Attention, Shoppers

On Oct. 15, VWR Scientific, a Buffalo Grove, Ill., lab supplies company, received a small but notable purchase order from Massachusetts. Sent via the Internet, it marked the beginning of a six-month pilot of E-Mall, a multiple-state electronic buying and ordering network that many people believe will transform how state and local governments buy goods and services.

As envisioned by its creators, E-Mall would act as an electronic outlet mall, putting the Internet to work for buyers and sellers. Hundreds of vendors would gather to offer products that state government employees could browse, order and purchase on their PCs. For buyers, the concentrated purchasing power of thousands of state customers would drive prices downward.

Aside from being a sheer technical and logistical feat, E-Mall will be a bellwether for states now struggling to move from systems that automate the procurement process to platforms that enable true transactions, such as ordering and purchasing.

"E-Mall will test the technology in terms of establishing technical guidelines for electronic commerce," said Dugan Petty, purchasing manager for Oregon, a state that nevertheless took a wait-and-see position on joining the pilot. However, the project is significant for Oregon and the state buying community at large, he said.

"The notoriety and publicity E-Mall is getting is healthy because it is balanced off parochial interests," Petty said. "This has suddenly become a nationwide opportunity. We will all be looking at this consortium for the benefits we can receive through e-commerce in terms of our transactions and operations, and those will almost certainly offset the efforts involved in restructuring."

The Challenge

E-Mall is an Internet-style improvement to a tried-and-true practice. For years, states have been looking beyond their own boundaries to get better deals on goods and services. They typically do it on an informal basis. For example, one state may ask a neighbor to get in on a traffic cone purchase to reach a certain volume-say, 10,000 cones-and that way get a better price.

"There are two big things going on in the pilot project," said David Gragan, director of central procurement for Texas' General Services Commission and president of the National Association of State Purchasing Officials (NASPO). "One [thing] is external purchasing agreements, where states are joining with other states to bring prices down. And the other is electronic ordering."

Participants in the E-Mall pilot will have to tackle a number of technical, policy and legislative issues to enable cross-border business transactions. But more than that, they simply need to discover how to work together.

"Technology is not the issue," said Gary Lambert, Massachusetts' deputy purchasing director and one of the main architects of the E-Mall. "What will be difficult is building a sense of community and governance. In a sense, we are building an [online] village, and the question is how we can all work together in governing the village. That means being able to plan for the future and understanding enough about each participant's needs."

The idea for the multistate E-Mall grew out of Massachusetts' work on a similar project for its own state and local governments and the extension of that system to a national version. Massachusetts convinced a few states-Idaho, New York, South Dakota, Texas, Utah and Washington-to join it in the pilot. The number of active states will be limited to keep the pilot at a manageable size. Other states can participate as observers, and so far that category includes Georgia, Indiana, Maine, Ohio and Vermont.

At least a dozen vendors, including IT veterans Micron Electronics Inc. and Gateway Inc., have agreed to take part, and more are expected to sign on. The idea is that participating states will bring along vendors with whom they have contracts; those vendors in turn would provide products to the other members of the E-Mall under the same terms.

The Technology

Science Applications International Corp., which was awarded the integration contract for E-Mall, used IEC-Enterprise, an off-the-shelf e-commerce solution from Intelisys Electronic Commerce LLC, to build the E-Mall applications.

The package is expected to deliver about 80 percent of the functionality called for in the request for quotations published by Massachusetts. A second phase, which was due online Nov. 25, involves tweaking to provide the remaining functionality. The programs run on a Microsoft Corp. Windows NT server hosted by Massachusetts.

In addition to using the World Wide Web, the system is based on e-commerce technology called Open Buying on the Internet (OBI), a fledgling standard that defines extranet trading processes. Originally proposed by American Express, OBI has support from Microsoft, Netscape Communications Corp. and IBM Corp. and addresses the issues of maintenance as well as access to and approval of purchases from online catalogs across enterprise networks.

Of course, the readiness of states and vendors varies greatly. Some vendors are very savvy about the use of the Internet; others are not even Web-capable, let alone OBI-compliant. "At a minimum, vendors have to be able to accept an OBI object and send it back to [the server]," said Larry Sarner, a project manager with SAIC. "They then have to be able to host a catalog that the requisitioner can order from, plus when they issue an OBI object, they have to adhere to the OBI protocol. They have to have the infrastructure that can enable that."

The Hurdles

For states, the main difficulty will be adapting their business rules. For example, in Indiana, some companies are concerned that if the state government uses contracts from other states, it is sending business out of the state. Even if that's not the case, the perception alone could cause complaints to the legislature and could put a brake on the state's participation.

"It's an example of the politics with a small 'p' that could become a part of all of this," said Sean Fahey, director of purchasing for Indiana. "It's important that we bring our own business terms and conditions to the table, which is why we want to participate in the pilot as an observer. On top of that, we have to consider other things, such as how to account for all the legacy accounting systems that are out there and how we can take the information produced on other systems and get it back into ours."

It's an important point. Indiana already has started its own e-commerce initiative. Like most states, it has chosen to focus first on electronic procurement. The state has begun testing an online vendor-bid system and expected to be at a point last month where it could put large requests for proposals on the system. When friendlier back-end systems are developed, Indiana will begin to post bids on the vendor-bid system and evolve it into a complete system for online purchasing.

Given Indiana's heavy investment, it will be incumbent upon the E-Mall to prove that the project accommodates the state's individual purchasing processes. In that regard, E-Mall may be right on time because most state e-procurement efforts are still in their infancy (see sidebar, Page 14).

"Most state procurement agencies now have some presence on the Web, but those are largely passive rather than interactive systems which usually just distribute information on bid opportunities and business opportunities," Petty said.

For many other states, getting in position for e-commerce will be a matter of reshaping internal procurement procedures rather than building technical solutions. "Our issues involve going back and looking at the business process and mapping out an enterprise plan for successful e-commerce," Petty said. "That goes more to mapping that business process and understanding how it works to meet the needs of our customer agencies. It also requires us to provide the vendor community with a one-stop selling point," Petty said.

Indeed, Lambert and other E-Mall leaders will begin analyzing the pilot in those terms. This month they will use formal metrics and more "gut-level" criteria-among other things, the business relationships of the participants and how comfortable the participants feel with the process and with each other. The pilot is due to end March 31, 1999, after which a formal document will be published.

Judging by the level of interest from vendors and states that aren't yet a part of the pilot, Lambert said he thinks there is a huge demand for the E-Mall or for something similar.

And all other things being equal, Fahey pointed out, it is that interest and how it translates into the participation of other states and vendors that will be the ultimate arbiter of the E-Mall's success. "We can build it," he said, "but will they come?"

-- Brian Robinson is a free-lance writer based in Portland, Ore. He can be reached at hullite@mindspring.com. Jennifer Jones contributed to this story.

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E-Procurement: State Storefronts Abound, But Many Limited to Window Shopping

By Brian Robinson

Most states now use the Internet to advertise their solicitations and awards. At the same time, contractors usually have to get bid documents in paper form through the U.S. mail and return them the same way. To push their way toward e-commerce, several states are pursuing electronic end-to-end systems and making better use of the World Wide Web.

The National Association of State Purchasing Officials (NASPO) projects that about 40 percent of states have some form of electronic bid-notice and solicitation system, while half of all states are planning to take electronic receipt of bids within the next several years. NASPO says systems already in place in states, including the following, are proving their worth in slashed bid turnaround times, increased competition, faster awards and improved cooperation among agencies on procurements.

Oregon Transitioning to the Web

Some electronic bid systems pre-date the recent surge on the Web. To access Oregon's mainframe-based Vendor Information Program (VIP) system, users and vendors Telnet in through either the state's procurement Web site or directly through an Internet hookup. Once into VIP, vendors can browse and download requests for proposals and requests for information, and agency users can see information on available vendor products.

According to users, loading information into VIP can be a chore, and the state for several years has planned to migrate to a Web-based system, where the entire system would be accessible through Web-based forms. But in just the first couple of years of operation, VIP saved Oregon some $1.5 million in paper and administrative costs in getting bids out to vendors and more than $30 million in price savings because of the increased competition.

California Leaps Online

California finally leapt into the online procurement age with the announcement in November of the California Statewide Procurement Network (CSPN). A result of an executive order from outgoing Gov. Pete Wilson to reform the state's procurement system, CSPN will enable desktop comparison shopping for goods and services from suppliers' online catalogs and is expected to be fully operational by February 2000.

CSPN will replace a mainframe-based procurement system for purchasing some $4 billion in state commodities a year. Procurement vehicles such as the California multiple-award schedule and statewide master contracts will be made electronically available through the new system.

However, the CSPN so far stops short of a full e-commerce system because vendor payments will still be made through existing accounting arrangements. A complete e-commerce system is the eventual goal. California's Department of General Services chose two "best of breed" commercial technologies from Ariba Technologies Inc. and PeopleSoft Inc. as the basis of CSPN.

North Carolina: E-Mail not a 'Passive Medium'

When North Carolina added Web-based notification of bid opportunities to traditional newspaper advertising, it expected enhanced competition. But going online did not change that basic process and did not relieve the state from having to prepare expensive mailing list to cover its bases.

"Just having solicitations on the Web may seem fine, but at some point we should expect that people will stop 'reading' the Internet just as they have the newspapers," said John Leaston, North Carolina's state purchasing officer. "So we still need a way of getting notifications to the vendors."

North Carolina therefore chose a system to "push" its solicitations to particular vendors via e-mail as an enhancement to the Division of Purchase and Contracts' interactive purchasing system (IPS). As an added incentive, Leaston said, no state department or agency will receive increases in its procurement delegations unless it uses IPS.

At the beginning of 1999, IPS will allow vendors to return their bids electronically. Also, there will be an electronic vendor registration system that will be used to compose the vendor e-mail list that agencies will use to push their solicitations. Agencies, which can post their solicitations directly to the IPS Web site now, will then also, by a simple mouse click, be able to bring up a "targeted" e-mail list of vendors that have registered as being interested in particular categories, such as desktop IT, and send their solicitations to agencies over the Internet.

Massachussetts's Comm-PASS Points to the Internet

Even before Massachusetts began spearheading the E-Mall, it developed a completely Internet-based bid and ordering system called the Commonwealth Procurement Access and Solicitation System (Comm-PASS).

Massachusetts uses Comm-PASS for all procurements of $50,000 or more. The system resides on Microsoft Corp.'s Windows NT, SQL Server and Internet Information Server combined. Vendors can browse the available solicitation and then download the documents in Adobe Acrobat format. For now, however, bids have to be sent back from the vendors as print documents because digital signature legislation is still not in place.

Direct Comm-PASS savings have lagged and amount to perhaps about $10 a transaction on paper-handling costs on the 25,000 or so transactions a year that the electronic data interchange (EDI) system handles. "But we would expect to [eventually] see much bigger savings through Comm-PASS. In my office alone, we will save around $80,000 a year, and we handle just 200 of the 3,000 solicitations that are posted on Comm-PASS," said Gary Lambert, Massachusetts' deputy purchasing director and one of the main architects of the E-Mall.

Colorado BIDS System Pushes Agency Cooperation

Depending on what technology you use to create your vendor bid system, it can even benefit the way agencies organize procurements among themselves. Colorado used Lotus Development Corp. Notes to help create its Web-based Bid Information and Distribution System.

"We had e-mail before, of course, but you had to know someone's address and plug that in, and that was a crucial added step," said Susan McMillin, the BIDS coordinator. "But now, with BIDS, all you have to do is click on a name. People publish small memos to each other saying things such as, 'I did this and that on a solicitation and thought you'd like to know about it.' "

That doesn't necessarily mean there is a lot of collaboration on procurements, but the potential is there. Until recently, most agencies and departments had to go through the bid process all by themselves, McMillin said, and that was often an argument against doing the process at all. Now, through BIDS, she is seeing such things as one agency piggybacking off the work of another.

* * * * * * * * * * * * * * *

Florida Gives Vendors a 'Heads Up'

Florida has a similar process in its Vendor Bid System (VBS). Although the e-mail messages vendors get through the system do not contain specific bid information as the North Carolina system does they let vendors know there is a solicitation available according to the categories that they expressed interest in when they registered for VBS. Vendors can then go to the VBS Web site, view the solicitation and then download and print it or request a fax of the document.

Phase One of VBS was put into production in September 1997. Based on an Oracle Corp. relational database, it provided access rights to state agencies and other state organizations so they could post their bid advertisements on VBS online as well as in real time. To get into the system the first time, vendors have to register and are assigned passwords for future visits.

Phase Two set up the e-mail notification, which is automatically triggered once an advertisement is posted by an agency. Phase Three, installed concurrently with Phase Two, allows agencies to load the actual bid document onto VBS. "The whole system should be a mature and complete system by the middle of 1999," said George Banks, director of purchasing in Florida's Department of Management Services.

In the past, he explained, all the bid advertising was done through a print organ called The Administrative Weekly. "But it took as many as nine days to get ads into this, and then agencies also had to pay 79 cents a line for them," he said. "Now, there is no delay and no cost to agencies."

The building blocks for e-commerce are being put in place now, he added, with the use of a state purchase card that uses EDI, and the piloting of recurring payments such as utility bills also through EDI. Once Year 2000 issues have been settled, he believes e-commerce will become the next focus for the state.

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