Institutionalization of Public Systems in Developing Countries: A Case Study of eProcurement in Indonesian Local Government

Fathul WahidDepartment of Information Systems, University of Agder, Kristiansand, Norway and Department of Informatics, Universitas Islam Indonesia, Yogyakarta, Indonesiafathul.wahid@uia.no

Introduction•I

n developing countries:• Implementation of public systems/eGovernment has had to confront

many serious challenges, and generally has had a poor record of success

• One of the main challenges relates to institutional issues.• Implementation of eProcurement is very challenging • Lack of institutionalization is identified as one of the main causes of

failure

•Research question

• How does institutionalization happen during the implementation of a public system?

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eProcurement•e

Procurement systems • provides information only, or• facilitates transaction

•Benefits:

• more efficiency process, cost reduction, enhanced transparency, better access for SMEs, and corruption avoidance

•Issues:

• system integration, re-engineering the process, top management support, and implementation strategy, technological barriers, governing body resistance, and vendor resistance

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eProcurement in the public sector•S

imilarities with the private sector• Its main objective is to find goods or services needed at a potential

cheapest price and between acceptable limits of specifications or quality

•Differences:

• It should adhere to a number of rigid regulations• It depends on the political decision• The variety of goods or services purchased are greater• The transparency becomes its basic requirement• It is often implemented under a unified public procurement plan that

involves various government agencies (such as department levels)

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Institutional theory (1)•I

nstitutional isomorphism• Occurs when an institution has to respond to various external pressures

(DiMaggio & Powell, 1983)• Isomorphism pressure: coercice, normative, mimetic (DiMaggio & Powell,

1983)• Basis of legitimacy: legally enforced, morally governed, culturally supported

(Scott, 2008)

•Institutitional logic

• Guides its organizing principles and provides social actors with vocabularies of motive (Thornton & Ocasio, 2008).

• Defined as ‘the socially constructed, historical patterns of material practices, assumptions, values, beliefs, and rules …” (Thornton & Ocasio, 2008).

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Institutional theory (2)•I

nstitutional entrepreneurship• Actors who are taking advantage of the position to mobilize support

and resources to create and empower institutions (DiMaggio, 1988) • Collective institutional entrepreneurship to overcome collective

inaction (Wijen & Ansari, 2007)• Support mobilization: convening, leveraging, accumulation (Dorado,

2005).• Institutionalization:

• A process of instilling values: to infuse with value beyond the technical requirements of the task at hand (Selznick, 1957)

• A process of creating reality: occurs whenever there is a reciprocal typification of habitual actions by types of actors (Berger & Luckmann, 1967).

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Case and method•C

ase:• Implementation of eProcurement in Yogyakarta (a local government in

Indonesia) in four year period (2007-2011)

•Method:

• Interpretive case study• 11 interviews (various levels: from administrator to the mayor),

observations (several visits), and document analysis

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Development of implementation2008 2009 2010 2011

Total

2008-2011Number of work packages tendered via eProcurement

11 51 137 247 446

Selection criteria/work packages tendered

Attractive work packages valued between IDR 500 million and 1 billion

All work packages valued at more than IDR 500 million

All work packages valued at more than IDR 100 million

All work packages valued at more than IDR 100 million

-

Value (IDR million)

5,449 78,866 141,267 249,278 471,741

Efficiency (IDR million)

225 12,649 22,404 37,567 72,844

Efficiency (%) 4.34 16.18 16.10 15.07 15.44

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Critical events and status

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Institutionalization processMain concept Sub-concept 2007-2008 2009-2010 2011

Institutional isomorphism

Isomorphic pressure

Normative Coercive Mimetic

Basis of legitimacy

Morally governed

Legally enforced Culturally supported

Institutional logic - Transparency and accountability

Efficiency Better process

Institutional entrepreneurship

Resource mobilization

Convening Leveraging

Institutionalization

Instilling values Creating reality

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Some quotes: isomorphism‘We made a study by visiting the local government that have used eProcurement. In 2007, we visited the City of Surabaya which has developed and used an eProcurement application. … Then, we visited the City of Bogor which was going to use the application made by Surabaya. … In Bogor, we got information that Bappenas was developing a similar application.” (Administrator)

‘Yes [the perception changed]. After using the system for some years, they realized that it made a faster process since everything was available online. The eProcurement officers felt more comfortable, no more pressures, no more terrors.’ (Head of department)

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Some quotes: logic‘The direct communication between the internal procurement committee and the suppliers/contractors, and between the suppliers/contractors, would give an opportunity for “affairs”’. (Administrator)

‘We then could monitor the efficiency [of the procurement process] directly. When the procurement processes were under the authority of the departments, it took a long time to obtain the data [of the procurement process].’ (Head of department)

‘The positive impact on the procurement officers’ side was that we were feeling more comfortable with the process. No more external pressure’. (Head of department)

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Some quotes: entrepreneurship‘As I understood it, the eProcurement agency advanced by themselves, with their own innovation without my input. At first, I only cultivated values and shaped them. The hardest part [in the institutional change] is if there are no values. ... An institution is like a box and its foundation is values’. (The mayor)

‘You can ask those [pointing to his backers] who communicated with the local parliament. In Indonesia, the most difficult part is not on the technical side. The political side is more complicated than the technical one’. (The mayor)

‘When climbing a mountain, you find a steep track. For me, resistance is not a burden to stop me or to set me back. We only need to know when we should move slowly, when we should move fast. It's more about how to choose the right rhythm to play’. (The mayor)

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Conclusion•T

he eProcurement institutionalization process could be understood from three different but interrelated perspectives: isomorphism, logic, and entrepreneurship

•Identification of actual benefits:

• cost reduction (16.5% savings), a faster process (from 30 to 18 days), a better incentive for procurement officers (from IDR 150k to 700k per tender), a more comfortable process, a more transparent and accountable process

•Practical suggestions:

• Strategy for resource mobilization: convening leveraging• Strategy for institutionalization: shared values (normative) exercising power

(coercive) 14

Contributions•I

t provides a new understanding and a fresh explanation of how institutionalization of a public system (i.e., eProcurement), has taken place in the context of developing countries.

•T

he study demonstrates that three concepts from institutional theory as aforementioned provided vocabularies and insights to explain the phenomenon under study.

•The study identifies actual benefits enjoyed by the government agency after adopting the system.

•The study also provides some practical suggestions that can be adopted by eGovernment and/or public procurement practitioners and policy makers.

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Thank you! Tusen takk!Terima kasih!

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