GSA promises faster payment if vendors go electronic

To encourage more vendors to use electronic commerce, the General Services Administration last month said that for some contracts, the agency will pay vendors 20 days sooner if they agree to process orders and invoices electronically.

Under the interim rule published in the Federal Register, GSA will pay vendors within 10 days instead of the usual 30 days, after receiving an invoice for Federal Supply Service stock, special orders and schedule contracts, provided companies agree to use "full-cycle" EC.

Full-cycle EC means using electronic data interchange (EDI) to place orders, receive orders, issue invoices and pay invoices. FSS already has the capability to issue orders and receive invoices electronically, and payment by electronic funds transfer is required for most federal contracts, according to the agency.

The rule will help FSS save money by making the acquisition process more efficient, said Ken McMullan, a procurement analyst at FSS' Acquisition Management Center. "We have a dwindling pool of resources, and this will allow us to use these resources more efficiently," he said.

Contractors will benefit from faster payment on invoices and more streamlined administrative procedures associated with processing contract orders, he said.

Encouraging EC Use

"As we say in the rule, we think it does save on administrative costs, and procedurally it's easier," said Gloria Sochon, a procurement analyst at GSA's Acquisition Policy Division. "We are encouraging as much use of EC as possible, and we will [encourage it] as far as contractors are willing and able."

Full-cycle EC helps alleviate what can be a processing nightmare for agencies, said Tony Trenkle, co-chairman of GSA's EC Program Management Office. "A lot of the time there are 12 invoices for one order that have to be matched," he said. "[EDI] makes it easier because [the matching] is electronic. So the more we can move to full-cycle EC, the better off we are."

The process will work this way: A vendor will sign up with a value-added network, which will become the vehicle through which orders are placed with the company. FSS will place orders, receive invoices and pay invoices electronically, and the company will accept and fill orders, submit invoices and receive payment electronically.

If the process proves successful at GSA, Trenkle said it could be something that other agencies will imitate. But a key to the widespread use of EC in the government is partnership with industry. "We really have to develop a partnership with industry to get it done," he said. "I think this is a step in the right direction."

Patti Reardon, vice president of Government Sales Consultants Inc., said the rule sounds like a "great incentive" for vendors to use EC. "On the one hand, it may cost a company a lot of money to move to [EDI], but on the other [hand], the government is moving in that direction anyway," she said. GSA is accepting comments on the interim rule until May 15.