States premature on e-procurement
- By Dibya Sarkar
- Sep 03, 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 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 study 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
* "Bureaucrats," with centralized purchasing structures and practices
but not the technology infrastructure.
* "Technocrats," which have 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,
partnering with other states, starting small pilot projects with several
interested agencies, or joining buying consortiums.
The study also found that it is critical to have political support from
legislators 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 isn't profitable 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