A setup for savings

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.

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