Electronic auction to downward adjustment of the starting price at the Uzbek Republican Commodity Exchange (UZEX)

Oct 14, 2015

Public procurement system in any country is linked to the provision of public services; by improving the system it is possible to achieve significant budget savings, as well as improve the quality of public services. One of the areas of reform is the introduction of e-procurement, which promotes competition and increases efficiency and transparency of public procurement.

Modern information technology has rapidly invaded all spheres of society, facilitating a rapid search for necessary industrial, commercial and other information to assist various companies and organizations. At the same time the technology is extensively used in the public sector. Since April 2011, an innovation appeared in one of the most important areas of cooperation between the state and business, namely in the field of public procurement: Electronic procurement was introduced. The following elements of E-Procurement have been applied: 1) a special information portal for public procurement (www.dxarid.uz) was created; 2) Electronic auction to downward adjustment of the starting price, to put it more simply, the electronic auction was introduced at the Uzbek Commodity Exchange.

At a special information portal it is mandatory to post in advance the advertisements about the upcoming public procurements to be carried out by budget organizations (ten days before the supplier was determined). Log-in to the portal and review of procurement information is free and does not require an authorization.

At the information portal you can also find details about tenders (type of procurement exceeding 100 000 US dollars), broken down by sectors of the economy, and ads on purchases in the amount of 300 to 100 000 US Dollars. Interested suppliers can easily find the right ads by regions and by goods. In doing so, each ad is provided with additional information: name and address of the customer, specification of purchased goods (works, services), the initial price, volume and timing of deliveries, the deadline for receipt of applications, etc.

Electronic trades are conducted on such goods as clothing, shoes, furniture and office equipment, stationery, food, computers, as well as services including repairs of computer and other IT equipment, rental costs, and others for the total amount ranging from 300 to 100 000 dollars under one contract.

Business entities, including small businesses, may participate in the electronic auction bid after passing a fairly simple procedure of accreditation in the Uzbek Commodity Exchange.  In order to do so it's enough to fill out an application providing a notarized card with signatures and a certificate of small business membership. After that a capacious market for electronic public procurement is opened for a business entity and it can participate in electronic trading throughout the country.

At the information portal you can also find useful information both for the government customer, and for potential suppliers. Information includes legislation on public procurement, news, and possibility to participate in forums. The portal also conducts interviews and discussions for further improvement of the procurement procedures and the interface of the internet portal.

Electronic trading is gaining momentum. An extensive network of branches of the Uzbek Republican Commodity Exchange has been created and training courses for government customers conducted. Accountants and financial managers in over 26 thousand of budget organizations have been trained at eight-hour courses. After this course, government customers are able to post procurement notices directly, from their workplaces. This facilitates their participation in electronic trading.

Here are some results of e-auction trading in 2014:

The number of public procurement suppliers accredited at UZEX made 32,181, and the amount of transactions totaled to 467.5 billion UZS.  20% of the starting price has been saved amounting to 117.4 billion UZS. This amount is sufficient for constructing a school with the capacity to house 14 000 pupils. It is encouraging that small businesses have won contracts worth 467.5 billion soum or 99.4% of the total amount of electronic trading.

After the information portal and electronic trading were introduced small businesses obtained a complete source of information about all upcoming public procurements and got an access to a space for their active participation, which increased their chances for winning government contracts. In other words, small businesses became full members of the public procurement market, which would contribute to their further development and create new jobs.

Opportunities for small businesses in public procurement are expanding in other areas, for example, it was decided that the state will purchase some of the goods (works, services), exclusively from small businesses.

Thus, speaking about the electronic trading system, we can say that this is not a tribute to fashion and time, but rather a necessity, as the reform processes taking place in the economy, require improvements in the activity of state bodies, their relationship with the businesses and will inevitably affect the public procurement system.

Operation of the information portal and electronic trading will undoubtedly increase transparency and openness of government procurement, save budget, and enhance capacity of small businesses.