Tender(ing) Advances

Private-sector company helps unify Canadian federal and local government procurement systems.

by / March 31, 1998 0
MERX -- a new, electronic tendering system -- is an electronic covenant that bonds the Canadian federal government and 7 of 10 provinces. In the United States, that's the equivalent of having the federal government and 35 states agree to do something important, do it the same way, do it using the latest technology, and do it using the same external supplier!

On Oct. 27, 1997, the Canadian government instituted MERX, which has tremendous potential for electronic commerce and facilitating procurement reform -- a hot item in the United States. MERX is a Web-based system used by buyers to post opportunities (requests for proposals, requests for quotations, etc.) and used by vendors to identify business opportunities that match their capabilities.

WHAT DOES IT DO?

Like other electronic tendering systems, MERX connects suppliers of goods and services to purchasers. Many states have these systems, but MERX is a private-sector business serving most of the public sector, not simply one state or city. It is the latest in an evolving system that began with the Canadian federal government and was first outsourced in 1991.

From the buyers' perspective, MERX is a system designed to manage opportunities. Using the system, a buyer can post procurement announcements to the Web site, electronically transfer documents from the buyer's computer to MERX, update bid and award information, view all of the posted opportunities and see which suppliers have requested documents.

From the suppliers' perspective, new marketing opportunities can be quickly and easily located by browsing or specifying selection criteria. They can then electronically order and pay for documents and have the documents downloaded or have them sent from a regional distribution center if -- like blueprints, for example -- not available in electronic form. They can also be notified by e-mail or fax when new documents are added to the system, if these opportunities match their predefined selection criteria.

From the perspective of the participating governments, the system improves access to government business, increases competition and provides a level playing field for all businesses competing for government work.

A LITTLE HISTORY ...

In 1991, the Canadian government contracted out the notification and distribution of procurement documents through a centralized procurement service, called the Open Bidding Service (OBS). While this earlier system provided value, it had some shortcomings.

In April 1997, a report was issued by the Standing Committee on Government Operations, House of Commons, on the topic of government contracting. This report states, "witnesses from the private sector told our committee they did not use the OBS because they found it too expensive in terms of time and cost; it was not 'user friendly' ... it lacked transparency, feedback and responsiveness to unsuccessful bidders; it did not meet the needs of the construction industry; and in some business sectors, it was not readily or directly accessible."

The committee went on to conclude that OBS "[did] not adequately serve the needs of both private and public sectors; for issuing firms, there are difficulties of access, cost, transparency and fairness. There is a clear need to revamp the current open-bidding system to ensure its universal application, and furthermore, [that] it obtains best value for the Crown."

In May 1996, an RFP was issued for a new service provider. This RFP was prepared by a committee established under a trade agreement among the federal, provincial and territorial governments. Cebra -- a company dedicated to electronic commerce and owned by the Bank of Montreal -- was selected from eight proposals as the company with the best solution. The Cebra proposal addressed the shortcomings of the Open Bidding System and was a Web-based solution. It incorporated the use of powerful search tools, Internet technology, national marketing initiatives, regionalization of the service offering and low overall cost.

WHO USES IT?

Currently, the entire federal government and seven of the provinces have signed on. All departments within these organizations are required to use the system exclusively. There are about 1,500 buyers using the system, loading 200 documents per day. There are also 20,000 registered suppliers, and this is increasing at 300 per week. In November, they were getting 1,500 orders per day for documents, and there were about 2,000 active documents (competitions that were still open) on the system.

In 1998, MERX will expand by adding municipalities, academic institutions, school boards and hospitals for these provincial governments. In a year or so, according to Bob Binns, the executive responsible for MERX, they will have between 5,000 and 10,000 buyers and up to 100,000 suppliers throughout North America.

MERX is used to post opportunities as required by the North American Free Trade Agreement. It therefore represents a simple, inexpensive way for U.S. firms to identify business opportunities throughout Canada with every level of the public sector. Clearly U.S. companies will benefit from this service.

The prospects for electronic commerce using MERX are exciting. In the short term, it will continue to expand the number of distribution centers, the number of buyers and the number of suppliers. In the longer term, MERX will be a player in streamlining procurement via electronic submission of responses, distribution of award notices, supplier conferences and by providing other new services.

OBS vs. Merx

1991-Oct. 26, 1997
Open Bidding System
Oct. 27-Dec. 31, 1997
MERX

Federal government and six provinces
Expanded to municipalities,
academic institutions,school
boards and hospitals

Centralized in Ottawa
Regional offices

Phone-in to Ottawa, ship documents
Local access, print
and pick up

Limited download capabilities
Downloading for
most documents

CA$130 per year plus CA$430 for bid matching
CA$8.95 per month

26,000 subscribers
100,000 subscribers forecast for 1998


WHAT DOES IT COST?

MERX doesn't cost government anything. Using MERX means that an organization has outsourced document management related to procurement at zero cost. This alone represents a savings of millions.

MERX does not charge suppliers to browse. They charge suppliers who frequently use the system CA$8.95 per month plus a page-based charge when a document is downloaded or sent to them from the distribution center. Charges for paper documents are CA20 cents per page; electronic (downloaded) documents cost CA8 cents per page.

The opportunity matching service costs CA60 cents per notice via e-mail and CA50 cents per notice via fax.

ELECTRONIC COMMERCE IS HERE!

In 1997, the Organization For Economic Cooperation and Development published Electronic Commerce, Opportunities and Challenges for Government, which communicates the views of the leading international users of electronic commerce. The report states, "Governments must act in concert with each other, and with private-sector users and suppliers of electronic commerce facilities, to create a commercial environment that is responsive to technical change." In addressing transaction management, the report declares, "many of the separate steps that normally intervene between a buyer and a seller in a commercial transaction can be integrated and automated electronically." The report also states, "another major incentive is the desire to achieve greater production and distribution efficiencies."

Although MERX is in its infancy, it is clearly a solid example of electronic commerce on a large scale and seems positioned for success:

1. Marketing efforts are directed at significantly expanding the number of buyer organizations in Canada and the number of suppliers throughout North America.

2. It's a Web-based transaction-driven electronic commerce system. Most documents can be downloaded when ordered. Payment is handled electronically and automatically using a credit card.

3. MERX is a well-funded initiative dedicated to electronic commerce.

4. MERX is committed to providing other value-added products on its Web site for both buyers and suppliers. It will soon be adding substantial reference material -- such as The RFP Report, a quarterly newsletter of checklists, ideas and information -- as another product that is downloaded when ordered.

MERX is the largest electronic tendering system in Canada. It has the potential to become Canada's national public-sector procurement system and a leader in electronic commerce and procurement reform.

To access MERX, visit its Web site at .

Michael Asner is a consultant specializing in procurement and information technology. He also publishes "The RFP Report." Two of his books, "The Request For Proposal Process" and "Handling Supplier Complaints and Protests" are available from Government Technology Press .

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