eVA gets toll relief

The state of Virginia is tweaking the funding model for its electronic procurement system to provide temporary relief to vendors that found paying both a subscription fee and a transaction fee to use the system was unduly burdensome, state officials said.Vendors were required to pay both fees during fiscal 2002 but will be allowed to forego the transaction fee during fiscal 2003, James Roberts, Virginia's deputy secretary of administration, told Washington Technology. This means state agencies will partially fund the system to make up the difference, Roberts said.The state purchased the reverse funding system, known as eVA, two years ago from American Management Systems Inc. of Fairfax, Va. AMS is guaranteed $14.9 million over five years ending June 30, 2006. The project is expected to be completed in December, according to state officials.As the state began to roll out the eVA system in 2002, vendors objected to paying some fees that didn't exist before, Roberts said. The state decided to take "a step back" following discussions with the vendors, Roberts said."We will work with the vendor community to make sure all of the bugs are worked out, so that a year from now everyone will be more comfortable going back to the model that was set in motion, perhaps too quickly, this [fiscal] year," he said.Gary Lambert, senior consultant for AMS' public-sector group, said the introduction of eVA marks a brand new way of doing business for more than 5,400 vendors."You're taking a diverse business culture and asking them to think about doing business in a different way and use tools they haven't used in the past," Lambert said.Lambert said AMS is exploring ways to streamline the registration process for vendors. While vendors now register both to receive solicitations and to receive orders through the system, they may only have to register one time when the process is streamlined, he said.A report issued by the Virginia state auditor in June showed that eVA use is low, averaging only 1.5 percent of the potential monthly purchases that might flow through the system. The auditor's report also noted the state lacks sufficient interfaces between existing agency procurement systems and eVA.Many of the large agencies and educational institutions in Virginia have standalone systems for purchasing and financial management that aren't compatible with eVA, Roberts said. State officials at the Department of General Services are working with AMS to establish interfaces using middleware and various programming solutions, he said.AMS has connected all 165 agencies and higher education institutions in the state to eVA, Lambert said. The first phase of the process, now complete, was to connect the agencies to eVA. The second phase will provide an interface between the agencies' enterprise resource planning or legacy systems, he said.Once the interfaces are established and larger purchases start flowing through the system, "we expect the purchasing to skyrocket," Roberts said.During the first six months of fiscal 2003, state agencies will begin making purchases of more than $5,000 through eVA, Roberts said. Until now, agencies were only making purchases below $5,000, he said. Lambert said AMS and the state expect a low volume of purchases through eVA while the system is being put in place. In fact, despite vendor complaints about new fees, state agencies exceeded the purchasing goals Virginia had set for the first year of eVA by $40 million, he said. The state's goal was $105 million by June 30, but the system handled $145 million.State agencies and higher education institutions will have access to about 500 catalogs to purchase 1.8 million line items when they are fully connected, Lambert said.Once the system is installed, AMS will continue to provide hosting and call-center services, Lambert said. He said the business model for eVA is still evolving and might be different at the end of the original contract term.Walter Kucharski, Virginia's auditor of public accounts, said in his first-year report on eVA that before the project is completed, the Department of General Services needs to develop interfaces between existing agency procurement systems and eVA, develop an interface to capture small-purchase charge-card transactions, continue to improve vendor relations and take steps to increase vendor registration.XXXSPLITXXX-The self-funded e-procurement system works great in theory. In practice, however, integrators have found the self-funded model to be a losing proposition if state officials don't push their agencies to use it.While most of the 50 states now have some portal for solicitations or announcements, only 10 state portals are processing electronic orders, said Gary Lambert, senior consultant for American Management System Inc.'s public-sector group.Those states are California, Maryland, Massachusetts, Michigan, New York, North Carolina, Texas, Virginia and Washington and Wisconsin, according to industry officials.Greg Baroni, president of Global Public Sector for Unisys Corp. of Blue Bell, Pa., said the government customer and the company installing the e-procurement system must work together to develop strategies that increase purchasing through e-procurement portals.Because of the high risk associated with self-funded projects, Unisys has devoted only 5 percent of its global business to that model, Baroni said.The risk associated with the system is twofold, said Larry Herman, managing director of KPMG Consulting Inc. of McLean, Va. The first is whether agencies will use the system, and the second is how much they will use it."The risk gets higher when government doesn't require agencies to use it," Herman said.For this reason, integrators now believe government should pay for part of the system if it isn't requiring agencies to use it regularly, he said.Neither government customers nor systems integrators should underestimate the complexity of installing an e-procurement system, Lambert said. Statewide e-procurement systems are enterprisewide projects similar to replacing a statewide financial system, he said.The challenges associated with self-funded e-procurement systems "have led a number of companies to look at the model and wonder how long it will take them to get their investment back," he said.