Expand Electronic Commerce for Federal Acquisition Background Electronic commerce (EC) is the comprehensive, endtoend electronic exchange of information needed to conduct business. Since 1979, the private sector and the Accredited Standards Committee of the American National Standards Institute have aggressively sponsored electronic data interchange (EDI). Within the federal government, the Federal Information Processing Standards Publication 161 established the EDI standard.1 In EDI, data that would traditionally be conveyed in paper documents are transmitted or communicated electronically according to established rules and formats. Major industry associations and their member firms are committing significant resources to EDI. Even many small businesses have voiced their support and encouragement for the government to use EDI to provide electronic notification of small purchase opportunities. Need for Change The potential for savings from reengineering and automating the federal procurement system is enormous considering that the federal acquisition system involves over 20 million transactions and $200 billion each year. A test of EC at the WrightPatterson Air Force Base illustrates the significant savings that can be achieved. This test validated that EDI can reduce the cost of purchased goods by almost 10 percent while reducing lead time by onethird and doubling buyer productivity. If applied governmentwide, this system has the potential for saving the government and taxpayers up to $500 million per year and eliminating 1,200 federal jobs due to increased competition among vendors and reduced federal paperwork.2 Another significant side benefit of EC, as derived from the pilot, is that it increased awards going to small businesses. The private sector has been turning to EDI for some time now because it saves money. The federal government must catch up with the private sector to reduce its costs of doing business. Several federal acquisition organizations have recognized this need and started implementing local versions of EDI. However, if the federal acquisition community is to maintain an effective and efficient interface with the vendor community, it must implement EDI in a standard and consistent manner. Vendors should be able to connect with the federal EC system through a single implementation standard and should not be required to comply with varying implementations to conduct business with different federal agencies. The government should build its EC system in consideration of the following private sector EDI community findings and observations: -- Successful implementation of EDI requires the full commitment of a company's top management, without which companywide implementation of EDI will not only be wasteful and disorganized, but will likely fail. -- The requirement to use EDI should be based on a business decision, and its implementation should be assigned to the functional organization (e.g. purchasing) that it supportsnot the Information Resources Management (IRM) organization. -- Implementation of EDI and the development of specific EDI transaction guidelines and conventions should begin with basic business transactions, such as requests for quotations and purchase orders. More complex transactions, such as contracts, should follow. -- Reengineering functional processes (i.e., eliminating a particular step in a process to avoid the expense of automation) is necessary to realize the full benefits of EDI.3 Recent operational tests have verified that both industry and the government benefit from using EDI for small purchases. For industry, the benefits include onetime governmentwide registration, elimination of the need for local company representatives, and increased access to procurement information. For government, the benefits include increased competition, improved customer support, the ability to use existing agency automated acquisition systems, and access to commercial Value Added Network services (e.g. subscription computer services such as Prodigy or CompuServe) at no cost to the government. Cross References to Other NPR Accompanying Reports Reengineering Through Information Technology, IT11: Improve Methods of Information Technology Acquisition. Improving Financial Management, FM04: Increase the Use of Technology to Streamline Financial Services. Reinventing Support Services, SUP03: Improve Distribution Systems to Reduce Costly Inventories, and SUP04: Streamline and Improve Contracting Strategies for the Multiple Award Schedule Program. Endnotes 1. U.S. Department of Commerce, Federal Register, vol. 56, no. 61, March 29, 1991, p. 13123. 2. The Government Acquisition through Electronic Commerce (GATEC) program at Wright Patterson Air Force Base has been testing EDI concepts for three years. 3. The evaluation of federal department and agency acquisition systems and the possibility of standardizing them should be considered under an EC initiative. For example, this would include revising the financial support systems to facilitate greater use of purchase cards and electronic fund transfer payments. 4. Standard electronic acquisition formats specify the placement and type of information required in requests for quotations, quotes, purchase orders, and other acquisition transactions.
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