Federal EC: FACNET, Internet offer agency options

There are just six months left for federal agencies to comply with the president's mandate to use electronic commerce for many of their procurements. But the question no longer is whether EC will come to the federal government, but how and in what form - issues that will be influenced strongly by the Internet.

Not that all the problems have been solved. There is still obvious confusion over the use of transaction and electronic data interchange (EDI) standards. In addition, managers at many agencies still have to be convinced of the importance of EC. And doubts about the efficacy of the government-imposed architecture of the Federal Acquisition Computer Network (FACNET) persist.

Yet there are real advances apparent. Large agencies such as the departments of Energy, Transportation, Treasury, Commerce and Veterans Affairs have instituted pilot EC/EDI programs and are in various stages of employing EC agencywide. The Defense Department is close to completing its two-year phased implementation of EDI-based contracting systems to 244 major procurement sites.

Several programs at the General Services Administration have also recently drawn considerable attention. The multiple award schedules, which are moving to the Internet, are a gigantic draw, outpacing all expectations. And GSA Advantage, a World Wide Web-based catalog of goods that agencies can order and pay for on-line, is being closely watched as a possible standard for other agency procurement systems.

All of which leads some observers to have much more confidence in federal EC than they had a year ago.

"If you look at how long it has taken industries like retail, automotive, aerospace and health care to develop the conventions and practices that make electronic commerce work in those industries, the progress the government is making is not significantly different," said Rose Meyers, a principal consultant with Enterprise Solutions Ltd., Westlake Village, Calif., and previously coordinator for EC and EDI at Boeing Information Services.

Though government took on the process later than some industries, she believes it has effectively built on what others have done. "If the momentum remains through this and perhaps the following administrations, the government will be using electronic commerce effectively throughout its agencies and programs," Meyers said.

But it's still far from smooth sailing. One of the major question marks remains FACNET, the government-inspired network architecture intended to allow government agencies to present a "single face to industry" by having electronic transactions to and from vendors go through designated network entry points (NEPs).

Software and hardware glitches caused delays and bottlenecks in moving transactions through the NEPs. The technical hurdles, coupled with a slower-than-hoped-for ramp up of EC usage at agencies, have led to a low volume of electronic business that has disappointed the government's commercial trading partners and led to doubts about the government's commitment to EC.

"There have been only some 20,000 requests for quotations (RFQs) a month posted to the FACNET, whereas they should be running at 20,000 a day," said Drew Gorman, director of electronic acquisitions systems program development at CACI International Inc.

However, with new hardware being installed at the NEPs and agencies expected to come on-line much faster now that they're completing their acquisition of automated procurement systems, Gorman expects RFQs and other agency transactions through the NEPs to "substantially increase" in the next few months.

That still won't be fast enough for some agencies. DOE, for example, faced with having to comply with the president's mandate but not confident about FACNET, decided last year to go with the Government Acquisition Through Electronic Commerce procurement system. GATEC was first developed by the Air Force but rejected for DODwide use.

After evaluating a number of systems, GATEC was selected to meet the department's requirements, according to Andrew Yocke, DOE's EC manager.

The DOE EC system is now finished with its pilot stage and is being developed through a prototype running at the department's Washington, D.C., headquarters. That prototype should be wrapped up by August or September, Yocke said recently, and then the entire system will be deployed nationally to DOE sites. "Certainly by the end of the year we will have EC up and running DOEwide," he said.

DOE does not intend to stray completely from the fold, however. At the same time DOE is deploying its GATEC system, the agency will continue support for the government's FACNET system and migrate to it "when necessary," Yocke said.

Most EC systems so far have been custom-built around a particular agency's needs.

However, many smaller agencies require less expensive and less complex answers, a need mirrored by the demands of small- and medium-size government vendors. This situation is driving the trend to Internet-based solutions.

NASA, one of the largest non-DOD procurement agencies, has used this reasoning for its focus on the Internet for "low-cost, reliable delivery of our procurement information to a broad audience, especially small and small, disadvantaged business." NASA uses a Web-based approach to post procurement synopses and competitive solicitations of more than $25,000, and it is working with other agencies to help them establish their Internet presence.

NASA has one of the largest procurement presences on the Internet, and that should only increase when the agency's Scientific and Engineering Workstations Procurement II, the follow-on to its SEWP contract, is awarded later this year. While SEWP II will be open to all federal agencies, it will only be accessible via the Internet.

That's proving to be an opportunity for EDI vendor Premenos Corp., Concord, Calif., whose Templar, an Internet-based EDI authentication product, is being used as a basis for SEWP II. NASA is providing a bundled EC system that other agencies can use to order off SEWP, thereby seeding Templar into other federal sites.

Premenos believes the future direction of Internet-based EC will only lead to more opportunity.

"The Web is extremely well-suited to a whole host of procurement problems," said Greg Vesper, director of strategic opportunity at Premenos, who was previously part of the SEWP team at NASA.

Does this mean the Internet is becoming the medium of choice for government EC and EDI? Not quite yet. Lingering doubts over such things as security and the limitations that many people see in current browser technology to deliver more than the simplest EDI functions may keep a brake on Internet-based EC for a time. The rate of development of new products and services is accelerating, however.

Harbinger Corp., for example, recently announced a new service that will allow companies to send or receive EDI transactions over the Web. The service allows any company to send a traditional EDI message to a server using Harbinger's EDI-translation product, which will then convert it to a "human readable" document that a trading partner can retrieve over the Internet.

GE Information Services has linked up with a company called X-Change Software, which produces customized Microsoft Corp. Windows-based EDI software to interface with specific agencies' procurement systems - in this case, to provide a service for companies that want to do business with the government through the Web-based GSA Advantage.

In addition, Sterling Commerce has Internet-enabled its COMMERCE: Network value-added network (VAN) and Gentran EDI management software. The company also offers CONNECT: Firewall, a product that provides security features for organizations seeking to do EC over the Internet.

As agencies find themselves pressed to comply quickly with the need to do more of their procurements electronically, the attraction of such off-the-shelf products and services will only grow. And there are other factors driving federal procurement to the Internet, particularly in small-dollar purchases. The use of purchase cards for this purpose, for example, is exploding, from a total of $1.6 billion in 1995 to an expected $3 billion this year.

GSA Advantage, where purchases can be made either through a government purchase account or a charge card, is expected to highlight the benefits to agency buyers of such simplified electronic purchasing.

"Agencies are waiting to see what happens with the Internet and how such things as GSA Advantage and catalogs make use of it," said Steve Howard, a spokesman for the Federal Electronic Commerce Program Management Office. "But I think it will eventually take over."

In the end, it may well come down to what has to be done to get the biggest number of people doing EC, both within the government and among the government's trading partners.

Most of the government's 300,000 or so vendors are small- and medium-size companies that find the expense of going through the traditional VANs, as they would if using FACNET, to be prohibitive, particularly given the small volume of possible deals that now go out electronically from agencies. So far, only some 5 percent of those vendors are thought to be capable of doing business electronically.

"With the fixed cost of signing up for EC so high, companies need to make a lot of successful bids in order to make it worth their while," said Steven Kelman, administrator of the Office of Federal Procurement Policy. "Of the total number of vendors in the U.S., only some 50,000 are thought to be plugged into existing EC systems nationwide. So our original thinking of getting most of the 300,000 government vendors hooked up is now seen as totally unrealistic."

Government was also "overly optimistic" in its assessment of the potential for EC to be used to make contract awards for small purchases, he said. It can actually make more work for agencies if EC is used to make contracts. Rather, as in commercial businesses, EC is seen as most useful when it's used to place orders through already negotiated contracts.

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