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Dear Vice-Chancellor or Principal

1.   This letter invites higher education institutions (HEIs) to apply for funding to implement e-marketplace systems or to further develop existing e-marketplace systems.

2.   'Allocation of funding for shared service activities in 2010 11 through the University Modernisation Fund' (HEFCE Circular letter 07/2010) reported that HEFCE has been allocated £20 million in 2010 11 to support universities and colleges in delivering further efficiency and value for money through shared services, collaborative procurement and other innovative ways of reducing support costs while sustaining the quality of frontline teaching and research.

3.   In Circular letter 07/2010 we outlined our initial proposals for a shared services pilot scheme. Those proposals have now been agreed, and we have earmarked up to £6 million to establish an e-Procurement Fund to which all HEIs may apply for funds for the implementation or further development of e-marketplaces.


4.   An electronic marketplace or 'e-marketplace' is a web based application facilitating electronic trade between one or more buying organisations and several supplier organisations. An e-marketplace helps to streamline the order cycle by replacing manual systems with electronic systems. e-Marketplaces can be used to select and then order goods from the supplier, to track the status of orders and the receipt of goods. Some e-marketplaces include systems for invoicing and payment. e-Marketplace systems currently available for use by HEIs include Science Warehouse, SciQuest, Parabilis, and Zanzibar.

5.   e-Marketplaces deliver both process and contract efficiencies for HEIs. Process efficiencies can be significant; it is challenging to identify and quantify them, but the electronic invoicing capabilities in some e-marketplaces will benefit institutional finance departments. Contract efficiencies are delivered because e-marketplaces concentrate expenditure on institutional contracts thereby ensuring best price is achieved.

6.   Benefits of e-marketplaces include:

  • saving time on routine administration and product selection of purchases while still having informed choice
  • instant access by every institutional user to the HEI's agreed contracts
  • robust audit trails, ensuring compliance with the HEI's financial regulations and the requirements of HM Revenue and Customs
  • all purchases are made in the same way, so users only have to learn one system
  • quotations may be requested electronically
  • products from contract suppliers may be compared and contrasted simultaneously, on a single screen
  • looking at 'shopping baskets' of commonly purchased products from contracted suppliers allows quick and easy comparison of like for-like, which may enable significant savings to be made
  • imposing more discipline on purchasers may help to reduce maverick spending.

7.   The costs of implementing an e-marketplace will vary from institution to institution, but indications from existing users are that costs can be up to £60,000 per year. Costs – direct and internal – include licence procurement, staff training, contract management, project management, set-up of the necessary technology, and supplier adoption.

e-Procurement Fund

8.   We propose to allocate up to £5 million of the e-Procurement Fund as grants to individual institutions, as follows:

  1. Larger HEIs that do not already have an e-marketplace will be able to apply for grants to offset the cost of procuring and implementing one, including the costs of software licences, training, and consultancy support during start up.
  2. Institutions that have already invested in e-marketplaces should not be penalised for good management. Such institutions will be able to apply for grants to help them develop further, and roll out more widely, their existing e-marketplaces.

9.   The maximum grant to any HEI for either implementation or development of an e-marketplace will be £60,000. If the total funding requested is greater than the funding available, grants will be scaled back to accommodate all eligible requests.

10.   We believe that effective implementation of an e-marketplace requires a certain level of infrastructure support. In order to participate in the initiative, institutions must demonstrate that they have appropriate procurement structures in place and are able to secure value from the investment.

11.   We propose to use up to £1 million of the e-Procurement Fund to develop a generic e-marketplace for use by smaller HEIs that do not have the resources to implement and run their own systems.

Conditions of funding

12.   e-Procurement funds will be awarded subject to the following conditions:

  1. Applicants must demonstrate that the institution concerned is sufficiently structured and resourced to implement the proposed changes. This would include an assurance that the institution has a central, professional full-time procurement team, or access to one.
  2. All funding must be drawn down and spent by 31 March 2011. Any funding unclaimed or unspent at that date will no longer be available. Successful institutions will therefore be required to submit a project completion form, signed by the institution’s director of finance, no later than 30 April 2011, certifying that that all the funds received have been spent (not just committed), and that they have been used for the purposes for which they were awarded.
  3. Institutions must confirm their commitment, if funding is awarded for e-procurement development, to sustain the activity in future years.
  4. HEFCE has no funding for this initiative after financial year 2010-11, so applicants are required to confirm that any costs in 2010-11 in excess of HEFCE grant and all costs in future years will be met by the institution.
  5. Successful institutions will be required to report to HEFCE the efficiencies achieved as a result of our e-procurement grant funding for 2010-11 and future years, using the annual Efficiency Measurement Model reporting system.

How to apply for e-procurement funding

13.   All HEIs funded by HEFCE are eligible to apply for funding.

14.   To apply, complete and return the electronic version of the template at Annex A. Completed templates and any supporting material should be e-mailed to by Friday 6 August 2010.

15.   We expect to notify applicants of decisions about funding by Friday 3 September 2010.

Yours sincerely

Sir Alan Langlands
Chief Executive

Date: 28 June 2010

Ref: Circular letter 16/2010

To: Heads of HEFCE-funded higher education institutions

Enquiries should be directed to:

Stephen Butcher, tel 0117 931 7425, e-mail