After several years of high expectations and modest returns, states are taking a more conservative approach toward electronic procurement. Rather than follow in the footsteps of the early innovators, who rushed to build electronic purchasing systems funded by transaction fees, only to find the results less than promising, a majority of the states are taking a go-slow approach. Out go the stand-alone e-catalog systems, so popular a little while back. In come the more conventional procurement systems that emphasize e-contracting and are modules of an overall state financial system.

This is one of the central findings in a recent, 50-state survey by the Center for Digital Government, the knowledge-management and research division of e.Republic. A majority of states are still without an operational e-procurement system, which can include an electronic contracting application for automated bid solicitation, notification and tabulation, or an electronic purchasing application, such as online catalogs for commodity products and services, or both.

But nearly all of these states are in some stage of the development or implementation process, according to Alia Mendonsa, a research analyst for the center. New Hampshire remains the lone holdout with no plans to build an e-procurement system.

What separates these projects from past efforts is the top-down, conservative approach taken by most states. Enterprise resource planning (ERP) systems play a much bigger role in how e-procurement is implemented. States are no longer turning to just e-government partners to build stand-alone procurement systems funded through transaction fees. Instead, they are asking large integrators to incorporate e-procurement into the much larger, enterprise financial systems states are now finding necessary to build.

For example, Minnesota, Montana, Nebraska and New Mexico are investigating how to integrate e-procurement into their overall budgeting and financial systems rather than build and fund a system separately through transaction fees. Missouri already has headed this way by launching e-procurement as part of a larger ERP system that comprises human resources, payroll, budgeting and planning. The system, known as SAM II, serves 32 agencies and departments and has already slashed some purchasing costs by as much as 50 percent.

States that have the furthest to go are focusing on the necessary legislative changes needed to make e-procurement a reality. In most cases, this involves revamping codes so they can receive bids electronically from suppliers. In some states, however, fears have arisen that online purchasing will open the floodgates to "old-boy" networks, where favored suppliers will receive preferential treatment from select buyers who have access to electronic bids that haven't been properly sealed. To avoid this potential problem, states are trying to develop electronic lock-boxes where bids can be stored and are safe from tampering.

Perhaps most telling about why states are moving cautiously toward e-procurement these days is the small group of states that had e-procurement, but no longer do. Massachusetts, Indiana and Michigan have all conducted pilot projects involving online catalog purchasing, but have ceased operations for one reason or another. Massachusetts, which jumped out in front of everyone with its EMall project, pulled the plug when it's partner Metiom, went under last year and the economy turned sour, reducing state revenue and funding to keep the project alive.

Operational Systems

Of the 15 states with operational e-procurement systems, about one-third have built just e-contracting applications that allow online vendor registration, e-mail notification, online posting and receipt of bids and bid tabulation capabilities. Typical is Arizona, which has said no to an online catalog system for the time being, instead opting to put its resources into e-contracting, which will eventually handle as much as 80 percent of the service-oriented solicitations the state receives annually.

The rest of the states with online procurement are running catalog systems, most of which are funded by transaction fees. These systems are beginning to handle a sizable amount of

Tod Newcombe  |  Features Editor