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E-invoicing in public procurement: another step towards end-to-end e-procurement

The European Union (EU) is about to take another step towards the digitization of the public procurement process by starting to use e-invoicing in such processes.

According to the estimates by the European Commission (EC), the expenditure of the public sector amounts to some 19% of the EU GDP, while the value of public procurement totals approximately EUR 420 billion EUR per year. The EC estimates that the adoption of e-invoicing in public procurement across the EU could generate savings of funds allocated for public procurement of up to €2.3 billion. Currently, the uptake of e-invoicing across Europe is very low, accounting for only 4–15% of all invoices. Having in mind the fact that public procurement represents about 3.7% of the EU’s GDP, the implementation of the proposed initiative of using e-invoicing in public procurement could see the public sector taking the lead in this area, which could encourage other economic operators to follow its example.

‘E-invoicing in public procurement should improve the functioning of the internal market, to reduce the obstacles of entering the market, especially for small and medium sized companies, and solve the problem of the compatibility of different e-invoicing systems in various member states. We hope that the costs for suppliers will also be reduced, since there will be no need to adjust technical equipment for the different e-invoicing standards in member states. This will facilitate settlements in public procurement, they will become faster and less costly,’ said Vice Minister of the Economy Rasa Noreikienė.

To-date, Europe still fails to make a full use of opportunities made available by electronic public procurement. Although most Member States provide an environment for electronic publication of procurement, supply of tender conditions and offers of suppliers; however, these opportunities are still not fully used in practice. In those Member States that have e-invoicing systems, such are based on mutually incompatible systems. This poses a risk of fragmentation in the internal market.

The results of an EC opinion poll confirmed that the business sector, including representatives of small and medium sized business, welcome the initiative to uptake e-invoicing for public procurement, and acknowledge that this would be significantly beneficial for them.

There have been suggestions for the EC to give the European Committee for Standardisation a mandate to draft a new European e-invoicing standard. Member states will have to ensure that the purchasing organizations do not refuse to adopt the e-invoices that conform to this standard.

By proposing a directive on using e-invoicing in public procurement processes, the EC also adopted a communication ‘End-to-end e-procurement to modernize public administration’ in which member states’ full transition to e-procurement is encouraged - from the publication of a public procurement procedure up to the settlement according to public procurement contracts. The above communication should be covered during the Lithuanian Presidency in the Council conclusions regarding the internal market policy.

In recent years, Lithuania has made significant progress with regard to e-procurement. Since 2009 the Law on Public Procurement of the Republic of Lithuania obliges purchasing organizations to ensure that every year at least 50% of the total value of public procurement is implemented using the Central Public Procurement Information System. Currently, the volume of e-procurement accounts for over 80% of all public procurements published. Lithuania also has an e-catalogue, which is administered by Public Body CPO LT for the centralized purchase of goods, services and works.

Lithuania has taken its first steps towards ensuring the e-invoicing of public procurement. Currently, the Ministry of Finance along with its partners – the Ministry of Economy and State Enterprise Centre of Registers – is implementing a project ‘Development of E-Invoicing Electronic Service’. The aim of the project is to create and implement in 2014 an information system ensuring the provision of an e-invoicing service.

During an Informal EU Competitiveness Council Meeting in Vilnius on 22-23 July 2013, the Ministers of Internal Market and Industry discussed the importance of the transition towards end-to-end e-procurement, including e-invoicing, for the modernization of the public administration sector. Event participants supported the initiatives to encourage electronic public procurement. The Lithuanian Presidency will aim at fruitful negotiations and an agreement in the Council on the text of the draft directive on using e-invoicing in public procurement.

The EC proposal for the directive and the EC communication can be found here.

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