more fully on compliance with the
guidelines and the performance in achieving procurement outcomes. Overall, the incentives
and penalties for compliance with the guidelines needs to be strengthened.
The PSB has provided for training at the procurement officer level but there needs to be
collaboration with the Universities to provide training at the manager and executive levels
and the provision of strategic procurement units in first level degree courses. The issue of
developing a career structure for procurement managers and staff needs to be addressed and
linked to the training and education programs. In other jurisdictions, a lack of career
structure has resulted in few young people being attracted into procurement function, while
the existing staff age and become less tolerant to change.
The development of expertise in e-GP has yet to be addressed and this will be a critical issue
in the implementation of any e-GP strategy.
There is an apparent lack of initial procurement planning and expertise in contract

management at the agency level. Some key management issues at the agency level need to
be addressed, including ensuring more emphasis on procurement planning, raising the level
of contract management expertise, applying internal management controls to the
procurement process and better monitoring of the procurement outcomes via monitoring and
reporting. A system of agency accreditation should be investigated, based on performance
and the capacity of the agencies to deal with complex procurement.
There needs to be a more formal approach to seeking industry sector advice and
participation on procurement policy and process. This may assist in reducing the
widespread problems related to the overly long duration of the procurement process,
contract cost and time overruns, and the subsequent lowering in the quality of procurement
outcomes.
The roles and responsibilities of Tender Boards need to be more clearly stated.
Sri Lanka has a readiness level consistent with Level 2 on the component of Procurement
Management.
There are a number of actions that could be taken to address some of the problems identified
above in the current management of the procurement process. The recommendations are:

9) That in conjunction with Recommendation 1, the role, function and resources of the
Procurement Support Bureau be reviewed by a project group with MOF&P and PSB
representatives, and government agency and industry representatives in relation to:
a) Widening and strengthening its role and authority in policy development, the
management of key procurement process issues, and the reporting and monitoring of
agency performance in meeting their procurement responsibilities.
b) Providing for the required education and training of its staff and suppliers.
c) Providing advice and support to tender boards.
d) Widening its mandate to seek industry advice and representation in developing
procurement policy and issues.
e) Providing advice and support to improve the levels of procurement planning,
contract management, and internal management controls at the agency level.
f) Ensuring that it has the expertise requirements to carry out its wider role.
g) Providing more comprehensive procurement information and advice to government.
10) That a project group, with PSB, government agency and industry representation, review
the existing procurement process in relation to streamlining the decision process and
improving its transparency and integrity, based on the findings and conclusions of this
report and the recommendations of the CPAR conducted in 2002.
11) That the Ministry of Finance and Planning review the role of the Tender Boards at each
level in relation to:
a) Identifying their role and responsibilities.

b) The relationships between tender Boards and their project managers.
c) Increasing their autonomy to make decisions on tendering outcomes.
d) Including industry representation in Ministry and Cabinet appointed Boards.
11) That three suitable persons be given support by the Ministry for Finance and Planning,
to visit and work in e-GP functions in advanced countries, to raise the standard of
expertise to further support procurement development within Sri Lanka.
4.7 ENVIRONMENTAL INFLUENCES
4.7.1 COMPONENT
This component does not have any set parameters, as the environment in each country will
be different. However, sub-issues such as the incentives for GoSL to follow through on
procurement reform, the development of a business model to support the implementation of
the reforms, previous attempts at reform in government, community attitudes to issues such
as corruption and cost over-runs of large projects, and the level of expertise available to
government, will all affect the likely success in planning and delivering an e-GP strategy.
4.7.2 FINDINGS
a) Incentives for e-GP: The GoSL has clearly recognised the international and domestic
economic and political consequences of continuing to have protracted procurement
processes. These processes are largely seen as not being transparent, efficient, or
providing the GoSL with effective outcomes. There is an increasing volume of planning
documents indicating that the GoSL has recognised the need for integrated e-
Government and e-Commerce planning. It would appear that there is a commitment to
provide for the planning and resources necessary to implement these initiatives, which
include e-procurement. This will greatly assist any transition to e-GP.
b) Barriers to procurement reform: The physical barriers are the need to fund and
resource procurement reform and the further development of the ICT network. The
more intangible barriers are how to improve the transparency and consistency of the
process, provide a more supportive environment to people who raise complaints, and to
develop a more performance orientated approach to the management of procurement.
4.7.3 CONCLUSIONS
There is clear commitment by the GoSL to plan for procurement reform and the barriers are
well recognised
No recommendation are made for this component.
4.8 CURRENT E-PROCUREMENT INITIATIVES
4.8.1 COMPONENT
It is often the case in many countries that some initiative to establish specific e-procurement
systems has already taken place. This may or may not be linked to an overall strategy to
pursue e-GP. However, the list of sub-components shown below could be used as future
guidance to the issues involved in considering how these systems might be integrated into an
overall e-GP strategy.
In countries that have successfully introduced e-procurement systems, the government has
taken the initiative to provide a context for the development and implementation of the
system(s). This is the case even if the system being implemented has been developed by the
private sector and is being modified for government procurement use. There is a
government lead agency to oversee the development and implementation of e-procurement
system(s).
The systems (usually tendering systems) are web based and commonly have the following
characteristics:
a) Information on procurement opportunities, progress of the procurement process, the
award of contract and price is available to the public free of cost.
b) Access for registered buyers and suppliers is free or at very affordable cost.
c) Electronic download of documents is available.
d) Electronic upload of documents is available.
e) The system(s) provide security and privacy of information.

f) All government procurement can be accessed through nominated sites with a common
set of rules.
g) Common inter-operability, transmission of information and procurement standards are
applied to all systems.
h) The systems are linked to supplier and buyer registries.
i) The systems link to other back-office systems such as finance and asset management.
This is not a common feature yet but is developing.
j) No proprietary hardware or software is required by suppliers to use the system, other
than a web browser and access to the Internet.
k) Government has control over the further development and use of the system (even
though the delivery and support of the services may be via the private sector).
Specific legislation to support the use of e-procurement is in place (eg. digital

identification). Training for buyers and suppliers is available. Common standards for the
operation of e-procurement systems are being developed and longer-term links to other
back-office systems are being planned.
The key issue here is the extent to which e-procurement systems are being developed so as
to be compatible with a longer-term national e-GP strategy.
4.8.2 FINDINGS
a. The GoSL has not addressed this component as yet. There are strategies outlined within
the e-Sri Lanka: Policy on e-Government Preliminary Draft May 2003 to pilot e-
procurement in selected situations, to develop website support and standards, and to
introduce guidelines for e-procurement.
b. The Sri Lanka Development Gateway (LkDG) has the facility to advertise tender
opportunities in Sri Lanka that are foreign funded, and send targeted tender information
to individuals.
c. The Procurement Support Bureau indicated that it was committed to moving to e-

Procurement. It currently has a website www.psb.gov.lk This site provides information
on issues such as policy, training, government circulars on procurement, notices,
standard documents in use, and the procurement guidelines. This site is being upgraded
and incorporated into a new Department of Public Finance website www.pfd.gov.lk
4.8.3 CONCLUSIONS
The fact that Sri Lanka has not addressed this component as yet is not a drawback. Some
countries have developed, or been given e-procurement systems, before any integrated e-GP
strategy had been fully formed. This situation can lead to significant problems in
connectivity with other systems, pre-empting of system standards, increased costs to
government and the collapse of these systems. In the implementation of a sustainable e-GP
approach the selection, development and implementation of e-procurement systems is very
much done in the context of the selected strategy. Most successful implementations have
begun as pilot projects accompanied by steep learning curves by the participants. This
approach has already been recommended in Section 4.4.4. It is a key reason why the ADB,
the Inter-American Development Bank and The World Bank are working together to
develop an e-GP Roadmap and an e-GP Strategic Planning Guide for the use of member
countries. A revision of the survey used for this report will also be included.
Sri Lanka has already started to develop e-Government and e-Commerce strategies and
plans to develop an e-Procurement strategy. Pre planning for selecting a suitable system to
pilot could be considered as long as there is close interaction with the selected procurement
strategy.
Sri Lanka has a readiness level consistent with Level 2 on the component of Current e-
Procurement Initiatives
12) That the GoSL make use of the proposed Multilateral Development
Banksharmonised documentation on the strategic planning and implementation of e-
GP, which is expected to be available in early 2004. This documentation could be
used as a basis for continuing the process of procurement reform and planning a pilot
implementation of e-procurement systems.
4.9 OTHER ISSUES
No other significant issues were raised that could not be included under the components
above.
5 RESPONDENTS VIEWS ON ASSISTANCE
5.1.1 VIEWS
Respondents were of the opinion that that addressing the following issues would most benefit Sri
Lanka in relation to procurement reform and the transition to e-GP.
a) Reduce the red tape of the procurement process and ensure that all government agencies are
consistent in their application of the process. Suppliers have to learn about a very complex
process and often have to buy information that should be freely available. Streamline the
decision making in the process and assign authority to make decisions at the Tender Board and
project manager level to reduce time taken for the process (currently two years for major
projects).
b) Bring the procurement processes of the key donors and the GoSL into line so there is some
consistency between them, and therefore an overall reduction in the time taken to complete the
process. The provision of more standardised documents would assist in achieving better
consistency.
c) Improve the setting of specifications and evaluation criteria so they are more representative,
unambiguous, and not prone to change later in the procurement process. This will also mean
that less legal action and protracted negotiation will be required in dealing with disputes over
interpretation of specifications.
d) Cabinet should only be the final decision maker for procurements of a national strategic nature.
Ministerial influence should be formally removed form all other procurement processes.

e) More active monitoring and enforcement of compliance with the procurement guidelines is
required.
f) Improve the communication between project managers and their tender boards. This may
reduce wastage of time and resolve the conflicts of interest that often exist.
g) The GoSL should provide training for contract administrators (managers). Suppliers who
responded to the survey were critical of the level of expertise exhibited by the government
procurement staff and managers with whom they dealt.
h) Trial an e-procurement system, in perhaps one or two industry sectors, to see to what extent it
can trigger improvements in the efficiency, transparency and integrity of the procurement
process.
5.1.2 CONCLUSIONS
The general views of respondents are very consistent with the findings and
recommendations in this report. Most of their views focus on improving the existing
process and streamlining the decision making by giving more authority at lower levels in the
process.
No additional recommendations are made for this section.
6 CONCLUDING COMMENTS
The levels of readiness for Sri Lanka to transition e-GP, as determined in this report, are
summarised in Table 3.
TABLE 3
SRI LANKA: LEVELS OF READINESS FOR E-GOVERNMENT PROCUREMENT
No COMPONENT LEVEL OF READINESS (2003)

1 Government leadership and planning 3
2 Direct and supporting legislation 3
3 Regulation 2
4 Infrastructure and technology 2
5 Industry development 2
6 Procurement management 2
7 Environmental influences Not applicable
8 Current e-procurement initiatives 2
The levels or readiness reflect the fact that some of the basic structural sub-components of the
existing procurement environment, necessary for a transition to e-GP, are in place. These
include:
a) A lead agency (PSB) to manage government procurement issues, and some support from
the Ministry of Finance and Planning are in place.
b) A raft of GoSL preliminary planning has been completed on e-Government and e-
Commerce that could encompass e-GP.

c) The new ICT Agency of Sri Lanka, which can drive the electronic agenda, was established
in July 2003.
d) Procurement guidelines that focus on the tendering process are used across government
agencies.
e) An appropriate legislative structure is established, which with some revision could support
e-GP.
f) Some supporting legislation in relation to corruption and the behaviour of public servants
has been established.
g) Annual external audits of government agencies are conducted by the Auditor General, but
have a limited focus on procurement.
h) An evaluation and management system using Tender Boards at different procurement levels
is in operation.
i) The development of the LkDG as a portal is providing support to industry and some limited
advertising of tender opportunities.
j) The PSB provides some limited support of government procurement that includes agency
support, project monitoring, policy development and capacity building.
k) The introduction of a web based portal that could support e-procurement is being sponsored
by the PSB.
The above structural sub-components are not enough in themselves to provide an existing
procurement environment at a level that could easily be transitioned to a sustainable e-GP
environment. Many of the management, regulation and infrastructure sub-components
necessary to provide a viable existing procurement environment are not sufficiently developed
or are not in place. These sub-components would need to be addressed to ensure there is a
viable existing procurement environment in which to develop e-GP. Substantial benefits can
accrue to the GoSL from both reforming the existing procurement environment and then
gaining the additional transparency, efficiency, effectiveness and access from the
implementation of e-GP.
The sub-components that need to be addressed include:
a) The PSB would need wider responsibilities and more resources with appropriate expertise
to be effective and deal with the changes required in the existing procurement environment.
This resource could also be used to support the transition to e-GP.
b) Procurement policy needs to be broader in scope, formalised, directly linked to the
guidelines, and widely promoted to government agencies and industry.
c) The current procurement guidelines focus on the tendering process and need to be widened
in their scope to include procurement planning, contract development and contract
management.
d) The content of the procurement guidelines needs to be reviewed; they should be interpreted
more consistently by agencies, and agency compliance with them needs to be more robustly
enforced.
e) The direct and supporting legislation needs to be more formalised from a procurement point
of view and more strongly enforced.

f) The regulatory framework is insufficient to be effective in its current state, and should be
widened to include the development of management controls, agency accountability
mechanisms, and to improve the expertise of procurement managers and staff.
g) It needs to be accepted that development of the national infrastructure will take time and
that interim strategies such as the VGK (Internet Centres) will need to be used to address
the issues that restrict access to the internet.
h) The procurement process needs an overhaul in terms of its complexity, lack of transparency
and efficiency, provision of stronger accountability mechanisms and to meet the concerns
raised by suppliers.
i) The decision making process within the procurement process needs to be reviewed in terms
of delays, reducing the influence of Ministers, and providing more autonomy for Tender
Boards at all levels.
j) Specific attention needs to be given to improving the writing of specification and evaluation
criteria, standardised documentation, pre-procurement planning, contract management, and
the development of a comprehensive procurement database.
k) Industry needs to be more involved in government procurement by increased representation
on Tender Boards, participating in industry forums and by being given better access to
training and procurement information.
l) Preplanning for the adoption of e-procurement needs to be progressed by identifying the
required legislative changes (if any), setting standards and identifying possible pilot
opportunities for e-procurement systems.
The majority of recommendations (1 to 10) in this report focus on bringing the existing
procurement environment up to a level where a transition to e-GP would be both manageable
and sustainable. A well-managed existing procurement system provides a base for the effective
application of e-procurement process and technology. Recommendations 5, 11 and 12 are
aimed at making a cautious start to e-procurement in the government procurement market.
Recommendation 12, the development of an e-GP Strategy, should be done early but does not
preclude the issues in the other recommendations being addressed in tandem. The development
of a comprehensive e-GP strategy will undoubtedly lead to specific additional
recommendations regarding sub components raised in this report.
Implementation Costs
Based on observations in countries that have implemented e-GP, the general, preliminary,
estimated costs to resource and implement the recommendations of this report, over a four year
period, are shown in Table 4.
The assumption is that all key components would be addressed and a fully functional e-
Tendering system would be put in place. The implementation of e-Purchasing and e-Contract
Management systems would involve additional cost. At this stage, these cost estimates are
indicative rather than actual. The staff numbers have been estimated, by scaling up the
numbers of staff actually deployed to implement and support e-Tendering only in the smaller
jurisdiction of Western Australia. A full analysis would be required to determine the actual
costs, as they are highly influenced by factors such as the scope of change to be attempted, the
ability of agencies to absorb costs and transfer resources, the arrangements made to acquire e-
systems, and policy issues such as whether the services will be free to users.

TABLE 4
ESTIMATED COSTS TO IMPLEMENT REPORT RECOMMENDATIONS

OVER 4 YEARS
Activity Assumptions Estimated Costs

(over 4 years)
Wider PSB support and 60 new staff, salary Rs 380,000 pa, Rs 228,000,000
management (develop a lead associated on-costs Rs 570,000 pa. with
agency) some reduction in costs as activities are
completed
Expertise support to PSB Development of expertise, training, Rs 40,000,000
implementation advice etc.
Changes made by other Use existing staff levels but allow Rs 32,000,000
central agencies RS 8,000,000 pa for additional
implementation costs
Other government agencies Assume costs to support e-GP is Rs 0
implementation and support absorbed into current budgets of each
costs (eg Auditor General) agency
Annual maintenance and Rs 4,000,000 pa Rs 16,000,000
support of e-Tendering
system only.
Obtain licence for and Licence for existing system modified for Rs 24,000,000
implement an fully functional Sri Lanka
e-Tendering system only.
TOTAL COSTS Rs 340,000,000
The draft CPAR, conducted by the three key donors, has indicated that some USD 0 75 million
(RS 94,615,000) should be donated as technical assistance to address issues in relation to the
development of legislation, training, curriculum development, standardised documents, e-
governance and e-commerce. This funding would complement and overlap the costs estimated
to implement the recommendations of this report.
7 ATTACHMENTS
Attachment 1: Sri Lanka: Survey on Readiness for Electronic Government Procurement (e-GP)
as used and modified for this report.
8 REFERENCES
1) Master Plan for Public Procurement Management Reform, Royal Thai Government,
Ministry of Finance, Office of Public Procurement Management, July 2003.
2) Government of Sri Lanka report Regaining Sri Lanka: Vision and Strategy for Accelerated
Development, May 2003.

3) Policy on e-Government, Preliminary Draft, May 2003, Government of Sri Lanka
4) Guidelines on Government Tender Procedure, Ministry of Finance and Planning, Revised

Edition 1997.
5) Revised Guidelines on Government Tender Procedure for Projects Assisted by Foreign

Financing Agencies, Ministry of Finance and Planning, Revised Edition 2000.
6) Financial Regulations of the Government of the Democratic Socialist Republic of Sri

Lanka, 1992
7) The Commission to Investigate Allegations of Bribery or Corruption Act 1994
8) Bribery Act 1954
9) Annual Report 2000, The Commission to Investigate Allegations of Bribery or Corruption
10) Sri Lanka Development Gateway, e-Readiness and e-Needs Assessment Report 2002.
11) Readiness for the Networked World, A guide for Developing Countries, Centre for
International Development at Harvard University, www.cid.harvard.edu/cidtg
12) Sri Lanka Country Procurement Assessment Report (Draft), South Asia Regional
Procurement Unit, The World Bank, November 2002.
13) Report of the Auditor General for the Year 2002, First Instalment, Volume 1.

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ASIAN DEVELOPMENT BANK

GOVERNMENT OF SRI LANKA

SURVEY OF READINESS FOR

Sri Lanka: Readiness for e-GP Report-final 2

c) Management of the procurement function: the development and management of contracts,

Electronic Government Procurement (e-GP) is defined as the online application of information

Existing procurement environment is defined as the jurisdictions current procurement approach

GoSL Government of Sri Lanka

1) Government leadership and planning

PSB Procurement Support Bureau.

Sri Lanka: Readiness for e-GP Report-final 3

The methodology underlying the survey is as follows:

1) Government leadership and planning

Level of Generic Descriptor

The key conclusions are summarised below.

Sri Lanka: Readiness for e-GP Report-final 5

SRI LANKA: LEVELS OF READINESS FOR E-GOVERNMENT PROCUREMENT

No COMPONENT LEVEL OF READINESS (2003)

The sub-components that need to be addressed include:

Sri Lanka: Readiness for e-GP Report-final 7

Indicative Costs of Implementation

ESTIMATED COSTS TO IMPLEMENT REPORT RECOMMENDATIONS

Activity Assumptions Est. Costs

3) That a regulatory framework be established and managed by:

a) Considering the formation of a separate, independent, regulatory body that is

Sri Lanka: Readiness for e-GP Report-final 9

a) Identifying their role and responsibilities.

Sri Lanka: Readiness for e-GP Report-final 10

2.1 WHAT IS ELECTRONIC GOVERNMENT PROCUREMENT?

Electronic Government Procurement (e-GP) is defined as the online application of information

A schematic representation of a mature example of e-GP is shown in Diagram 1.

e-GP SCHEMATIC OVERVIEW

Key Components Supporting e-GP

Sri Lanka: Readiness for e-GP Report-final 11

There is also strong support from the components of:

2.2 WHY ELECTRONIC GOVERNMENT PROCUREMENT?

a) Improved domestic and international confidence in the integrity, transparency and

d) Improved management of procurement through a more strategic approach to

Sri Lanka: Readiness for e-GP Report-final 12

3 CONDUCT OF THE SURVEY

3.1 THE SURVEY

If a country already has an existing well-supported, comprehensive, procurement approach

1) Government leadership and planning

3.2 SOURCES OF INFORMATION

3.3 E-READINESS LEVELS

Sri Lanka: Readiness for e-GP Report-final 15

3.4 AGENCIES CONSULTED / ACKNOWLEDGEMENTS

Ministry of Finance and Planning (Procurement Support Bureau)

3.5 CONTEXT OF THE SURVEY

increase full time employment by creating two million jobs;

4 SURVEY FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

4.1 GOVERNMENT LEADERSHIP AND PLANNING

capacity building for government procurement via training, support to agencies

Procurement guidelines (see References 4 and 5), based on World Bank/Asian

d) Procurement strategy: A coordinated, integrated, national strategy on procurement is

f) Common approach: A common approach, based on a set of procurement guidelines, is

the current function of policy and guideline development and implementation;

4.2 DIRECT AND SUPPORTING LEGISLATION

Sri Lanka: Readiness for e-GP Report-final 20

a) Procurement Legislation: There is no specific legislation relating to procurement.

reducing delays in projects, particularly foreign funded projects;

b) Supporting legislation: There is some supporting legislation. The Commission to

Sri Lanka: Readiness for e-GP Report-final 21