Reality check

A few years ago, the expectations for end-to-end Web-based procurement in the federal government were sky-high. Automating lengthy paper-based processes would save the government time, money and valuable man-hours, not to mention achieving compliance with e-government mandates, including 1998's Government Paperwork Elimination Act.

But expectations of completely electronic procurements have yet to be met, and the multibillion-dollar question is why?

The answer varies depending on whom you ask, but one thing is clear: E-commerce isn't as easy as everyone once thought. So said Don Heffernan, acting chief information officer at the General Services Administration's Federal Supply Service, which runs GSA Advantage, the online shopping mall for products and services.

"We were one of the first with a Web-based commerce site," he said. "When we brought schedules into the program and began aggregating catalogs to make them available to customers, it was a horrendously difficult problem."

Gary Krump, deputy assistant secretary for acquisitions and material management at the Department of Veterans Affairs, said it's obvious that expectations from a few years ago were just too high, though he and his colleagues remain optimistic about the benefits of Web-based procurement.

"I haven't found the silver bullet yet, and I don't think I'm unique," Krump said.

He was tempted to say that the VA was using some completely paperless procurement systems, "but there might be a confirming fax I don't know about. There's always something."

Currently, the VA is trying at least three completely Web-based procurement processes with varying degrees of success, but that doesn't mean it will ever be the only way to do business. "You can use Web-based end-to-end procurement as one of your mechanisms, and it may be the principal one, but not the only one," Krump said.

Alan Bechara, vice president and general manager of government and education for Comark Federal Systems, said the Web should be viewed as another business tool for accessing customers, not a replacement for any other means of doing business with them.

"The hype hasn't met the reality," Bechara said. "When you look at e-commerce, the "e' has happened, but the "commerce' hasn't," and the separation may be caused by a trust gap that has yet to be bridged. "People use the Web for information gathering for preliminary shopping, but technology is still not like buying staples and paper. It's still not a commodity."

Internal Obstacles

Krump said he is constantly looking for ways to include Web-based procurement in the VA's activities and in his role as chairman of the Procurement Executives Council's e-commerce committee. Everything — from meetings with prospective vendors to watching the GSA's progress with programs such as reverse auctions — plays into those decisions. In most e-commerce cases, however, the questions still outnumber the answers.

One major obstacle that agencies are fighting is accountability — who is responsible for what in the procurement process, Krump said. "There needs to be an increased realization that the business process has three major parts and all three [acquisition personnel, chief financial officers and CIOs] have ownership in that process. That needs to be a gut-level belief."

Government customers who are overseas, especially in the Defense Department, have led the Web-based procurement charge mainly out of necessity, Bechara said. When dealing with time zones around the globe, sometimes e-mail and online buys are the only way to close a deal.

However, DOD's online shopping mall handled just $150 million in sales; the Defense procurement budget totals approximately $80 billion annually.

But domestically, most agencies are using the Web for research, not purchases. "Some commercial processes don't play well in the government space," said Betty Greene, director of GTSI.com, a division of government IT reseller GTSI Corp. "The critical litmus test is [that] anything you put on the Web [had] better be more efficient than other means."

Searching through companies' online catalogs is great, but they don't always include an order function, and sometimes don't include the proper pricing for a certain agency, Krump said. Typically, he sees users checking the catalogs to get an idea and then referencing their agency's blanket purchase agreement or other contracting vehicles for proper pricing and to place a paper-based order.

"It is true that technologies may have a way to go before they are as easy to use as some would like, but you won't change decades of habit overnight, especially in the government marketplace," said Larry Allen, executive director of the Coalition for Government Procurement.

Also hindering change is that sometimes the company an agency orders a product from may not be the same company that delivers it, Bechara said. When multiple companies are involved in a simple transaction, customers are wary about the level of support they will get if something goes wrong. "Inevitably, they end up speaking to someone anyway."

On the GSA schedules, the largest-growing area is complex services, but those types of orders don't exactly lend themselves to Web-based interaction, Heffernan said. "It's going to be a while before those move to the Web, because they are complex and agencies need to work with vendors on a final description of services or work with multiple vendors. It's not a point-and-click kind of thing."

GTSI's Greene said she has seen the same thing from the other side of the transaction. She said 70 percent of GTSI's customers use the Web for research product and pricing, but for the big deals, they are still going to pick up the phone.

"You don't close a deal there," Greene said. "The Web isn't down and dirty the best venue in most of those cases. With quantities of 1,000 or more, you can pick up the phone and get a better deal, better prices and a better value."

Another reason why Web-based procurement has been slow to catch on is its unfulfilled promise to reduce manpower and operating costs. "It hasn't replaced anything or anyone," Bechara said. "In fact, we've added people to support the Web. It hasn't replaced the fax machine or snail mail, and for companies going out of business, the numbers are abysmal. [They're] not beating any expectations."

Comark, a government reseller, did less than 5 percent of its transactions last year exclusively via the Web. But even so, Bechara said the company would never dream of abandoning the practice. In comparison, he noted that the GSA schedule did approximately $8 billion in IT purchases last year, but only about $125 million in sales through the GSA Advantage Web site.

"Even though it's a very small percentage of business, if we didn't have it, it would be a major barrier to entry," Bechara said. "Without it, you are precluded" from certain contracts and projects.

Overhauling Buying Habits

Chip Mather, senior vice president of Acquisition Solutions Inc., a federal contracting consulting firm, said the main problem is that most times, an agency's first thought is to automate an existing process, which may not be the best way to use technology.

"That's difficult with government transactions, and it's extremely complex to automate a government contracting office," he said. "Automating a bad process doesn't make it any more efficient or effective, and as anybody who's worked in a contracting office can tell you, there are lots of [bad] paper-based processes."

One area where the Web is effective in streamlining the government's procurement processes is workflow, according to both Mather and GSA's Heffernan. Both men said tying an agency's workflow system into its financial system stream-lines the whole procurement process and facilitates electronic reviews, as opposed to paper-based ones.

"The key is automating the whole workflow process, and that's not a federal issue, but also a commercial issue," Heffernan said. "Many agencies are just beginning to develop workflow systems in-house, and that's not an easy task either. Changing to electronic transactions and electronic workflow will result in significant savings."

Mather, formerly a procurement official at the Air Force, has seen that firsthand. He said only about 2 percent of government procurements are valued at more than $100,000, and those processes are the most difficult to automate. He said the true value and benefits for using the Web are in the 98 percent of transactions that are less than $100,000.

GTSI's Greene said she would like to see her company conduct all transactions of $10,000 or less on the Web. In the future, even routine six-figure deals could be moved entirely online, but multimillion-dollar purchases may never get there, she said.

And the coalition's Allen echoed those thoughts, saying that GSA Advantage and DOD E-Mall have their devotees for just those reasons.

"Where each of these systems is still most successful is for basic commodity-type items," he said. "I think this is a reflection of the ease of purchasing for these products and the level of comfort the government customer has in being assured he or she will get what they order. The more complex the buy, the more risk there is to purchasing online."

The Web is a great way to lighten contracting officers' workload on smaller purchases and give them more time to work on the big money deals, Mather said. His advice is to let the government's end users order more things directly with the goal of simplicity, similar to what Amazon.com Inc. has accomplished in the commercial sector.

"The return on investment that industry is reporting by doing ordering and the transaction process is directly applicable to the government," Mather said.

But as the last few years have proven and the future may show, that could continue to be difficult. "There's a resistance to change. There's very little to compare it to, but anytime you automate something, you have to pick what to re-engineer first and pick the part where the biggest payback is," Mather said.

Still, the VA's Krump is confident Web-based procurement will happen, though it may take time and probably won't replace all paper-based systems. "When it makes sense to do it, we'll do it. It will be one tool in a toolbox with lots of different ways of doing business."