NIC looks to federal market

Electronic government service provider National Information Consortium Inc.this month acquired the eFed division from online procurement software vendorElectric Press Inc.

Officials at NIC and eFed, which became a subsidiary of NIC, expectthe $30 million deal to help them attack the state and federal markets withcomplementary products and services.

The acquisition of eFed will give NIC an entrance into the federal marketand help round out its service offerings with the eFed World Wide Web-basedprocurement software and hosting services.

The Army, the General Services Administration, the Justice Department,NASA and the Navy already use the eFed product. The system enables usersto browse an online catalog or specific government contracts, submit a requestfor quotes to vendors, receive quotes and place an order. The eFed systemalso can hook into existing electronic data interchange systems. NIC is an 8-year-old company that provides Web software development andhosting services for state governments, including Kansas, Arkansas, Virginiaand Georgia. The company builds the infrastructure and develops and maintainsWeb sites and portals for states that want to offer government servicesto their citizens. Instead of accepting payment from states' work up front, NIC makes its moneyby getting a share in the fees each state charges for a particular onlineservice, such as buying a hunting license.

"We started with states because they had immediate needs for the typeof business model we offer," said Jim Dodd, president and chief operatingofficer at NIC.

"It is a model that takes no additional taxpayer money... because itis funded through transactions. That basic model we believe can work inlocal and federal agencies."

As a result of the acquisition, eFed will have access to NIC's stategovernment installed base and will be able to provide its federal userswith a fee-based service model, saidRobert Main, president of eFed.

"We realized we needed to be a lot bigger in terms of a balance sheet,"he said. "We also felt that taking our software and penetration [in thefederal market] and moving to that kind of model is what we wanted to do."

Federal eFed users should receive better services thanks to the additionof NIC's resources, Main said. "We'll be able to offer additional servicesand applications that come from NIC's portfolio," he said. "We'll be ableto offer the transaction-based cost savings model, so agencies can pay forwork as they go instead of paying for it up front. We're willing to putour hat in the ring and take some of the risk."

Main added that eFed plans to announce in the next two months partnershipswith major industry players that will help the company provide end-to-endsolutions for agencies.The eFed office will remain in Reston, Va., and add 10 new employees inthe next few weeks.

Chip Mather, senior vice president of Acquisition Solutions Inc., saidthe alternative pricing option and the outsourcing services that NIC andeFed will offer to federal agencies make sense. Agencies that are manuallycollecting fees today and want to collect them electronically would be potentialcustomers, he said.

"The only fly in the ointment is if agencies charge additional fees,"Mather said. "Congress gets upset about charging constituents additionalfees."

Electric Press said it will continue to target the publishing industrywith its digital publishing and print-on-demand offerings.

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