States premature on e-procurement

State governments are rolling out enterprisewide e-procurement systems without

assessing their current purchasing operations, technological capabilities

and political backing from lawmakers, according to a new national study.

Although e-procurement systems may produce a windfall in savings and improve

efficiency, the recently released Forrester Research Inc. study, "States'

eProcurement Road Map," found that states aren't thinking through their

plans. As a result, it may take them longer than expected to develop a system

and to realize benefits, the report found.

"I think governments have the right idea, but they will be frustrated along

the way," said study co-author Jeremy Sharrard, an analyst with the Cambridge,

Mass-based technology research firm. Forrester interviewed purchasing directors

from 30 state and five local governments, and the majority said they plan

to integrate purchasing into enterprise resource planning by 2003.

The report divided states into four classes based on varied issues, opportunities

and plans. At the top are the "Fundamentalists" that "boast centralized

purchasing operations [and] have distinguished themselves as e-government

vanguards and have tech-interested governors who are most equipped to take

on robust e-procurement rollouts quickly." The report identified nine states,

including Pennsylvania and Massachusetts, in this category.

But the report said that, by far, most states are not equipped to roll out

statewide e-procurement systems. It identified the remaining states as:

* "Bureaucrats," with centralized purchasing structures and practices but

not the technology infrastructure.

* "Technocrats," with strong e-government advocates but not a centralized

process to support an enterprise resource planning rollout.

* "Laggards," which come up short in all areas.

Depending on a state's situation, the report recommended outsourcing for

technology needs, partnering with other states, starting small pilot projects

with several interested agencies, or joining buying consortiums.

The report also found that it's critical to have political support from

legislatures and governors, who can gain agency and public support for such

projects.

Funding is also a problem, Sharrard said. Because many states can't afford

multimillion-dollar systems, vendors put up the money and then recoup their

investment by charging suppliers a transaction fee. But this "self-funded"

model has "collapsed," he said, because it doesn't pay off for the vendors.

Instead, a "hybrid" funding model is emerging where states put up some money

and vendors recoup the investment through fewer transaction fees.

Sharrard also said more state governments than local governments are concerned

with e-procurement. He said local governments don't have the funds to implement

such systems and will probably have to wait to join a state's purchasing

system.

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