Streamlining Public Purchasing Through E-Catalogs.

• Author: Corvino, Michael

This article details how governments can use electronic commerce to streamline the purchasing process. Specifically, it highlights the different types of electronic catalogs available, along with their advantages and disadvantages.

The arrival of "e-commerce" as the new buzzword in business signals that the stampede toward electronic government cannot be far behind. Business magazines and newspapers tout extraordinary e-commerce success stories on a daily basis. For government professionals, and finance professionals in particular, it is important to separate the hype from reality. It is also important to make sure that efforts to implement an e-commerce, or e-government, solution are well-designed and cost effective. The purpose of this article is to provide background on electronic commerce, and in particular, how electronic catalogs are streamlining the public purchasing process and saving taxpayers' money.

What Is Electronic Commerce?

Electronic commerce is not a system; it is a concept, an enabling technology; and a means of conducting transactions electronically. Despite popular opinion, electronic commerce also is not reserved to the Internet. Electronic commerce has been around for over 50 years. Early electronic commerce used the telegraph, radio, telephone, telex, television, EDI (electronic data interchange), e-mail, and other electronic media: It has, however, been the Internet's ability to provide a common communication and information-sharing environment that has led to the exponential growth in e-commerce.

For most individuals, electronic commerce is about buying and selling over the Internet (i.e., Amazon.com). However, the true value of the Internet lies in its ability to integrate business processes between enterprises. Business-to-business (or government-to-business) e-commerce transforms the way enterprises do business with one another.

For the public sector, the Internet has many benefits: it neither has to be designed, constructed, implemented, or purchased. It is an electronic portal (a common information and communication environment) to the private sector and constituents and, as such, provides the opportunity to integrate business processes and share information. One area where this business process integration and information sharing is particularly beneficial is purchasing.

Traditional Public-sector Purchasing

Public-sector procurement organizations establish and manage term contracts for goods and services ranging from office supplies to foodstuffs to fire equipment. A term contract is a master contract established for a specific period of time, or term, that a jurisdiction may use for purchasing a large quantity (thousands or millions) of a commodity item on an as-needed basis. For example, a jurisdiction might issue a Request for Proposal to purchase copier paper for a term of two years. Pricing is established by the bidding process, and a vendor is awarded a contract for all the copier paper purchased by the jurisdiction.

The benefits of establishing term contracts include their economies of scale and just-in-time procurement, which sets up the supplier as the procuring entity's storehouse. Strategically this approach is sound, but tactically, it is difficult to ensure that all requisitioners make use of the term contracts. Incomplete or inefficient access to the necessary contract data needed for a requisitioner to determine if a good or service exists on a current term contract results in increased costs. The cost of this information gap is called "Contract Leakage." Contract leakage occurs when requisitioners, without the ability to easily identify all items under contract, seek their goods elsewhere, often at higher prices. Even when a contract has been identified, the lack of sufficient specifications presents the possibility that the procured item may not meet requirements.

To further complicate the process, the requisitioner, after placing an order, has difficulty determining the status of the order. As a result, additional communication between the central purchasing department and the supplier is necessary. Additionally, there is also an impact on the supplier, either requiring the maintenance of a customer support group or diverting other resources to satisfy customer inquiries.

But the problems with traditional procurement do not stop here. Receipt of and payment for goods also creates difficulties. Reconciling receiving reports, purchase orders, and invoices is time consuming and tedious work. Without integration between purchasing, receiving, accounts payable, and the supplier's accounts receivable system, redundancy and error abound.

Reinventing the Wheel

To eliminate the inefficiencies of traditional procurement systems, governmental entities have turned to e-commerce strategies. The objective of an e-commerce purchasing system is to include all participants in the supply chain as one virtual organization through integration via the Internet. By creating this virtual organization, the organization has...