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Buying supplies online is partly about saving money, the government acknowledges, but it's also - and more importantly - about understanding the processes and practices underneath.

Buying supplies online is partly about saving money, the government acknowledges, but it’s also — and more importantly — about understanding the processes and practices underneath.

Probably the biggest local attention-getter in the electronic procurement landscape, certainly within government, has been the State Services Commission’s long-running whole-of-government project, now known as GoProcure.

But SSC e-government unit procurement specialist Greg Nichols disputes it deserves the “flagship” status accorded it by the media.

Despite evident hesitancy by government agencies to commit firmly to using GoProcure, “our thinking has not changed”, he says. “By and large, we still see benefits in e-procurement and in syndicated procurement among agencies, but I’m surprised at the degree of interest it’s generated.”

In government, as in most businesses, more than 70% of expenditure is to do with the people employed, and only about 20% with the procurement of supplies, he says. “E-procurement is inevitable, and we want to hurry it along. But it’s not the most burning issue [in government or the application of IT to government]. The broader policy-based and front-office issues are much more important.”

E-procurement, he says now, “is just an initiative we wanted to scope”.

Agencies were given until August 31 to commit to using GoProcure if they wanted to, but while there was a lot of interest, Computerworld queries in late August could not uncover one firmly committed government department. Nichols at the time declined to say how many, if any, had committed to use the system, and when interviewed he and other central government sources refused to discuss anything directly to do with GoProcure pending a September Cabinet meeting. A slight extension was granted to the deadline, but again no agencies were willing to boast that they had agreed to use the system.

“E-procurement is an enabler so you can buy better and better understand what your spend is and where it’s going, not from the ‘e’ aspect of itself,” says Nichols.

Having looked into the potential of GoProcure, agencies will have a better idea of their procurement practices, he says, and there are now likely to be improvements in these practices, whether they adopt e-procurement in the short term or not.

This view is reminiscent of an address this reporter once gave to the Computer Society in a debate on “Has IT improved our productivity?” In it a company called ECBL (Empty but Convincing Boxes Ltd) would persuade an organisation to redesign its business processes around a fake prospective computer set-up. Then it would wheel the boxes out and leave the improved manual system.

“The ‘e’ is still important,” says Nichols, “and it will come. But you have to understand how and why you’re doing it.”

An important principle is centralised or syndicated procurement. From a simple interface-counting perspective, he says, it has to be easier for m suppliers and n buying agencies to communicate through m + n connections to a central hub than to run the m + n connections needed for all agencies to communicate with every supplier. Electronics is necessary to implement such a hub efficiently, he says.

“Yes, e-procurement is about getting [bulk-buying] savings, but it’s also about only doing [set-up-tasks] once. With a single transaction hub, suppliers are not repeatedly setting up interfaces.”

Other governments have seen the advantage and made it work, he notes; several states in the US have implemented centralised procurement, and New South Wales “is going that way”. These governments, he acknowledges, are more centrally controlled, without the strong perspective of independent departmental choice and accountability that the New Zealand government has developed since the mid-80s, so it’s easier to “capture” clients, and thereby suppliers, for the concept.

Nichols had in a file ready for our interview a copy of Computerworld’s story of Logistics co-chairman Tim Munro’s sceptical view of e-procurement’s value (see Logistics specialist doubts portal value), which Nichols claims is “wrong on almost every point”.

In particular, he disputes Munro’s contention that price concessions for cooperative and therefore larger-volume buying are limited.

“We’ve seen a range of prices [for the same lines] over our agencies, and these are now becoming more uniform,” under the impact of more cooperative buying among agencies, he says.

He also notes that the operator of an e-procurement system will not necessarily “clip the ticket”, which Munro suggested as a potential eroder of savings. “Marketplace” operations like the unsuccessful Onezone may do this, but in the case of GoProcure, all costs are up front in the budgeted cost of the system — for which the e-government unit is now negotiating a reduction in view of the apparently low level of interest.

Munro has since clarified that part of his comments, acknowledging that he was thinking of “marketplaces”.

An e-procurement system, Nichols says, can be divided into two parts: the “requesting solution”, internal to the department, which enables staff to bring up supplier catalogues, or local copies of them and order efficiently; and the transaction hub, which routes the order efficiently to the supplier, possibly combining it with orders from other buyers.

“A few [government agencies] already have a good internal requesting solution. The Police is using SAP, for example, and MSD [the Ministry of Social Development] has QSP. An agency that already has the requesting solution can still benefit by going through the transaction hub.”

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