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The Right Way to Do E-Procurement

An integrated system like Virginia's is a must for states that want to procure goods and services efficiently, and it's good for suppliers as well.

Virginia officials knew that their traditional, decentralized procurement system wasn't working -- for either buyers or sellers. Suppliers were frustrated: companies had to first identify all of the purchasing offices to market their goods, then travel to in-person meetings to identify and track opportunities. State officials lamented a lack of transparency, consistency and availability for small and diverse businesses to participate.

Virginia's solution was the development of an integrated, statewide electronic procurement system. Today in the commonwealth, e-procurement is recognized as having a solid return on investment, and it has increased the diversity of the state's supplier base.

Many states are approaching e-procurement, but according to the National Association of State Procurement Officials' most recent survey, only 32 have an active electronic system in place. And few of those systems approach the full functionality of Virginia's.

E-procurement (also often referred to as a supplier exchange) is a must for states that want to procure goods and services efficiently. But before embarking on implementation, states should understand emerging best practices. For a smoothly functional e-procurement system, many elements must be in place, including:

A single online point of entry: E-procurement works best when there is a single electronic system allowing state agencies, higher education and local governments to interface with suppliers. Imagine a small-business owner using his iPad to peruse opportunities with the state while sitting in his truck or a salesperson checking in from the airport.

This is a key to the success of Virginia's program. Its e-procurement app is updated in real time, so that from anywhere, at any time, the status of any bid can be reviewed. And every solicitation can be sorted by when they were opened or updated, the date of the close, and when they were published.

Self-service supplier registration: All suppliers should be able to register to do business throughout the state and establish their electronic account profiles via a single site on the Internet.

A centralized bidders' list: An electronic list of vendors that can be accessed to send a request for bid or proposal and receive responses from suppliers electronically is an essential piece of a strong e-procurement systems.

Use of push technology: Suppliers must be able to identify the business opportunities of interest by commodity code, and the system would automatically email a supplier when a business opportunity becomes available. This saves both the state and suppliers time and money since the state is no longer having to print and mail solicitation documents to suppliers and suppliers are not having to search through volumes of information.

Of course, implementing an e-procurement system on the scale of Virginia's is a complex endeavor. Like any large information-technology project, e-procurement implementation can encounter resistance by stakeholders and involve classic change-management challenges. In the end, there must be top-down and bottom-up support for the project.

And how will an e-procurement system be funded? There are at least three approaches: traditional state appropriations; the use of transaction and other fees; and a public/private partnership in which a company builds the system at no initial cost to the state and then collects a portion of the fees charged for use of the system.

Whichever route a state takes, though, e-procurement holds vast potential to enhance the diversity of the supplier base and save states money over the long term. It's worth the trouble.

Krista S. Ferrell is the director of strategic programs for the National Association of State Procurement Officials.
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