Report: Public E-Procurement Mired in Red Tape

Government agencies, fighting red tape, have not embraced e-procurement as rapidly as their private counterparts, according to a report released Thursday by Jupiter Media Metrix.

The study found that despite the best efforts of the Clinton administration to promote e-procurement, 1 percent of government spending occurred over the Internet in 2000 and 2 percent will take place online this year.

The future of e-procurement under President George W. Bush is uncertain, according to Jupiter. Although Bush has spoken out in favor of e-procurement, he has not yet named all key technology appointments and has earmarked only a “paltry” US$100 million over the next three years for the development of government e-procurement.

According to Jupiter, government e-spending will grow from $29.4 billion this year to $286.1 billion by 2005. By comparison, business-to-business (B2B) e-commerce is expected to reach $6.3 trillion by 2005.

Barriers to Entry

Funding is not the only hurdle to federal e-procurement, Jupiter said. Suppliers wishing to sell to government entities are also handicapped by government procurement procedures that often require either an approved price list or competitive bids.

The selection criteria in government buying often differs from those in the private sector, Jupiter said, because government officials worry as much about fairness and equal access by bidders as they do about prices.

Technology is another stumbling block, because no standard interface for e-procurement currently exists and each government agency and network operator uses a separate connection to enter sites and conduct transactions.

The report recommends that the federal government set a standard for all U.S. agencies. The New York City-based research firm said it would be a plus if all state and local agencies adopted the same standard.

State Efforts

Although the federal government may be falling behind in its e-procurement efforts, many state and local government agencies are actively pursuing e-procurement.

Both South Carolina and California allow counties, cities, school districts and nonprofit agencies to make e-purchases using state-negotiated contracts. Additionally, Colorado and Utah are building a joint procurement portal.

Cost savings are not the only motivation for using e-procurement, according to Jupiter. E-procurement is “often pushed by state officials who see political gain in taking advantage of the Internet,” the research firm said.

Opportunities Abound

Because most government spending is done at the state and local level, Jupiter recommended that companies willing to cut through the red tape required to sell to government agencies should target state and local branches.

Jupiter also said that companies already doing business with government agencies should “move immediately to electronic procurement,” because early movers will gain a competitive advantage.