States premature on e-procurement
- By Dibya Sarkar
- Jul 20, 2001
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
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