ETHICS e-tendering system

Before the products for public procurement in Denmark reaches the shelves of the electronic
supermarket they are selected through a thorough tendering process. The tendering process is
handled by ETHICs - the Electronic Tender Handling, Information and Communications
System. The system was developed by the public controlled company National Procurement ltd.
(SKI) in Denmark in cooperation with IBM and its business partner [inno:vation]. Ethics now runs
in Denmark, Portugal, Malta and Slovakia.

1 ETHICS introduction to the electronic tendering system

The Danish National Procurement Agency Ltd called SKI is responsible for issuing public
tenders and administering Frame Contracts on behalf of central and local Governments in Denmark.

ETHICS was developed by SKI in cooperation with IBM and the IBM business partner
[inno:vation]. Together with [inno:vasion] SKI has formed the SKI consortium that owns and
maintains the tendering solution ETHICS. The SKI consortium has entered a global agreement with
IBM to market and service the ETHICS solution outside Denmark. In 2003 the ETHICS solution
was demonstrated at the EU eEurope eGovernment seminar in Como and awarded as one of the top
5 eGovernment solutions.

As indicated in the graphic Ethics e-tendering at a glance ETHICS is designed to handle the
tendering process of framework contracts for public administrations. When the final selection of the
offers is made the actual framework contracts is the input the buying phase. In Denmark the buying
phase is handled by various e-procurement systems and notably the www.doip.dk. www.doip.dk
can be regarded as the electroninc supermarket for public purchasers. The www.doip.dk can
integrate with the backoffice ERP system of the public purchasers and thus DOIP is a more
advanced than the ordinary webshop.
ETHICS: A Web-based system to automate the tendering processes

ETHICS which works with any Java-supported browser is an open, secure Web-based
procurement system enabling agencies to plan, execute and evaluate public tenders in compliance
with EU-defined legal guidelines. The solution covers all aspects of operating a public tender
organization, including the annual planning cycle, and tender selection and timing, plus:

Official pre warning and external tender announcement procedures

Daily management issues with work in progress, including online communications with bidders
Online, secure tendering using digital signatures
Transparent decision making based on a questionnaire design tool
Tool for creating questionnaires and integrating them into vendors own systems
Reuse of knowledge and templates, contractual terms, questionnaires and forms
A comprehensive tracking and exception reporting system that helps control simultaneous tenders
Concurrent and multiple language support

ETHICS was developed by in cooperation with SKI and ETHICS is now marketed by IBM as an
IBM product. Ethics is sold to more European countries including Portugal, Malta and Slovakia.

2 E-tendering procedues
In 1995, National Procurement ltd. (SKI) issued a tender for a three-year frame contract for IT
equipment for its public-sector customers. But the tasks involved proved daunting: The Company
received more than 30,000 pages of proposalsin highly varied formatsfrom 36 vendors. Coupled
with cumbersome, paper-based contract terms, the evaluation required many government
specialists.

As a result SKI decided to create an automated system that would reuse contractual terms and
questionnaires and ensure an open, transparent evaluation process. It needed a comprehensive e-
procurement system that would ease the burden of managing public tenders, while maintaining the
high levels of security, confidentiality and contractual fairness required by EU guidelines. This is
the foundation of the ETHICS -the Electronic Tender Handling, Information and Communications
System.

All tendering procedures take places in three distinct processes.

The preparation process. In the preparation phase the tender material is prepared. It
involves analysis of the need for procurement and end-user needs are mapped in detail in
close cooperation with the end-users in the public sector. The preparation further involves an
analysis of the market and the development of selection criteria and a tender plan in order to
insure that all milestones in the tendering process is met. For framework contracts it is
customary to publish an indicative notice, that a tendering process in under way.
 The tendering process. The tendering phase is the actual tendering procedure from the
publication of the Tender Notice to the tender closing. In the process tender docs is send out
and queries are handled. Before the tender closing all the bids arrive back to be evaluated.
The awarding process. The awarding process involves a thorough evaluation of all the bids
according to the criteria in the tender notice. In the case of the IT tender in 1995 this
involved a systematic evaluation of 30.000+ pages each presented in its own way. The
costly challenge for the SKI was to make it both a transparent and fair process at the same
time. The result of the awarding process is the awarding of the contracts.

ETHICS is build as a webbased database with a querying system which underlies and supports all
the tendering phases: preparation, tendering and awarding. In the graphic below the tendering
process with ethics is diagrammed. The use of the databases system below the tendering process
gives a huge advantage in the evaluation process on speed, accuracy and transparency. And since
the system is run on the internet more evaluators can cooperate on the evaluation process.

Since ETHICS has addressed transparency issues, it has virtually eliminated the need for bidders to
complain about the outcome of a tender, which helps eradicate potential legal issues. Every step in
the procurement process, including approvals, documents, or suggestions, is now logged and
nothing can be hidden away. If a vendor wants a thorough explanation of why they were not
chosen, for instance, SKI is now in a position to explain that in detail.

To the vendors there are multiple advantages such as browser based clients, multiple, concurrent
language support, on-line announcements, XML based questionnaire design tool. To the tendering
procedure digital signatures, encryption and time stamping is used.
The preparation process

In the preparation fase ETHICS helps to make a precise planning of each tender project, and
make sure that all milestones in the project is met. Management can take an overview across all
tender processes running or planned for a year in order to re-allocate resources or to prioritize
the tendering processes. Each tender is has an overview of all related documents and makes
sharing of information with relevant parties easy.
The tendering and award process

The tender notice is published through ETHICS and the tender follows the planed workflow.
Trivial tasks are automated and a common library of templates, rules, legal texts and questionnaires
is maintained. The tender plan makes an automatic control of deadlines. In the award process the
system has a number of efficient decision support tools with build in options for what if to prof
and test validity of choice.

3 Costs and benefits

Main benefits
SKI has benefited substantially from the solution. ETHICS has speed up processes and make the
organization work more efficiently. SKI doubled the number of frame contracts in the portfolio with
the same headcount [of specialized consultants], even in a situation with a 50 percent turnover rate
of staff.

At the same time, since ETHICS has addressed transparency issues, it has virtually eliminated the
need for bidders to complain about the outcome of a tender, which helps eradicate potential legal
issues. Every step in the procurement process, including approvals, documents, or suggestions, is
now logged and nothing can be hidden away. If a vendor wants a thorough explanation of why they
were not chosen, for instance, SKI is now in a position to explain that in detail.
Ethics is the system handling the tendering procedures in a transparent way.

After the selection of the next e-procurement system, which meets the suppliers is the electronic
catalogues.

Main costs
The main cost for hardware is the server and internet connections preferably equipped with a
UPS, backup or replication. Hardware needs at lease 4 * 20 GB.

The main costs for software is Ethics, Lotos Domino 6.5 or better, Tomcat or IBM Websphere,
Apache Server (OS software), Adobe 6.0 and an operating system such as Windows or Linux. The
Ethics software its selves costs from 100.000 USD for 10 tenders a year to 300.000 USD for an
unlimited number of tenders.
Cost of implementation
Then of cause there will be expenses for implementation of the system and training of staff. SKI
points to two different roads: either a lean implementation or a full implementation of the system.

The lean implementation is the easy bottom-up approach where you install the system and start
up using the IT infra structure as-is. In the start out existing documents and templates is used and
perhaps not all digital functions is used right from the beginning.

The full implementation is a more advanced top-down approach where the procurement
organization is reengineered, all tender material is redesigned and documents and templates are
standardized. The system is not started up before every notch and bolt is the right position.

Experts on ETHICS

Sren Duus stergaard, IBM SDO@dk.ibm.com

ETHICS Konsulent Hans Jesper mand p e-mail: hje@ski.dk

Inno:vation
Is an IBM businesspartner and the developer of the Ethics system.
Ethics means Electronic Tender Handling, Information & Communications System

[Inno:vation]
Forskerparken Symbion
Fruebjergvej 3
DK-2100 Copenhagen OE
Denmark
Phone +45 7022 7007
Fax +45 7022 7008.
Web: http://www.innovasion.dk/1.html

Contact person
Sren Duus stergrd at sdo@dk.ibm.com

Public authorities

National Procurement Ltd. - Denmark

Zeppelinerhallen, Islands Brygge 55
DK 2300 Kbenhavn S
Phone.: +45 3342 7000
Fax.: +45 3391 4144
Homepage: www.ski.dk
E-mail: ski@ski.dk

Project Manager at National Procurement Ltd., Vagn Andersen, Ethics the electronic procurement
system, va@ski.dk
Consultant Hans Jesper mand p e-mail: hje@ski.dk
The Ministry of Science, Technology and Innovation
Head of Division Kim Brinckmann
Phone. +45 33 92 97 00
e-mail: kbr@fsk.dk.

Helle Schade-Srensen
Phone. +45 33 95 52 36
E-mail: hss@vtu.dk

Litterature and websites

IDABC (May 2006): eGovernment in the Member States of the European Union, p. 221

eGovernment Good Practice Framework, Good Practice Database Case: Electronic Invoicing in
Denmark URL: http://www.egov-goodpractice.org/gpd_details.php?&gpdid=1848

eGovernment Good Practice Framework, Good Practice Database Case: ETHICS: Electronic
Tender Handling, Information and Communications System (Denmark) http://www.egov-
goodpractice.org/gpd_details.php?&gpdid=232

Helle Zinner Henriksen & Volker Mahnke (2005): E-Procurement Adoption in the Danish Public
Sector The Influence of Economic and Political Rationality. In Scandinavian Journal of
Information Systems, 2005, 17(2):85106.
URL: http://www.cs.aau.dk/SJIS/journal/volumes/volume17/no2/06henriksenmanhke.pdf

Gatetrade.dk website: http://www.gatetrade.dk

Ethics website: http://www.innovasion.dk/
National Procurement ltd. Staten og kommunernes indkbscentral (SKI: http://www.ski.dk/ )