No. 240

June 2004

SMALL BUSINESS

RESEARCH

SUMMARY

Trends in Electronic Procurement and Electronic Commerce and

Their Impact on Small Business

by Innovation and Information Consultants, Inc.

2004. [82] pages. Concord, MA 01720

under contract no. SBAHQ-02-Q-0008

This Small Business Research Summary (ISSN 1076-8904) summarizes one of a series of research papers prepared under contracts

issued by the U.S. Small Business Administration’s Office of Advocacy. The opinions and recommendations of the authors of this study do

not necessarily reflect official policies of the SBA or other agencies of the U.S. government. For more information, write to the Office of

Advocacy at 409 Third Street S.W., Washington, DC 20416, or visit the office’s Internet site at www.sba.gov/advo.

This report examines the extent to which businesses

are utilizing Internet and electronic information technologies in government procurement. It also examines whether the transition to electronic commerce

has helped or handicapped small businesses in

obtaining at least 23 percent of federal purchases

annually, as Congress has mandated. It also investigates whether small businesses in industries that successfully adopt e-commerce have an advantage in

competing for procurement dollars, and it includes a

survey of existing evidence on the implementation of

electronic procurement in these industries.

Methodology and Data

The researchers reviewed the relevant literature on

the state of e-commerce generally, trends in e-procurement, costs and benefits of the electronic marketplace, and potential barriers to the adoption of ecommerce and e-procurement. Using industry codes

from the North American Industry Classification

System (NAICS), they analyzed three databases: (1)

the Bureau of the Census’s E-Stats; (2) the Census of

Manufacturers; and (3) the Federal Procurement

Data System’s procurement database. With these data

they investigated specific industry areas and structural features associated with them, including firm-size

distribution, industry concentration, rate of adoption

of e-commerce, and level of procurement activity.

The researchers also conducted interviews with a

small sample of respondents to shed light on some of

the findings of the data analysis and literature review.

Research Findings

• Small firms appear to rely more heavily on e-procurement tools than do large firms. Using Simplified

Acquisition Procedures as a proxy, the authors found

that in FY 2000, 2 percent of all small business procurement dollars were obtained through e-procurement. By FY 2001, this share had risen to 6.3 percent

and in FY 2002, to 6.5 percent. Large businesses, on

the other hand, obtained about 1 percent of procurement dollars through Simplified Acquisition

Procedures in FY 2000, and that share remained relatively constant over the three years studied.

• Certain barriers appear to exist that may prevent

small business from using e-commerce. These

include multiple points of entry, the expense of monitoring procurement offerings, and shifts within the

government’s e-procurement system.

• Small businesses have not lagged significantly in

their adoption of e-commerce.

• In industries where small businesses obtain a

significant share of federal procurement dollars (i.e.,

greater than 25 percent of the total), small firms are

likely to use e-procurement tools, such as Simplified

Acquisition Procedures.
• The data identified certain industries that have

led in the adoption of e-commerce. These early

adopters include

Motor vehicles and equipment,

Computer equipment and supplies,

Drugs and pharmaceuticals,

Courier services,

Beverages and tobacco,

Computer and electronic products,

Electrical equipment and components, and

Transportation equipment

By using Simplified Acquisition Procedures as a

proxy for e-procurement tools, the authors found that

these early e-commerce adopters have used e-procurement tools much more frequently than average.

Industry areas that lagged in the adoption of e-commerce also lagged in the use of e-procurement tools.

Policy Recommendations

The researchers developed several policy recommendations to facilitate small businesses’ use of e-procurement.

• Successful selling to the federal government

begins with certainty about how the government

intends to purchase products and services from

potential suppliers. The federal government has

altered its course many times over the last decade,

beginning with electronic data interchange, then

moving toward Internet-based postings via numerous

individual portals. It has now arrived at a single

interface, FedBizOpps, an Internet-accessible site

where all opportunities are to be posted.

• Central registration of companies needs to

become a reality. There continue to be numerous

places where a small business needs to register in

order to obtain information about potential business

opportunities with the federal government. The

recent merging of the Central Contractor

Registration (CCR) database with SBA’s PRO-Net is

a welcome change, as is the merging of

DoDBusOpps with FedBizOpps. Other federal agencies should emulate these examples and merge any

existing registrations into CCR. The CCR process

should be used to populate databases with individual

agencies, DOD supply centers, or prime contractors’

databases, eliminating the need for small firms to

visit each of these sites in order to do business with

the federal government.

• Small businesses, especially those that do not

regularly use electronic commerce, need training,

support, and networking opportunities in order to

successfully use e-tools to seek federal contracts.

Policymakers should encourage such training opportunities and facilitate networking events for small

businesses. 

• Current e-government initiatives must include

substantial training for procurement officers and

employees, so that e-commerce tools will be used to

their full potential.

• Policymakers should target industries that lag in

their adoption of e-commerce and work with trade

groups to offer support and training to small businesses in those industries.

• Some of the initiatives being implemented as

part of the Integrated Acquisition Environment and

e-Gov programs may impede small businesses’ ability to compete. Some initiatives, such as the CCR to

develop one comprehensive list of suppliers (that can

be used for payments, as well), will strengthen equal

access to small businesses.

Ordering Information

The full text of this report and summaries of other

studies performed under contract to the U.S. Small

Business Administration’s Office of Advocacy are

available at www.sba.gov/advo/research. Copies are

also available from:

National Technical Information Service

U.S. Department of Commerce

5285 Port Royal Road

Springfield, VA 22161

(703) 487-4650, (703) 487-4639 (TDD)

www.ntis.gov

NTIS order number: PB2004-104381

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