Expand Electronic Commerce for Federal Acquisition

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.