Report: E-procurement spending on the rise

State and local governments will spend heavily on e-procurement over the next five years as the approach continues to gain in popularity, according to a new study.

Market research firm Input Inc. of Reston, Va., reported Nov. 19 that state and local spending on e-procurement will grow at an average annual compound rate of 17 percent over the next five years to reach $1.1 billion by 2008, up from $500 million in 2003.

Though most states have implemented some part of an e-procurement solution, only a handful have complete end-to-end systems that allow state agencies to handle the entire procurement process, from solicitation to order fulfillment, online.

"With the increasing popularity of reverse funding model and advancing legislation to ensure supply chain adoption, procurement automation at the state and local level is no longer constrained by funding availability," said James Krouse, Input's manager of state and local market analysis.

The reverse funding model used by some states allows for e-procurement systems to be implemented without any state funding. Under this approach, the contractor's development and operations costs are paid by transactions fees charged to participating vendors.