An electronic purchasing system may seem like an ideal way for states to save money, but beware of the roadblocks.
Electronic procurement systems are often touted as a way for state and local governments to save money and improve purchasing efficiency. While that’s true for some governments, demonstrating financial savings can be more complicated than it sounds. Just ask Georgia.
The state’s purchasing arm deployed Oracle’s PeopleSoft Enterprise applications in 2011 as a replacement for its paper-based purchasing system. Although the transition isn’t complete, Georgia has already made strides with better data access and a shorter purchase-order cycle. But translating those improvements to budgetary figures has been difficult for purchasing officials.
Leslie Lowe, assistant commissioner for procurement in Georgia’s Department of Administrative Services (DOAS), said one of the myths associated with e-procurement is that it will be easy to prove a return on investment.
“Even though we have studies and benchmarks that say a paper purchase order costs this much in time and handling versus doing it electronically, they just don’t buy that,” Lowe said, referring to Georgia lawmakers. “They want hard-dollar savings, so we had to stop calling it ‘savings.’”
Instead, the DOAS now calls the efficiency gains “benefits” to avoid the perception that agency budgets can be cut thanks to streamlined purchasing. Lowe added that the situation is “a tough balancing act” because the DOAS is the business adviser to state agencies, but the department must also report to the state Legislature, which is looking for more areas to cut funding.
Lowe said another myth associated with e-procurement is that every agency will embrace new technology and that the tech itself is a cure-all for the purchasing process. She explained that state agency customers that are entrenched in their own paper processes can be a tough hurdle to overcome.
From the frontline personnel making the purchases to stakeholders and legislators, not everyone feels that technology makes things better.
“[You’ve] really got to convince them and show them how and why it is better,” Lowe said. “It’s not just a given that everybody is going to jump on board and say, ‘Yeah, more technology!’”
Despite the challenges, e-procurement technology has resulted several benefits for Georgia. It helped shorten the average purchasing cycle from more than six days to less than four days, and moving to electronic purchasing greatly reduced paper use and streamlined the requisition process.
The Oracle system replaced homegrown procurement systems and provided a unified view of spending, enabling the state to negotiate better contracts and volume discounts.
Lowe said the first step in her department’s implementation strategy was to find a senior-level person in each state agency who could see the long-term benefits and champion the move to e-procurement.
“You make your argument and convince that first level why this is a good thing and why this is going to help the state and their agency. Once you have that executive sponsor, that sponsor plays a key role in marshaling the rest of the forces,” Lowe said.
“If that person is not on board, the whole thing is going to flop [or] it is going to be very difficult,” she added. “So I think we did a good job identifying who that key sponsor was going to be and working hand-in-hand with [them].”
Georgia’s e-procurement project began in May 2005, when the state decided to go with Oracle’s PeopleSoft applications. It was another two years before CherryRoad Technologies was selected as the implementation partner and actual work began in fall 2007.
Approximately two years later, the DOAS and two of the more complex state agencies — Georgia’s departments of Human Resources and Corrections — went live with the e-procurement technology. By late 2010, seven of the eight top-spending agencies in Georgia were on the new system, making up about 80 percent of the state’s procurement.
The last major piece of Georgia’s e-procurement implementation is the state’s technology college system, which comprises 24 campuses and a central office. Lowe likened it to doing rollouts at 25 different agencies. Three waves of implementation are set for fiscal 2013, and a final three waves will happen in fiscal 2014 to complete the project.
The state’s transition to e-procurement is taking some time, however. Lowe said the delays experienced by Georgia could pose a third myth — that moving to an e-procurement system will happen quickly.
While the project has taken years, Lowe felt securing the funding to ensure implementation happens as scheduled instead of piecemeal was an important element of the process. She added that Georgia was very deliberate in its move to e-procurement, transitioning agencies in waves where personnel undergo training before the actual implementation date occurs.
“In my opinion, there is no way to fully [move] over all state agencies on one day. That is just impossible,” Lowe said. “From the first idea to now completing absolute implementation for the stage agencies, it has been a long journey.”