A setup for savings
- By Patrick J. Walsh
- Jan 07, 2001
For some state and local governments, online procurement programs are a
way to keep up with the pace of technology and do business as effectively
as their private-sector counterparts. But as e-commerce products become
increasingly accept-ed, vendors and state purchasing officials are trying
a new argument for e-procurement — it might save big money.
By streamlining byzantine purchasing procedures, automating tasks that
are now handled manually and enabling strategic sourcing and volume buying,
Web-based purchasing could help state and local buyers trim a princely portion
from the cost of buying goods and services. Or so goes the theory.
One major test of this is under way in Michigan, which launched its
MiBuy online procurement pilot in December. Designed to be a thorough tryout
involving three of the state's largest agencies, about 50 users and 10 suppliers,
the program should gauge a number of savings opportunities as well as its
suitability for statewide use.
"If we decide to go statewide, we expect that one of the major areas
for savings would be our ability to do more strategic sourcing with our
vendors," said Stephanie Comai, director of e-Michigan, the state's online
customer service office.
"For instance, if we've got many different agencies purchasing from
the same vendors, the MiBuy program should allow us to seek some volume
discounts. In addition, we're hoping to realize some "softer' savings by
streamlining a number of processes," Comai said. "We expect to have our
staff people spending less time doing things like filling out paperwork,
and more time doing other, added-value activities."
Because of the pilot's focus on streamlining the buying process and
trimming the costs of doing business, differences have emerged between Michigan's
online procurement program results and those of other states. While IT staffers
in other regions often found themselves wheedling, cajoling or even politely
threatening recalcitrant agency heads who worried that the new systems might
not work, the e-Michigan team had enthusiastic support from the state's
largest agencies from the beginning.
The Department of State was particularly interested in an e-procurement
solution and helped generate interest and enthusiasm for the pilot among
the state's other agencies, Comai said. "They recognized that there are
more efficient ways of buying, and they led the way in wanting to move forward
and participate in the pilot," she said.
The Corrections Department and the Michigan State Police will also
participate in the pilot. In addition to their enthusiasm for testing the
system, these agencies perform many transactions on a regular basis, which
makes them the ideal pair to test the new system, Comai said.
Epylon Corp. (San Francisco), Ariba Inc. (Mountain View, Calif.) and
Accenture — formerly Andersen Consulting — (Chicago) provide the infrastructure
and implementation expertise. Epylon initially worked with the 10 multi-agency
suppliers involved in the pilot to transform their product offerings into
an online, interactive catalog, and the company is hosting MiBuy using Ariba's
e-procurement software. Accenture did an initial study of the cost and benefits
of the proposed project.
In keeping with the savings motif — and thanks in large part to the
fact that Epylon and Ariba already had an e-procurement system that could
be adapted without much customization — the state pays nothing for the pilot
other than compensation for involved staff.
If everything goes as expected, Michigan will have a uniform, streamlined
method of buying that works seamlessly across the full breadth of its vendor
community and its agencies — while also saving money.
"We're doing the pilot initially to figure out if the savings can be
generated, if there are time savings for state employees and if we can
integrate the procurement program into our existing financial and accounting
system," Comai said. "If you jump into this sort of program presuming that
it will pay for itself and it will all turn out OK, I think you're being
naive. There has to be a very strategic decision about how you're going
to assess what the costs are and what the benefits are. We've studied it
carefully, and we plan to make an informed decision about whether or not
we should move forward with a statewide implementation."
Walsh is a freelance writer based in Peekskill, N.Y.