It may be some time before electronic procurement has an impact in state and local government, but for those who were the first to try, the results are encouraging. Maryland and Connecticut, two states that have launched online bidding and catalog purchasing systems, report a recent groundswell of support for the technology among buyers and sellers.
"We are growing exponentially," said Mark Krysiak, deputy director of Marylands procurement and contracting. "We have about 60 government agencies trained to use the system and about 260 active buyers. Thats about 10 percent of all buyers in the state."
About 300 vendors are actively bidding on contracts and selling through catalogs, according to Krysiak. That number represents about 20 percent of vendors the state has on file, but they make up nearly 50 percent of the states existing suppliers.
In Connecticut, a similar story is unfolding. Since the states online catalog system, Orderlink, went live in 1999, more than 114 suppliers have subscribed to list their products electronically. Starting slowly, government buyers purchased only $70,000 worth of supplies in the first month. But by March 2001, buyers spent $3 million in one month, according to Jim Passier, the states procurement manager. "Our objective is to do $50 million in online procurement by the end of the year," he said.
While such a promising start seems to bode well for electronic procurement in state and local government, having just two states purchasing and taking bids online is hardly a ringing endorsement. Thirty-one states have yet to plan, build or launch an online procurement system, according to the Center for Digital Government, the knowledge-management and research division of e.Republic.
Its not known why these states have decided to wait, but their reasons may be found in a report issued in March by Jupiter Research. "[Most procurement managers] see little advantage in moving online, in part because their existing suppliers are not there," according to the report. Nearly half of those surveyed said they would do less than 20 percent of their procurements online for at least the next two years.
Biding Their Time
Besides the lack of existing suppliers, buyers gave several reasons why they are reluctant to go online, including lack of knowledge about Internet markets, limited product offerings and lack of trust.
Buyers are very aware of the value online procurement can deliver, including lower product costs, more choices and reduced cycle times, but they are still unwilling to commit, according to Jean-Gabriel Henry, an analyst with Jupiter. "Buyers are not going to use an e-procurement system just because its a better solution. It requires education and training to make them feel comfortable, and that takes an awful lot of energy," he said.
The problem, according to Henry, is that the suppliers who are online havent done a good job telling the buyers they are available online, nor have they made the effort to show buyers how to use them in an online environment they can trust while getting value from e-purchasing. But Henry believes the obstacles to online procurement will be overcome, and he expects the business to really take off by 2003.
In Maryland, lack of commitment hasnt been a problem. The governor called for the state to deliver at least 50 percent of government services over the Internet by 2002 and 80 percent by 2004. That was more than enough to jumpstart e-procurement, according to Krysiak. In March 2000, the state signed a contract with SAIC to host a self-funded portal, called eMaryland Marketplace, which allows buyers from state and local government agencies to use an interactive bidding engine and to purchase commodity supplies from electronic catalogs. SAIC worked with Metiom Inc., KPMG, Early Morning Software Inc. and International Technologies Inc. to create the portal with its various procurement components.
Vendors can subscribe to the interactive bidding module for a base fee of $150 or $225