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The future of public procurement?

By Christian Lanng, CEO, Tradeshift

The timing of the UK Department of Health's adoption of PEPPOL ("Pan-European Public Procurement Online) may just help accelerate the economic recovery in EU member countries. With billions of euros tied up in supply chain paperwork, small and medium-sized businesses stand to benefit from faster, digitised procurement transactions.

Among the EU public-sector programs, PEPPOL is a rising star. In the UK, when the Department of Health communicated the mandate to use PEPPOL and GS1 standards for the NHS e-procurement strategy to all trust boards, not one questioned the decision or complained about it, according to Chris Doyle, head of healthcare for GS1 UK.  The adoption of PEPPOL by UK’s Department of Health marks the largest organisation private or public of this international standard.

For the uninitiated, PEPPOL stands for the Pan-European Public Procurement Online project, and since 2008 it has been developing and implementing technology standards to align business processes for electronic procurement across all governments within Europe.

The efforts of the UK National Health Service (NHS) and other early adopters of PEPPOL and GS1 standards will result in substantial savings, efficiency improvements, and greater supplier enablement. It is a big step forward for interoperable public-sector services. An e-procurement reality can boost EU competitiveness because it will usher in new cross-border market opportunities.

By the end of 2015-16, NHS trusts are projected to cut £1.5bn of procurement efficiencies by stabilizing their non-pay spending. Others have had a head start.

Scotland, a PEPPOL trailblazer, has transformed public procurement and now has a single P2P system that covers over half public sector procurement spend. An “Information Hub” captures and analyses over £9bn spend across all sectors and helps to deliver over £1.2bn savings. The “Scottish Model” as they call it, has also delivered social and environmental benefits, stimulated growth, and removed barriers to access for competitive SMEs. 46% of procurement spend goes to SMEs, with half of that going to companies with less than 50 people.

According to Alastair Merrill, Scotland’s director of procurement and commercial, the model “shows that an approach that is both business friendly and socially responsible can not only deliver cost efficiencies but also support innovation, investment and sustainable economic growth.”

Neighbouring Ireland made a similar commitment to PEPPOL last year when Minister Brian Hayes formally launched the first Irish Government and public sector e-invoicing project. The country is on the path to having all public sector authorities use e-invoicing through PEPPOL by 2016. According to a vendor in the region, e-invoicing alone can reduce the costs of doing business in Ireland by €250 million annually.

In Norway, over 2.7 million electronic invoices were exchanged using PEPPOL, with 1.4 million of that within the first three months of 2014. And in Sweden, which is one of four PEPPOL Authority nations, the private sector such as the construction industry is currently testing PEPPOL-based solutions.


It’s also worth mentioning that as of this past March, the Open PEPPOL association reached 100 members from the public and private sectors, and now covers 18 European countries, Russia and USA. The momentum has never been higher. 

With a public sector mandate, common standards and common infrastructure, PEPPOL and other EU digitization programs have the power to unleash enormous opportunity for the entire region. Procurement will grow to be more transparent and connected, spawning collaborative innovation across supply chains on a European level. Some estimates peg the savings of e-procurement at €50 billion per year.

We’re optimistic that we’ve reached a tipping point for e-procurement adoption and more will follow -- and help at an important time in our economic recovery.

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