Over the past several years, the Office of Federal Procurement Policy, part of the Office of Management and Budget, has emerged as a guiding force in the Clinton administration's efforts to re-engineer the federal procurement process. And electronic commerce plays a central role in that process. For its part, EPIC serves a critical coordinating position within the government in formulating policy on electronic commerce. The government's first serious foray into electronic commerce came with the Federal Acquisition Streamlining Act of 1994. That act revolutionized the federal procurement process, in part by establishing the Federal Acquisition Computer Network (FACNET). Unfortunately, FACNET proved a failure. Its architecture was a closed, proprietary system that required vendors to use expensive (and sometimes unreliable) closed networks to communicate with the government.
The government's recent report, "An Assessment of Current Electronic Commerce Activity in Procurement," found there have been failures in the government electronic commerce effort. It acknowledged, for example, that FACNET's high-cost, national architecture was ill-suited to the low-dollar, local transactions it was supposed to accommodate. The report also noted, however, that Electronic Data Interchange, the electronic business forms transferred across FACNET, will be a useful tool to electronic commerce even outside the FACNET architecture.
Recognizing FACNET was a failure and had systemic problems, Congress passed legislation last year that made it far easier for agencies to avoid using FACNET. Many believe FACNET will wither rapidly as a result of that legislative reform. The 1997 legislation also strengthened procurement policy office's role in federal electronic commerce.
The second report, "Electronic Commerce for Buyers and Sellers: A Strategic Plan for Electronic Federal Purchasing and Payment," is potentially more important than the first. In theory, this report was to map out a strategic plan for federal electronic commerce. In practice, though, the report focused more on establishing processes for reform, outlining these seven guiding principles:
- Ease of transactions. Federal agencies should use electronic commerce to streamline purchasing, and whenever possible "federal electronic commerce applications should not disrupt existing and developing commercial relationships for purchasing and payment support services."
- This suggests that government agencies should adapt to evolving commercial models for electronic commerce rather than create their own unique proprietary solutions.
- Use e-commerce for best value procurement. Agencies should use electronic media to learn more about the products they buy. Electronic catalogs should be made broadly accessible and interoperable so agencies can determine whether the products they seek are available on other agencies' contracts.
- Use commercial models. The report discouraged government-specific systems of electronic commerce, suggesting instead that agencies ask outside vendors to develop federal electronic commerce systems using commercial models.
- The Clinton administration is drafting legislation that will encourage agencies and vendors to use electronic payment systems by promising early payment to vendors when they use electronic commerce to promote savings.
- Outsource transaction processing. The EPIC report strongly recommended agencies leave electronic transaction processing to outside vendors.
- Manage risk. The report signaled, perhaps for the first time, that the government generally will accept commercial models of risk allocation in electronic commerce. This issue, a critical one for electronic commerce's success, was never resolved in FACNET. It was never clear who - the government or its vendors - would be liable when messages were lost in the FACNET system.
- Monitor performance. The report suggested agencies first identify those areas in which they could achieve the greatest gains, generally areas of high volume transactions. Beyond that, however, the EPIC report offered little guidance on just how progress should be measured.
- Change management. To ease "change management," the EPIC report called for "education, partnerships and performance measurement."
As the recent reports make clear, the government is profoundly reluctant to stride ahead of the marketplace in devising electronic commerce solutions. It would far prefer to use soundly tested commercial solutions. Through continued dialogue with key industry groups, the government can identify the best practices that have evolved in the commercial sector. Government then can share in the tremendous benefits electronic commerce already is bringing to the commercial marketplace.
In the coming year, it will be important for industry to share with government its insights on the electronic commerce solutions that have - and have not - succeeded in the commercial marketplace.
Robert Sturm is vice president of business development at Digital Commerce Corp., Reston, Va. Christopher Yukins is a senior attorney specializing in government contracts and litigation at Holland & Knight LLP, Washington. The reports are available at policyworks.gov/org/main/me/epic/opendocs.
