For State of Washington, AMS' Buy Plan Made Lots of Sense

By William Welsh, Staff WriterWhen Washington state's Department of General Administration narrowed its choices in March for the state's e-procurement solution to two companies ? American Management Systems Inc. of Fairfax, Va., and Intelisys Electronic Commerce Inc. of New York ? department officials called in suppliers to help them make the final decision.Using their extensive experience in e-commerce, the suppliers helped state officials create the final tests for AMS and Intelisys. The suppliers loaded their catalogs onto the software, trained the state's purchasing officials, and let the buyers conduct a series of purchasing scenarios. Following intense testing of the two solutions April 10 and 12, state officials weighed four factors ? supplier experience, buyer experience, reporting capabilities and business practices. When the final numbers were tallied up April 20, AMS came out on top."Part of what made the software really work was the [AMS] team's ability to put together the communications process and explain how it would manage the whole program," said Bill Joplin, state purchasing manager at the department. "They exhibited a great understanding of what it takes to be successful in a hosted government environment."Washington announced June 20 the signing of a two-year contract with options for AMS' e-procurement solution, called Buysense (www.buysense.com), which allows the state to purchase goods and services online.The state has named its electronic purchasing system "The Ultimate Purchasing System." It is actually a purchasing cooperative that will include Washington state agencies, political subdivisions ? essentially, cities, counties, school districts and ports ? in Oregon and Washington and select nonprofit organizations, said Washington state officials.While AMS signed a Buysense contract earlier this year with Arizona State University, company officials regard the Washington deal, the first with a state government, as an important win."It is a critical contract for us in the sense that the state of Washington is viewed by the public-sector community as a very progressive, technology-focused state, and for us to go through a head-to-head competition in the [request for proposals] process and to be chosen as the contracted service provider for Washington obviously has significant merit and bearing on our approach, model, and solution for e-procurement," said Gary Lambert, senior principal at AMS. In 1999, AMS had $1.24 billion in revenue, representing annual growth of 17.3 percent, and more than 9,000 employees. Using what AMS refers to as its "rapid deployment technology," the company expects to have Washington making purchases through Buysense within 90 days. "The marketplace itself is in the early formative stages and people are watching to see what happens," said Lambert. "One of our key goals is to bring up quickly any client that signs on with Buysense ? in 90 days or less ? from when we actually start the work. This will be a strong message for us as we approach other states."AMS' Buysense is powered by software developed by Ariba Inc. of Mountain View, Calif. By allowing users to shop and place orders online from their desktops, e-procurement solutions such as Buysense help state and local agencies save substantial amounts of time and money. In the trials in Washington, a transaction made through Buysense took one-third of the time previously needed to complete a transaction, Joplin said. State officials believe the tracking technology embedded in Buysense will allow Washington to increase the number of purchases from suppliers made at government discount rates. "Our evaluation from the beginning was designed to find a system that offered the shop-through payment functionality, which would be easy to use, effective for the suppliers, and a killer reporting tool that would provide the management and analytical reports needed to strategically manage the purchasing activity of the Office of State Procurements' co-op," Joplin said.When fully implemented, the state expects to have 10,000 users making upward of 500,000 transactions annually totaling approximately $150 million in expenditures. For the Washington Buysense contract, AMS' revenue will come from transaction fees charged to both seller and buyer. The commercial supplier will pay a percentage of the value of the transaction, less than 1 percent, according to Lambert, while the government buyer will pay a transaction fee for each purchase order. "We've set the fee for the supplier in such a way that it would cost less than if they were to accept a credit card," said Lambert.The purchase order fee is initially set at $3.30, but this eventually will drop to $2.50 as the number of transactions increases toward projected purchase order volume estimates of 500,000 transactions by the fourth year, Lambert said.The Washington competition was but one hurdle for business-to-government companies in a tight race to capture new business via e-government opportunities around the nation. Some of the companies and teams that competed for the Washington contract are returning for another round of competition for a state e-procurement site that will be shared by Colorado and Utah. The proposals were under consideration at press time, and an announcement of the award is expected this summer.Although AMS' Washington contract length is two years with options to extend, Lambert believes it is in states' best interests to establish longer contracts to ensure the continuing success of their electronic purchasing systems. He recommended either five-year contracts or open-ended contracts. This is because states may find that solutions initially provided with no up-front cost to the state may over the long haul require considerable funding to sustain. "If you continue down this traditional path you wind up with situations where you may have to recompete a solution that is taking you down a successful road, and one of the last things you want to do in an electronic commerce environment is undo those systems, solutions and services that are effective for you," Lambert said.XXXSPLITXXX-