EDI by '97? No way, agencies tell Clinton

With agencies now doing only limited buying on line, the goal of
eliminating most of the paper from federal procurement by year's end seems less and less
attainable.

In just 10 months, agencies are supposed to meet a White House deadline to handle all
routine procurements electronically. But administration officials now acknowledge that
most agencies remain unprepared.

President Clinton's October 1993 executive order mandated that governmentwide
electronic data interchange begin by January 1997. To help agencies, the Office of Federal
Procurement Policy and the General Services Administration established the Federal
Acquisition Network.

With special software to convert their transactions to the ANSI X12 EDI standard,
agencies are supposed to interact with vendors over FACNET, an amalgam of agency, Internet
and FTS 2000 networks.

But recent government and industry reports show that FACNET traffic is crawling,
despite urgings from OFPP and GSA's Electronic Commerce Acquisition Program Management
Office (ECA-PMO). Too few agencies have gone beyond pilot systems and too few vendors have
registered as electronic trading partners, OFPP administrator Steven Kelman said.

Now administration officials are pitching electronic catalogs and credit cards as the
best interim tools for agencies and small businesses working to build electronic commerce
systems.

Meanwhile, small businesses keep complaining that participating in FACNET costs too
much and that agencies are preoccupied with broadcasting requests for quotes just to
demonstrate FACNET capability.

"Electronic data interchange was intended for routine and volume purchases. But
agencies are using it for the bidding process, and that doesn't make a lot of sense,"
said Tony Stirk, president of Iron Horse, a small network management services company in
Burke, Va. "It's being misapplied. It's like trying to screw in a screw with a
hammer."

Government procurement officials acknowledged that FACNET's preliminary results are
underwhelming. The General Services Administration has compiled a list detailing FACNET
traffic in 1995. It shows that some agencies are not using the system at all, although
every Cabinet department has tried some type of on-line buying.

For instance, although the Labor, Veterans Affairs and Housing and Urban Development
departments did not use FACNET last year, they all tried some alternative such as an
electronic bulletin board system. Of the 15 Cabinet departments and five independent
agencies that GSA tracked, only the Federal Emergency Management Agency and the Small
Business Administration had not tried any on-line buying method in 1995.

But the new procurement law requires GSA to make its Multiple-Award Schedule contracts
accessible through FACNET by 1998. This, OFPP and GSA officials suggested, could help more
agencies satisfy basic electronic commerce needs by using electronic catalogs and EDI
links with suppliers that accept government credit cards.

"Electronic catalogs are even more convenient for users and can potentially mix
all of the best aspects of the credit card with it," Kelman said. "The
combination would mean less time, better prices and direct access. But the buying agent
and the supplier still would be connected via EDI at the back end of the system."

ECA-PMO spokesman Steve Howard agreed with Kelman. "Part of the model has changed.
When we first started, the government was in a solicitation mode," Howard said.

"But now users who really need something can just go out and buy it with a credit
card. The MAS buying rules also have eased up to make that program more robust and
attractive. It's really changed the dynamics of the situation."

The Federal Supply Service's enhanced GSA Advantage system is the agency's test bed for
using the Internet, electronic catalogs, credit cards and EDI links to create a simple
FACNET option.

Stirk agreed that combining credit cards with EDI applications to process
indefinite-delivery, indefinite-quantity contract orders is a more solid formula for
building up electronic commerce. But the government still has not fixed its basic FACNET
flaws, he said.

Stirk complained that the FACNET infrastructure is unreliable and many agencies have no
efficient means of evaluating the glut of electronic bids generated by FACNET requests for
quotes.

"With RFQs you don't know who you're dealing with, and it's a low-cost-only
approach. There's also no incentive for small businesses to service their customers,"
Stirk said. "The technology is only a tool for people who know how to use it and have
the proper support. Mistakes cost money, and many are too costly to go back and fix."

GSA officials appear to have heard some of Stirk's gripes. They now are persuading
agencies to use FACNET more for purchase orders and invoices, not just RFQs.

But FACNET's critics also cite diminished leadership as hampering development.

The White House trumpeted FACNET as an essential weapon in its government reinvention
crusade. But ECA-PMO co-chairman G. Martin Wagner has taken a full-time GSA policy job on
top of his PMO responsibilities, and his co-chairman, Deane Erwin, has retired.

Meanwhile, the ECA-PMO is gearing down from an interagency operation to more of a
coordination and help desk function.

"There are questions about where the policy and planning authority is to impose
discipline and oversight," said Robert Deller, GCN columnist and director of market
research for Global Systems and Strategies, a research and consulting firm in Potomac, Md.

"There is a leadership void," Deller said. "The government must
establish top-level program management for guidance, and industry must present to the
government its business case for the products and solutions."

FACNET's inadequacies have been well documented. Last summer, the General Accounting
Office warned that FACNET's architecture was ill-defined, and auditors are preparing
another status report now.

A recent Industry Advisory Council survey also found that many agencies were reluctant
to install more than the minimal FACNET components. Plus, few agencies have included
electronic commerce as a specific budget component in their strategic plans.

Despite its growing pains, FACNET is producing savings, some agencies report.

For example, Office of Personnel Management officials said they have obtained better
prices on commodities such as optical disks using RFQs sent to vendors on line. With a 486
equipped with EDI translation software and a modem, the agency has solicited electronic
price quotes via the Defense Department's data hubs in Columbus, Ohio, and Ogden, Utah,
which support links to value-added networks.

Lynn Furman, OPM's director of contracting and administrative services, said his agency
was the first to be FACNET-certified, and procurement officials are about to expand
electronic commerce operations beyond the central office.

"We've been able to generate some good competition because we're tapping into new
sources," Furman said. "This spring we're moving to a mainframe-based system
that will have translation software grafted into it. This will delegate authority to other
offices and allow more people to use it."

Full-fledged electronic commerce will not become a reality until agencies upgrade and
link their integral procurement and financial systems, Kelman said. The government also
needs to resolve the endless policy debates over encryption and digital signatures.

But electronic catalogs and credit cards offer some easy short-term answers.
"Electronic commerce is progressing, but the target is changing," Howard said.
"The end user has become the buyer who wants to get the goods quickly. Electronic
catalogs are cropping up, and my advice to vendors is to get on the schedule and accept
the government purchase card."