Report to the Ranking Minority

Member, Committee on Small Business

and Entrepreneurship, U.S. Senate

United States General Accounting Office

GAO

October 2001 ELECTRONIC

COMMERCE

Small Business

Participation in

Selected On-line

Procurement

Programs

GAO-02-1
Page i GAO-02-1 Electronic Commerce

Letter 1

Results in Brief 2

Background 4

Small Businesses Actively Participate in Federal Electronic

Procurements, but Obstacles Reportedly Remain 8

Federal Programs Provided Locally Coordinated Electronic

Commerce Education to Businesses 14

Conclusions 19

Agency Comments 19

Appendix I Scope and Methodology 21

Appendix II Reported Small Business Obstacles to Conducting

Federal Procurements Electronically 25

Appendix III Comments From the Defense Logistics Agency 33

Appendix IV Comments From the U.S. Small Business

Administration 34

Appendix V Comments From the Secretary of Commerce 37

Appendix VI GAO Contacts and Staff Acknowledgments 39

GAO Contacts 39

Acknowledgments 39

Tables

Table 1: Selected Federal On-line Procurement Programs: Services,

Products, and Process 6

Table 2: Actual and Estimated Sales in Three On-line Procurement

Programs Dollars in thousands 6

Contents
Page ii GAO-02-1 Electronic Commerce

Table 3: Agency/Program, Focus, and Target of Business

Assistance Programs Studied 8

Table 4: Commonly Reported Obstacles for Small Businesses in

Federal Electronic Procurements 13

Table 5: Number of Local Offices Providing Various Types of

Electronic Commerce Assistance [Out of Six Offices We

Selected for Each Program] 15

Table 6: Electronic Commerce Topics Covered by Local Offices

[Out of Six Offices We Selected for Each Program] 16

Table 7: Types of Coordination Performed by Local Offices [Out of

Six Offices We Selected for Each Program] 18

Figures

Figure 1: Fiscal Year 2000 Small Business Share of Procurement

Dollars for Three On-line Procurement Programs

Compared to Governmentwide Share 10

Figure 2: Fiscal Year 1999 Small Business Share of Procurement

Dollars for Three On-line Procurement Programs

Compared to Governmentwide Share 11

Abbreviations

CCR Central Contractor Registration

DLA Defense Logistics Agency

DMLSS Defense Medical Logistics Standard Support

DOD Department of Defense

ECRC Electronic Commerce Resource Center

FAR Federal Acquisition Regulation

FedBizOpps Federal Business Opportunities

FPDS Federal Procurement Data System

GSA General Services Administration

HTML Hypertext Markup Language

ITSS Information Technology Solutions Shop

MEP Manufacturing Extension Partnerships

NIST National Institute of Standards and Technology

PRO-Net Procurement Marketing and Access Network

PTAC Procurement Technical Assistance Center

SBA Small Business Administration

SBDC Small Business Development Center
Page 1 GAO-02-1 Electronic Commerce

October 29, 2001

The Honorable Christopher S. Bond

Ranking Minority Member

Committee on Small Business and Entrepreneurship

United States Senate

Dear Senator Bond:

This letter responds to your request that we explore issues related to small

business1

 participation in government on-line procurement programs and

electronic commerce2

 education activities covered by selected federal

programs for businesses in general. Over the past several years, the federal

government has pursued various electronic initiatives to strengthen its

buying processes in order to reduce costs and create a competitive

“virtual” marketplace. These efforts have been augmented by the

Administration’s announcement in early 2001 that expanding the

application of on-line procurements in the federal government was one of

its major reform initiatives. Moreover, the use of electronic commerce in

the U.S. economy at large is growing. For example, according to the U.S.

Census Bureau, for the second quarter of 2001, retail electronic commerce

increased 24.7 percent over the sales of the second quarter of 2000.3

Because of concerns that small businesses may be facing difficulties in

participating in federal on-line procurement programs, you asked us to

ascertain the share of procurement dollar awards made to small

businesses in selected programs and to identify whether obstacles exist

for small businesses in participating in electronic procurements. In

addition, you were concerned about the extent of the government’s

business outreach and education programs related to electronic

commerce and whether these programs are adequately coordinated.

 1

For the purposes of government procurement, a small business is a concern that is

independently owned and operated, is not dominant in the field of operation in which it is

competing for government contracts, and is qualified as a small business under criteria and

size standards prescribed by the Small Business Administration (FAR, sec. 19.001).

2

Electronic commerce encompasses all aspects of buying and selling electronically,

including marketing end-to-end transactions with consumers, and on-line auctions. It is

transacted through a variety of technologies, including electronic data interchange,

electronic mail, electronic funds transfer, and Web-based applications.

3

United States Department of Commerce News, August 30, 2001.

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-02-1 Electronic Commerce

Accordingly, our objectives were to (1) determine, for three federal on-line

procurement programs, the differences between the small business share

of federal prime contract dollars awarded by these programs and the small

business share of all federal contract dollars awarded and to identify what,

if any, obstacles exist for small businesses in conducting electronic

procurements with the federal government and (2) review what steps four

federal business assistance programs have taken to educate businesses on

using electronic commerce and the extent to which these programs have

coordinated their efforts.

To determine the comparative small business share of dollar awards at the

three selected federal on-line purchasing sites, we calculated the

percentage of small business awards to total awards for each program and

compared them to the governmentwide small business share for federal

procurements, as reported by the General Services Administration’s (GSA)

Federal Procurement Data System (FPDS)—the central repository for

governmentwide procurement data. We addressed the reliability of the

data of the selected programs by performing data consistency checks and

reviewing reports on general system controls. To gather information on

obstacles to small businesses in participating in federal electronic

procurements, we performed a literature search and obtained comments

from officials in selected federal business assistance programs and

organizations representing or working with small businesses.4

 To review

what steps selected assistance programs have taken to educate businesses

in using electronic commerce and the extent to which they have

coordinated their efforts, we reviewed documentation and interviewed

headquarters and local and regional office officials for four federally

funded programs. Appendix I provides more information on our scope and

methodology.

For the three federal on-line procurement programs we reviewed, the

dollar share of awards to small businesses exceeded the overall small

business share of total federal contract dollars awarded in fiscal years

2000 and 1999.5

 For fiscal year 2000, the small business share was 61

percent for the Defense Medical Logistics Standard Support E-CAT, 51

percent for GSA Advantage!, and 39 percent for GSA’s Information

 4

Some of these organizations also include members that are not small businesses.

5

The three on-line programs in our review accounted for about 0.5 percent and 1 percent of

total federal procurement dollars in fiscal years 1999 and 2000, respectively.

Results in Brief
Page 3 GAO-02-1 Electronic Commerce

Technology Solutions Shop, compared to the overall 22 percent

governmentwide small business share.6

 While these figures indicate that

small businesses successfully participated in these three programs,

officials from organizations representing or working with small

businesses, as well as related literature, still report that such businesses

face obstacles in conducting electronic procurements with the

government. Some of these reported obstacles pertain to the general

capability of small businesses to conduct business transactions

electronically (for example, having limited technical expertise), while

others relate to difficulties with participating in the federal government

electronic procurement environment, such as having knowledge of the

government’s multiple procurement Web sites. The federal government

has taken, or is in the process of taking, actions to help address some of

these obstacles, such as implementing a single point of entry on the

Internet for vendors to access information on available government

business opportunities greater than $25,000.

Each of the four business assistance programs we examined had taken

steps to educate its clients on electronic commerce as part of its

operations. We could not fully determine the extent of these activities

because they are conducted by hundreds of local and regional offices, and

only the Defense Logistics Agency’s (DLA)7

 Electronic Commerce

Resource Center (ECRC) program collected performance metrics specific

to electronic commerce. Nevertheless, all but 1 of the 24 local and regional

offices we contacted reported that they provided some type of electronic

commerce education, including sponsoring or participating in

conferences, training, consulting, and technical assistance. The extent and

content of electronic commerce education at the local and regional level

varied but typically included (1) general introductory material; (2)

technical issues, such as electronic data interchange; or (3) governmentspecific subjects. In addition, although coordination among the

headquarters offices of these programs was limited, local and regional

 6

GSA’s calculation of the small business share of government procurements excludes

certain types of procurements. For more information about the exclusions and the goalsetting process, see Small Business: More Transparency Needed in Prime Contract Goal

Program (GAO-01-551, August 1, 2001).

7

The ECRC program was operated by DLA through the Defense Electronic Business

Program Office. The Department of Defense Chief Information Officer has overall

functional responsibility for the Defense Electronic Business Program Office, but the office

receives its funding and personnel through DLA and the Defense Information Systems

Agency. The ECRC program was terminated on September 30, 2001.
Page 4 GAO-02-1 Electronic Commerce

offices generally reported extensive coordination and cooperation. This

included referring clients to other programs and providing specialized

training (e.g., in some cases, Electronic Commerce Resource Centers

conducted training for other assistance programs’ staff and/or clients).

Commenting on a draft of this report, the Defense Logistics Agency, the

Office of Management and Budget’s Office of Federal Procurement Policy,

GSA, and the Small Business Administration stated that they generally

agreed with our report. The Department of Commerce provided updated

online sales statistics.

Although it is still a small part of the U.S. economy, electronic commerce

is growing rapidly. For example, according to the U.S. Census Bureau,

retail electronic commerce dollar volume, though less than 1 percent of

overall U.S. retail sales, increased in all but two of the last six quarters.8

Moreover, while precisely predicting future electronic commerce volume

is difficult, in June 2000 we reported that business-to-consumer Internet

sales were estimated to increase to between $78 billion and $143 billion in

2003, and that business-to-business Internet sales were estimated to

increase to between about $1.5 and $2.2 trillion in that same timeframe.9

According to GartnerGroup, a private research firm, through 2006 the pace

of innovation will increase as enterprises institutionalize electronic

business, and small businesses “must embrace this transition or risk their

long-term viability and survival.”10

The federal government is taking steps to increase its use of electronic

commerce, particularly in the area of conducting procurements on-line.

For example, the President has designated expanding the application of

on-line procurement a major reform for fiscal year 2002. Further,

according to a recent Congressional Research Service report, agency Web

 8

United States Department of Commerce News, August 30, 2001.

9

Sales Taxes: Electronic Commerce Growth Presents Challenges; Revenue Losses are

Uncertain (GAO/GGD/OCE-00-165, June 30, 2000). To obtain sales estimates, we reviewed

academic, government, and private sector studies. In the case of 2003 business-toconsumer Internet sales, the lower range of the estimate was from Jupiter Communications

while the higher end of the range was from Forrester Research, Inc. For the 2003 estimate

for business-to-business Internet sales, we used a Forrester Research, Inc. estimate and

assumed a 20-percent margin of error because it was the only source for these data.

10Ten Imperatives for SMB E-Business Success (GartnerGroup, COM-13-0713, March 9,

2001).

Background
Page 5 GAO-02-1 Electronic Commerce

sites provided various information on federal procurement, including bid

opportunities.11 Moreover, procurement opportunities for small businesses

and for women- and minority-owned businesses were also often identified

on these Web sites. Among the major federal agencies maintaining

procurement Web sites are DLA, GSA, and the National Aeronautics and

Space Administration.

One type of on-line procurement program is a multivendor Internet-based

purchasing site, sometimes called an “electronic mall.” An example of an

electronic mall is GSA Advantage!, in which government buyers can search

listings, compare prices, and purchase items on-line much as a private

individual might purchase an item from an on-line retailer. As of July 1, all

vendors on the GSA schedule were required to electronically submit

product descriptions and price information to GSA Advantage!.12 Another

electronic mall is DLA’s Defense Medical Logistics Standard Support

(DMLSS) E-CAT program, which operates in a similar manner to GSA

Advantage!, except that vendors must have an indefinite delivery/indefinite

quantity contract with DLA to participate. A different type of on-line

procurement program model is GSA’s Information Technology Solutions

Shop (ITSS) program, which is used for larger or more complex

purchases. The ITSS on-line purchasing program maintains an inventory of

contractors through which federal buyers can get quotations in response

to requirements documents. Table 1 summarizes how each of these on-line

programs works and the products that can be obtained using them.

 11Electronic Government: A Conceptual Overview (Congressional Research Service, July 9,

2001).

12According to GSA, as of August 30, 82 percent of the vendors on the GSA schedule on

January 31 have electronically submitted product data to GSA Advantage!. Vendors that

made a good faith effort to comply with the July 1 requirement were given an extension to

provide their information electronically to GSA Advantage!. In addition, vendors with new

contracts are not required to submit data electronically to GSA Advantage! until 6 months

after contract award.
Page 6 GAO-02-1 Electronic Commerce

Table 1: Selected Federal On-line Procurement Programs: Services, Products, and Process

Agency/ program Services Products Acquisition process

DLA/

DMLSS E-CAT

Primarily a Web-based catalog

ordering system

Labware, dental and optical

consumable products, and medical

equipment

Customers browse, compare, select

and order items electronically, and

orders are shipped directly from the

vendors.

GSA/

GSA

Advantage!

Web-based catalog ordering

system

Over 2 million commercial products

and services, many of which are

office supplies and information

technology products and services

Customers browse, compare, select,

and order items electronically, and

orders are shipped directly from the

vendors or a GSA warehouse.

GSA/

ITSS

Web-based contracting

services

Information technology products and

services, from computer monitors to

complete network installations

Customers enter requirements on-line.

GSA staff solicit quotes, issue purchase

orders, and authorize payment

electronically.

Source: GAO, based on DLA and GSA documentation.

These three on-line procurement programs are small but growing in

comparison to overall federal procurement dollars. According to the

Federal Procurement Data System (FPDS),13 the government procured

about $232 billion and $209 billion in goods and services in fiscal years

2000 and 1999, respectively. The three on-line programs in our review grew

as a percentage of total federal procurement dollars from about 0.5

percent in fiscal year 1999 to about 1 percent in fiscal year 2000. Table 2

shows actual and estimated dollar volumes for the three programs and

their growth over three fiscal years.

Table 2: Actual and Estimated Sales in Three On-line Procurement Programs

Dollars in thousands

Fiscal year sales

On-line procurement

program

(Actual)

1999

(Actual)

2000

(Estimated)

2001

DMLSS E-CAT $2,475 $14,057 $24,000

GSA Advantage! 85,687a124,892b250,000

ITSS 977,472 2,258,709 3,700,000

a

This total includes about $17 million in direct sales by vendors and $69 million in sales of GSA

purchased stock items.

b

This total includes about $30 million in direct sales by vendors and $95 million in sales of GSA

purchased stock items.

Source: GSA and DLA.

 13FPDS collects data on all federal contract actions and calculates the governmentwide

percentage of federal procurements awarded to small businesses based on procurement

information received from the agencies.
Page 7 GAO-02-1 Electronic Commerce

Other on-line procurement Web sites also support government purchasing.

These sites include the Department of Defense’s (DOD) EMALL program,

which is planned as the single DOD electronic mall,14 and the National

Institutes of Health Intramall program. The private sector also offers online procurement Web sites that support government buying activities.

Beyond its on-line procurement programs, the federal government also

supports electronic commerce by sponsoring programs that provide

electronic commerce education to businesses. For example, each of the

four federally funded business assistance programs that you asked us to

review provides electronic commerce education as part of its operations.

Each program also uses nonfederal organizations such as nonprofit

organizations or contractors to perform its education services. However,

as shown in table 3, the programs differ in focus and the target clients

served.

 14The Strom Thurmond National Defense Authorization Act for Fiscal Year 1999—P.L. 105-

261, sec. 332, 112 stat.1920, 1968 (1968)—called on DOD to develop a single, Defense-wide

electronic mall system.
Page 8 GAO-02-1 Electronic Commerce

Table 3: Agency/Program, Focus, and Target of Business Assistance Programs Studied

Agency/program Service providers

Number of

offices Focus Target clients

SBA/

Small Business Development

Center (SBDC)

States, colleges and

universities, and nonprofit organizations

About 1000a Business management and

technical assistance

Small businesses

Dept. of Commerce/

National Institute of Standards

and Technology (NIST)

Manufacturing Extension

Partnerships (MEP)

States, colleges and

universities, and nonprofit organizations

About 400 Transfer of advanced

manufacturing technologies

and related management

and implementation

processes to manufacturers

Small and medium-sized

manufacturers

DLA/

Procurement Technical

Assistance Center (PTAC)

States, colleges and

universities, and nonprofit organizations

90 Assistance in contracting

with federal, state, and local

governments

Individuals or businesses,

especially small and/or

disadvantaged businesses

DLA/

Electronic Commerce

Resource Center (ECRC)b

Contractors 17 Assistance in adopting

electronic commerce,

particularly with DOD

The U.S. civilian-military

industrial base, including small

and medium-sized businesses,

DOD, and other government

organizations

a

SBA has cooperative agreements with about 60 lead offices which, in turn, contract with about 1,000

local service providers.

b

The ECRC program was terminated on September 30, 2001. Before that date, it was operated by

DLA through the Defense Electronic Business Program Office. DOD’s Chief Information Officer has

overall functional responsibility for the Defense Electronic Business Program Office but the office

receives its funding and personnel through DLA and the Defense Information Systems Agency.

Source: GAO, based on SBA, NIST, and DLA documentation.

The small business share of federal procurement dollars awarded through

three on-line procurement sites was higher than the governmentwide small

business share, as reported by FPDS, the central repository of

governmentwide procurement data. However, obstacles to conducting

electronic business with the federal government continue to be cited by

organizations representing or working with small businesses and business

assistance program officials. Some of these obstacles relate to the general

readiness of small businesses to conduct electronic commerce while

others are specific to how the government has implemented electronic

procurement activities. The government has taken, or plans to take,

actions that are expected to address some of the government-specific

obstacles.

Small Businesses

Actively Participate in

Federal Electronic

Procurements, but

Obstacles Reportedly

Remain
Page 9 GAO-02-1 Electronic Commerce

As figures 1 and 2 illustrate, the share of procurement dollars awarded to

small businesses through the three on-line programs in fiscal years 2000

and 1999, respectively, was greater than their governmentwide share, as

reported by FPDS.15 These on-line procurement programs also exceeded

the governmentwide goal of a 23-percent share for small businesses.16 Most

of the contract awards made through DMLSS E-CAT and GSA Advantage!

were small, which may at least partially account for the relatively large

share of dollars awarded to small businesses in these programs. Small

businesses generally obtain a greater percentage of contract awards of

$25,000 or less (e.g., 43 percent for non-credit-card awards in fiscal year

2000), and, in fiscal year 2000, 91 percent of DMLSS E-CAT awards and 93

percent of GSA Advantage! awards were $25,000 or less. (Only 3 percent of

ITSS awards were $25,000 or less.)

 15SBA directed GSA to exclude several types of contracts when calculating the percentage

of federal procurements awarded to small business in FPDS. These exclusions fall within

three types of contract actions: (1) those for which small businesses’ chances to compete

are limited or nonexistent, (2) those using nonappropriated funds, and (3) those made by

agencies that are not subject to the Federal Acquisition Regulation or are otherwise

exempted from statute from following procurement rules. The governmentwide percentage

also does not include credit card sales because federal agencies do not report detailed data

on purchase card expenditures to FPDS.

16The governmentwide goal for participation by small business concerns must be

established at not less than 23 percent of the total value of all prime contract awards for

each fiscal year. 15 U.S.C. sec. 644(g)(1).

Small Business Share of

Awards in Three On-line

Procurement Programs is

Greater Than Reported

Share of Governmentwide

Procurement Awards
Page 10 GAO-02-1 Electronic Commerce

Figure 1: Fiscal Year 2000 Small Business Share of Procurement Dollars for Three

On-line Procurement Programs Compared to Governmentwide Share

Note: For a discussion of data reliability, see appendix I.

a

The GSA Advantage! percentage is based on direct sales by vendors (about $30 million in fiscal year

2000).

b

As reported by FPDS.

Source: GAO analysis, based on data provided by GSA and DLA.
Page 11 GAO-02-1 Electronic Commerce

Figure 2: Fiscal Year 1999 Small Business Share of Procurement Dollars for Three

On-line Procurement Programs Compared to Governmentwide Share

Note: For a discussion of data reliability, see appendix I.

a

The GSA Advantage! percentage is based on direct sales by vendors (about $17 million in fiscal year

1999).

b

As reported by FPDS.

Source: GAO analysis, based on data provided by GSA and DLA.

Although small businesses received a higher share of awards in the three

on-line procurement programs than the governmentwide share, some

small businesses still face reported obstacles to successfully participating

in on-line government purchasing activities. Obstacles reported generally

fall into two categories: (1) those relating to general readiness—the

willingness and ability of small businesses to conduct business

electronically and (2) those specific to conducting procurements

Obstacles to Small

Businesses Conducting

Electronic Procurements

With the Government

Reported
Page 12 GAO-02-1 Electronic Commerce

electronically with the federal government.17 Table 4 lists the reported

obstacles by category. While these obstacles were reported in the context

of small businesses, some—such as security and privacy—also apply to all

businesses.

 17In addition to obstacles pertaining to conducting procurements electronically, small

business organizations cited other concerns related to federal contracting in general, such

as contract bundling. This is the consolidation of two or more procurement requirements

previously provided under separate smaller contracts into a solicitation of offers for a

single contract that is likely to be unsuitable for award to a small business concern. For

more information on bundling, see Contract Management: Small Businesses Continue to

Win Construction Contracts (GAO-01-746, June 29, 2001) and Small Businesses: Limited

Information Available on Contract Bundling’s Extent and Effect (GAO/GGD-00-82, March

31, 2000).
Page 13 GAO-02-1 Electronic Commerce

Table 4: Commonly Reported Obstacles for Small Businesses in Federal Electronic Procurements

Number of sources citing obstacles

Reported obstacle

Studies and

surveysa

(out of 6

total)

Business

assistance

providers

(out of 24

total)

Organizations

representing or

working with small

businessesb

(out of 8 total)

Obstacles Related to General Electronic Commerce Readiness

Need to make a business case: Small businesses may be reluctant to make

the investment to implement electronic commerce. 6 7 4

Limited technical expertise: Small businesses can lack the necessary

technical skill sets. 68 5

Internet access issues: Small businesses may have difficulty obtaining

affordable high speed Internet access. 4 6 4

Concerns about security and/or privacy: Small businesses are concerned

about inappropriate disclosure of proprietary business information that

governments collect from companies, consumer fraud, and the adequacy of

security afforded a transaction on the Internet. 3 5 3

Obstacles Related to Conducting Electronic Procurements With the

Government

Monitoring various federal procurement information Web sites for business

opportunities: The government has multiple Web sites that list contracting

opportunities. 13 5

Differing requirements for on-line purchasing programs: The government has

multiple on-line purchasing Web sites that have different formats and

procedures. 14 2

Lack of a single vendor registration system: Vendors must generally complete

multiple registrations and profiles to do business with more than one

government office. 06 2

Problems related to technical data and drawings: Businesses can have

difficulty in locating, transmitting, downloading, and printing on-line

specifications and drawings. 1 4 4

Difficulty in obtaining help with problems and marketing assistance: Vendors

can have difficulty reaching someone at the buyer’s or program office who is

able and willing to help, particularly with technology-related problems and/or

marketing questions. 19 2

Uncertainty about the government’s electronic procurement strategy: Since

government agencies are pursuing different approaches to implementing

electronic purchasing, small businesses hesitate to make investments in any

one electronic commerce system. 1 5 5

a

These studies and surveys were published between early 2000 and mid 2001.

b

Some of these organizations also include members that are not small businesses.

Source: GAO analysis.

As the relatively large small-business share of awards made through the

three federal on-line procurement programs shows, some small businesses

are overcoming these reported obstacles. Still, as the federal government

continues to implement electronic procurement initiatives, it is essential
Page 14 GAO-02-1 Electronic Commerce

that it consider the obstacles that some small businesses face and work to

implement solutions that address these obstacles. Small businesses, in

turn, must act to develop, maintain, operate, and evolve effective Webbased approaches to improve the likelihood of their successfully

conducting business with the government.

Appendix II provides additional information on these reported obstacles

and various government actions being taken to address some of them. An

example of such an action is GSA’s Federal Business Opportunities

(FedBizOpps) Web site, which has been designated the single

governmentwide point of electronic entry on the Internet where vendors

can access all the information they need to bid on available government

business opportunities greater than $25,000.

Each of the four federally funded business assistance programs in our

review provided electronic commerce education as part of its operations,

although the level of involvement varied. Three of these business

assistance programs are oriented toward management issues and

addressed electronic commerce as only one part of their responsibilities.18

In contrast, the fourth program, ECRC, focused entirely on electronic

commerce. The ECRC program was terminated September 30, 2001. While

coordination at the headquarters level for these programs was limited, the

local offices generally coordinated their various electronic commerce

activities.

Although officials from the three management-oriented programs stated

that they expect local offices to address electronic commerce issues, the

standard agreements for these three programs do not require local entities

to report performance metrics associated with electronic commerce.

Accordingly, nationwide statistics on the electronic commerce education

activities for the three management programs are not available. As a

result, we contacted six local offices for each of these programs to

determine whether they provided electronic commerce education. All but

one of the local offices we contacted indicated that they offered electronic

commerce education or assistance to their clients. Table 5 shows the types

 18In addition to addressing management issues, the MEP program provides U.S.

manufacturers with implementation services to assist them in adopting new, more

advanced manufacturing technologies.

Federal Programs

Provided Locally

Coordinated

Electronic Commerce

Education to

Businesses

Business Assistance

Programs Provided

Electronic Commerce

Education
Page 15 GAO-02-1 Electronic Commerce

of electronic commerce assistance activities provided by the six local

offices in each program we contacted.19 For example, local offices

provided formal training as well as counseling or technical assistance to

individual clients.

Table 5: Number of Local Offices Providing Various Types of Electronic Commerce

Assistance [Out of Six Offices We Selected for Each Program]

Number of local offices providing service

Type of service provided SBA/SBDC NIST/MEP DLA/PTAC

Counseling, consulting, or technical

assistance 5 6 5

Conference sponsorship, presentation,

and/or exhibitor 4 4 6

Classroom traininga51 5

On-line training 2 1 1

Other 3 5 3

a

In some cases, this training was fully dedicated to electronic commerce while in others it was just

one of several topics covered in the course.

Source: GAO analysis.

Subjects covered by the three management-oriented programs’ local

offices in their electronic commerce assistance activities are shown in

table 6. These subjects ranged from general introductory material to

technical or government-specific topics. According to local and regional

office officials, offices tailor the types of topics offered to meet local and

individual client needs.

 19Because the local offices of the management-oriented programs generally did not

specifically track electronic commerce assistance and because electronic commerce

content was often embedded in other training, we were unable to determine how many

clients received electronic commerce education or assistance.
Page 16 GAO-02-1 Electronic Commerce

Table 6: Electronic Commerce Topics Covered by Local Offices

[Out of Six Offices We Selected for Each Program]

Number of local offices providing service

Topic covered SBA/SBDC NIST/MEP DLA/PTAC

Introduction to electronic commerce,

including marketing on the Internet 4 6 5

Web-site development 4 3 1

Electronic data interchange 0 1 4

Selling to the government 2 0 6

DOD electronic commerce initiatives 0 0 2

On-line vendor registration with the

government 2 06

Other 1 1 1

Source: GAO analysis.

As for the ECRC program, each of the centers was required to make

available a standard set of training courses that was centrally maintained.

Standard training courses that ECRCs provided included introductory

material as well as technical and DOD-specific courses. In fiscal year 2000,

ECRCs reported providing 3,468 training courses with a total enrollment of

53,800 students of whom 37,968 were DOD staff and 15,832 were non-DOD

staff, including business owners or employees (some of these may be

multiple courses taken by the same client). Among non-DOD staff, the

courses with the highest number of participants, accounting for about twothirds of non-DOD training were

• Hypertext Markup Language (HTML),20 (2,987 non-DOD participants);

• Marketing on the Internet (2,907 non-DOD participants);

• Internet as a business platform, (1,772 non-DOD participants);

• Getting started with electronic commerce (1,620 non-DOD participants);

and

• Business opportunities with DOD through electronic data interchange

(1,494 non-DOD participants)

The six regional ECRCs we contacted also reported providing other types

of electronic commerce education, such as one-on-one technical

assistance, conference presentations, and on-line training in electronic

commerce.

 20HTML is the language used to create World Wide Web pages.
Page 17 GAO-02-1 Electronic Commerce

The following examples illustrate how the four assistance programs

helped businesses in the electronic commerce arena and also demonstrate

the differences in approach between the more management-oriented

SBDCs and MEPs and the more federally and technically oriented PTACs

and ECRCs.

• An SBDC helped two high school students set up an Internet advertising

business. The company is now incorporated, and the proprietors received

the 2001 SBA Young Entrepreneur of the Year Award.

• A MEP helped a small cabinet manufacturer develop a complete marketing

plan, introduced it to electronic business, and designed a company Web

site.

• A PTAC helped clients with the on-line DOD central contractor registry

and trained them on how to search FedBizOpps.

• An ECRC provided hands-on training on DLA bid boards and showed the

client the award notification menu on one bid board that displayed a

contract award to the client, issued 5 weeks earlier, of which the client

had been unaware.

The ECRC program was discontinued on September 30, 2001. Reaction to

this decision at the local offices of the management-oriented programs

was mixed—six were concerned about losing access to expertise or about

not having the staff or resources to address issues handled by the ECRCs,

while four did not have such concerns (most of the remaining eight offices

did not express an opinion). According to DLA officials, materials for the

ECRC training courses will be turned over to its PTAC program, which

plans to make them available to local PTACs via downloads from a DLA

Web site. Neither DLA’s Electronic Business Program Office nor its PTAC

program plans to keep the course materials up to date.

The four business assistance programs generally coordinated their efforts

through, for example, referrals and jointly delivered training; however,

such coordination occurred largely at the local level. At the headquarters

level, there is no ongoing process for coordinating electronic commerce

activities, although discussions on specific issues have taken place.21 In

 21While SBA and DLA signed a memorandum of understanding in which they agreed to

work cooperatively to help small businesses benefit from the procurement and electronic

commerce assistance they provide, a DLA official stated that the agreement was intended

only to document an existing relationship and that no action to implement it was necessary

or planned.

Business Assistance

Programs Coordinated

Activities at the Local

Level
Page 18 GAO-02-1 Electronic Commerce

contrast, all but one of the local offices we contacted reported that they

coordinated with at least one of the other programs. Coordination at the

local level is important because each program has its own specific focus

and may lack expertise found in the other programs. In one example, two

ECRCs reported that they trained the local staffs of two of the

management-oriented programs on selected electronic commerce issues.

In other cases, ECRC staff provided electronic commerce training for the

clients of these business assistance programs. Finally, in one other case,

the regional rural area management-oriented business assistance offices

met quarterly to determine the most appropriate program to address the

clients’ needs.

Table 7 indicates the types of coordination activities with one or more of

the other programs that the local offices of each of the business assistance

programs reported. While the local offices of the four programs generally

coordinated their efforts, this coordination was not universal in that we

found instances in which such coordination was not occurring. For

example, in five cases, the local or regional official we spoke with was not

familiar with one or more of the other business assistance programs.

Table 7: Types of Coordination Performed by Local Offices

[Out of Six Offices We Selected for Each Program]

Number of local offices reporting various

coordination activities

Type of coordination SBA/SBDC NIST/MEP DLA/PTAC DLA/ECRCa

Referrals from one program to

another 55 6 6

Joint sponsorship of conferences

or seminars 34 3 5

Participation as speaker or

exhibitor in the other’s events

and/or including the other

organization in their events 2 3 6 5

Training developed and/or

delivered jointly 42 3 5

Shared staff, facilities, or other

resourcesb 24 3 3

Other 0 0 1 3

a

The ECRC program was operated by DLA through the Defense Electronic Business Program Office.

DOD’s Chief Information Officer has overall functional responsibility for the Defense Electronic

Business Program Office but the office receives its funding and personnel through DLA and the

Defense Information Systems Agency.

b

In nine cases, the local offices of two or more of these programs were part of the same organization.

Source: GAO analysis.
Page 19 GAO-02-1 Electronic Commerce

As the federal government’s electronic procurement presence grows, the

participation of small businesses in this activity is critical if the

government is to meet its small business procurement goals. Small

businesses successfully obtained a relatively large share of federal

procurement dollars in three specific on-line procurement programs,

compared to the governmentwide share of federal procurements that were

awarded to small businesses. At the same time, concerns about obstacles

to small business participation in electronic procurements are still

expressed in studies and surveys and by organizations representing and

working with small businesses. These entities report that small businesses

continue to face obstacles in conducting electronic procurements with the

federal government, including a lack of (1) technical expertise and (2)

knowledge about the government’s electronic procurement strategy. Key

to the success of small businesses’ participation in government electronic

procurements is that both parties—the government and the businesses

themselves—continue to work on overcoming these and any future

obstacles that may arise. The government has taken, or plans to take,

actions that are expected to address some of these obstacles.

In the larger electronic commerce arena, federally funded programs are

providing assistance to businesses in a variety of ways. For four specific

programs, this assistance included not only helping businesses with

federal electronic procurements but also providing assistance in

performing electronic commerce in the economy at large. The four

business assistance programs in our review also were coordinating their

activities at the local level.

In oral comments on a draft of this report, officials representing GSA and

the Office of Management and Budget’s Office of Federal Procurement

Policy stated that they generally agreed with our report. In written

comments, DLA and SBA also stated that they generally agreed with our

report. DLA submitted technical corrections, which have been included in

the report. In written comments, the Department of Commerce provided

updated online sales statistics and stated that they believed the services

provided by the Electronic Commerce Resource Centers should be

continued. SBA also included information on their electronic government

vision. The written comments we received from DLA, SBA, and Commerce

are reprinted in appendixes III and IV, respectively.

As agreed with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report for 30 days. At that

Conclusions

Agency Comments
Page 20 GAO-02-1 Electronic Commerce

point, copies of this report will be sent to the Chairman, Senate Committee

on Small Business and Entrepreneurship; Chairman and Ranking Minority

Member, Senate Committee on Governmental Affairs; Chairman and

Ranking Minority Member, House Committee on Small Business;

Chairman and Ranking Minority Member, House Committee on

Government Reform; Chairman, House Subcommittee on Technology and

Procurement Policy, Committee on Government Reform; and other

interested congressional committees. We are also sending copies to the

Secretaries of Defense and Commerce, the Administrators of the General

Services Administration and the Small Business Administration, and the

Director of the Office of Management and Budget and other interested

parties. We will also make copies available to others upon request.

If you have any questions on matters discussed in this report, please

contact David McClure at (202) 512-6257 or David Cooper at (202) 512-

4587 or by email at mcclured@gao.gov and cooperd@gao.gov, respectively.

Other contacts and key contributors to this report are listed in appendix V.

David L. McClure

Director, Information Technology

 Management Issues

David E. Cooper

Director, Acquisition and

 Sourcing Management
Appendix I: Scope and Methodology

Page 21 GAO-02-1 Electronic Commerce

To determine the small business share of procurement dollars awarded by

three on-line procurement programs (GSA Advantage!, ITSS, and DMLSS

E-CAT) and the small business share of all federal contract dollars

awarded, we obtained fiscal year 1999 and 2000 award data for these

programs and interviewed applicable GSA, DLA, and contractor officials.

We calculated the percentage of small business awards to total awards for

each program and compared them to the governmentwide small business

share, which we calculated based on the aggregate FPDS data reported in

GSA’s Federal Procurement Report for fiscal years 1999 and 2000.1

 We

assessed the reliability of the GSA Advantage!,2

 ITSS, and DMLSS E-CAT

data by (1) performing electronic tests of relevant fields (for example, we

tested for completeness by checking key fields for missing data and

checked for accuracy and reasonableness by examining summary

statistics for values that were in proper and expected ranges) and (2)

requesting and reviewing, if available, related program and system design

documentation, audit and system reviews, and reports. The results of our

assessment showed that the DMLSS E-CAT data were reliable enough for

use in this report. However, the results of our assessment of the GSA

Advantage! and ITSS data were inconclusive in large part because of

concerns related to limitations on available documentation and security

weaknesses reported in GSA’s Fiscal Year 2000 Annual Report.

Nevertheless, we determined that the reliability of the data provided is

adequate for the comparative purposes of this report. We will be providing

additional information on the GSA Advantage! and ITSS document

limitations in a separate letter.

To identify what, if any, obstacles exist for small businesses in conducting

electronic procurements with the federal government, we performed a

literature search. We also interviewed selected SBDCs, PTACs, ECRCs,

and MEPs about their clients’ experiences with obstacles and officials

from SBA’s Office of Advocacy and Office of Government Contracting. In

addition, we obtained comments from organizations representing or

working with small businesses to obtain their members’ views on

 1

The FPDS Federal Procurement Report is published annually and contains “snapshot”

statistics on the procurement activities of over 60 agencies. The figures in the Federal

Procurement Report are only as accurate, timely, and complete as the data provided by the

reporting agencies.

2

In June, GSA launched a new version of GSA Advantage!. We did not assess the data

reliability of the new version.

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 22 GAO-02-1 Electronic Commerce

obstacles. The following are the organizations that provided information

on small business obstacles:

• Association of Government Marketing Assistance Specialists

• Coalition for Government Procurement

• Contract Services Association of America

• National Black Chamber of Commerce

• National Small Business United

• U.S. Pan Asian American Chamber of Commerce

• Small Business Legislative Council

• U.S. Hispanic Chamber of Commerce

We contacted 13 other organizations, such as the U.S. Chamber of

Commerce and the National Women’s Business Council, but they did not

provide us with any information on obstacles small businesses had in

performing electronic procurements with the federal government.

In addition, to review what steps four federal business assistance

programs have taken to educate businesses on electronic commerce and

the extent to which they have coordinated their efforts, we interviewed

headquarters staff of the programs and reviewed applicable program

documents, such as grant and cooperative agreements and contracts. We

also interviewed officials from 24 local and regional offices of these

programs and obtained and reviewed available documentation from these

offices. We judgmentally selected six offices from each program based on

the following:

• For each program, we chose at least one office from each of the four U.S.

census regions. Overall, we chose at least two local offices from each

census Division. The census divides the United States into four regions

and nine divisions—Northeast region (New England and Middle Atlantic

divisions), Midwest region (West North Central and East North Central

divisions), South region (West South Central, East South Central, and

South Atlantic divisions), and the West region (Pacific and Mountain

divisions).
Appendix I: Scope and Methodology

Page 23 GAO-02-1 Electronic Commerce

• For each program except ECRCs,3 we chose at least two offices serving

less populous areas, based on the Office of Management and Budget’s

classification of a metropolitan area.4

Based on the above criteria, we interviewed officials from the following

offices:

ECRCs

Bremerton, WA

Cleveland, OH

Dallas, TX

Fairfax, VA

Scranton, PA

MEPs

Arkansas Manufacturing Extension Network

California Manufacturing Technology Center

Idaho Techhelp

Iowa MEP

Maine MEP

Maryland Technology Center

PTACs

Alabama Small Business Development Consortium

California Central Valley Contract Procurement Center

Minnesota Project Innovation

National Center for American Indian Enterprise Development

New Hampshire Office of Business & Industrial Development

George Mason University Procurement Technical Assistance Program

SBDCs

Bronx SBDC of Lehman College

Danville Area SBDC (Illinois)

Joplin SBDC (Missouri)

Northern Virginia SBDC

Western Kentucky University SBDC

Wyoming SBDC, Region 2

 3

Because ECRCs serve multi-state regions, they serve both rural and urban areas.

4

A metropolitan area consists of a large population nucleus, together with adjacent

communities having a high degree of social and economic integration with that core.
Appendix I: Scope and Methodology

Page 24 GAO-02-1 Electronic Commerce

We performed our work at SBA headquarters in Washington, DC, GSA

offices in Crystal City, VA, and Washington, DC; DLA headquarters at Fort

Belvoir in VA; Defense Supply Center, Philadelphia; NIST in Gaithersburg,

MD; and the offices of business assistance providers and business

organizations in Maryland, Virginia, and Washington, DC. We conducted

our review between January and August 2001 in accordance with generally

accepted government auditing standards.
Appendix II: Reported Small Business

Obstacles to Conducting Federal

Procurements Electronically

Page 25 GAO-02-1 Electronic Commerce

Obstacles reported by various studies and surveys as well as from

comments provided by officials in selected federal business assistance

programs and organizations representing or working with small

businesses generally fall into two categories: (1) those related to general

readiness—the willingness and ability of small businesses to conduct

business electronically and (2) those specific to conducting procurements

electronically with the federal government.

Commonly cited obstacles for small businesses in this category include the

following.

• Need to Make a Business Case. Our literature search and discussions with

industry groups and business assistance program officials indicated that

some small businesses may have difficulty in making a business case for

adopting electronic commerce because of their inability to ascertain costs,

benefits, and risks. They may have little working knowledge of the Internet

and other electronic commerce technologies and insufficient information

about the benefits and applicable implementation strategies appropriate

for their business models. As a result, such businesses may be reluctant to

make the investment to implement electronic commerce. For example, an

August 2000 survey of 50 Idaho manufacturers’ use of Internet

technologies showed that of the 23 respondents with Web sites, 74 percent

were not engaged in electronic commerce.1

 The primary reasons

companies with Web sites cited for not moving to electronic commerce

were a lack of knowledge and a concern that implementation was too

time-consuming and costly. One researcher concluded that for small

businesses, adopting electronic commerce requires low, predictable cost;

minimal changes in employee behavior; and compelling benefits over

alternatives.2

• Limited Technical Expertise. A June 2000 Organization for Economic Cooperation and Development report on enhancing the competitiveness of

small and medium-sized enterprises noted that many small businesses do

 1

Survey of Idaho Manufacturers’ Use of Internet Technologies and eBusiness Principles

(Idaho TechHelp Manufacturing Extension Program, August 2000). While this survey was

not limited to small businesses, 92 percent of its respondents were businesses with 550 or

fewer employees.

2

The Five Immutable Laws of Universal Supply Chain Connectivity by Larry R. Smeltzer

(Arizona State University, February 2001).

Appendix II: Reported Small Business

Obstacles to Conducting Federal

Procurements Electronically

Electronic Commerce

Readiness
Appendix II: Reported Small Business

Obstacles to Conducting Federal

Procurements Electronically

Page 26 GAO-02-1 Electronic Commerce

not know how to profitably develop their electronic commerce capabilities

or how to cope with the “complex rules” governing this area.3

 This report

and other studies point out that the lack of appropriate human resources,

in terms of technical and/or managerial staff familiar with the information

technology environment, constitutes a major barrier for small businesses

wanting to adopt electronic commerce technologies and strategies.4

Business assistance program officials also noted that their small business

clients lack the skill sets necessary to participate in electronic commerce.

They stated that small businesses need help with building Web sites,

selecting Web site designers and Internet service providers, and

integrating electronic commerce into their business processes. However,

small businesses may not have such experience and expertise on staff and

may not be able to afford to recruit and retain technical staff with these

skills.

• Internet Access Issues. PTAC, MEP, ECRC, and SBDC business assistance

program officials reported that small businesses, particularly in rural areas

and on Indian reservations, have difficulty obtaining affordable high-speed

Internet access sufficient for electronic commerce activities. For example,

a PTAC official in a rural state said that many individuals and companies

in his state have only dial-up modem service. Moreover, according to an

official working on programs to assist American Indian enterprise

development, reservations often lack Internet infrastructure. She

estimated that only 40 percent of her clients on reservations have e-mail

service. The continuing expansion of electronic commerce requires

widespread high-speed Internet access. However, as we noted in February

2001, there is less availability of broadband high-speed, high-capacity

connection to the Internet in the rural areas of America.5

 Similar to other

studies, our survey found the availability of broadband technology to be

most prevalent in large metropolitan areas. 6

 3

Realizing the Potential of Electronic Commerce for SMEs in the Global Economy

(Organization for Economic Co-operation and Development, June 2000).

4

See also Towards Digital eQuality, (U.S. Government Working Group on Electronic

Commerce Second Annual Report, December 1999) and Survey of Small and Mid-sized

Businesses, Trends for 2000 (Arthur Anderson and National Small Business United, June

2000).

5

Telecommunications: Characteristics and Choices of Internet Users (GAO-01-345,

February 16, 2001).

6

See also Falling Through the Net: Toward Digital Inclusion (Department of Commerce,

October 2000).
Appendix II: Reported Small Business

Obstacles to Conducting Federal

Procurements Electronically

Page 27 GAO-02-1 Electronic Commerce

• Concerns About Security and/or Privacy. Ensuring the security of

payments and proprietary information and privacy of personal data are a

top priority for small businesses considering electronic commerce as a

means to sell their products and services. According to the U.S.

presentation before the Free Trade Area of the Americas electronic

commerce committee, because of their small size and limited financial

resources, small businesses may not be prepared to take on the kinds of

security and privacy risks that larger companies can more easily face.7

Security and privacy concerns of small businesses include inappropriate

disclosure of proprietary business information that governments collect

from companies, consumer fraud, and the adequacy of security over a

transaction on the Internet. For example, some small businesses fear

bidding on-line because they do not believe that it is secure. They want

assurances that their pricing and other proprietary information would be

accessed only by intended recipients and not by competitors.

These concerns are not unjustified. For example, we have designated

information security a governmentwide high-risk area since 1997. Our

latest high-risk report noted that progress in strengthening federal

information security has been mixed.8

Commonly cited obstacles in this category include the following.

• Monitoring Various Federal Procurement Information Web Sites for

Business Opportunities. The federal government has multiple Web sites

that list contracting opportunities and related procurement information

that businesses need for deciding whether to pursue a business

opportunity. For example, an August 2001 search for federal “contracting

opportunities” on www.firstgov.gov—the federal government’s portal for

accessing government on-line information—provided links to over 1,000

Web sites listing procurement opportunities and related information.

Among the first 10 “hits” were links to sites with information on

contracting opportunities for the Departments of Housing and Urban

Development, State, and Transportation, the Army Corps of Engineers,

and GSA. Organizations representing or working with small businesses

 7

Issues Faced by SMEs In Utilizing the Internet as a Medium for Electronic Commerce

(U.S. presentation before the Free Trade Area of the Americas Joint Government-Private

Sector Committee of Experts on Electronic Commerce, April 30, 2000).

8

High-Risk Series: An Update (GAO-01-263, January 2001).

Federal Electronic

Procurements
Appendix II: Reported Small Business

Obstacles to Conducting Federal

Procurements Electronically

Page 28 GAO-02-1 Electronic Commerce

point out that small companies with limited resources and staff cannot

afford to spend several hours a day “surfing the Net” for potential work.

To help address this issue, a May 2001 Federal Acquisition Regulation

change designates the FedBizOpps Web site as the single governmentwide

point of electronic entry on the Internet where vendors can access all the

information they need to bid on available government business

opportunities greater than $25,000. After subscribing, vendors can receive

various announcements automatically via email, including solicitations

and post-award notices. Agencies must provide access to all applicable

actions by October 1, 2001. Because the requirement to use FedBizOpps is

new, its impact on simplifying access to the government’s procurements is

not yet known.9

 Moreover, information about contracting opportunities

expected to be $25,000 or less does not have to be posted on FedBizOpps.

As noted earlier, small businesses generally obtain a significantly higher

share of these contract opportunities.

• Differing Requirements for On-line Purchasing Programs. The federal

government has multiple on-line purchasing programs that federal buyers

can access to search vendor catalogs and purchase goods and services

from suppliers with government contracts. According to three business

assistance program officials, the process for posting listings on these sites

is inconsistent and time-consuming because vendors may have to upload

their electronic catalogs to multiple sites, involving different formats and

procedures. For example, the GSA Advantage! and DMLSS E-CAT

programs have different requirements for formatting catalog data. An

industry group representing companies that conduct business with the

federal government told us that small businesses often must hire thirdparty service providers because they lack the ability to manage multiple

electronic catalog formats, revisions, and uploads. Moreover, according to

one research report, some commodity suppliers may perceive an on-line

catalog to be impractical, due to the sheer number of their products and

the complexity of their pricing.10 As of mid-August, GSA Advantage!,

 9

Past surveys of small business users’ feedback to the centralized electronic posting of

contract opportunities have been positive. See Acquisition Reform: NASA’s Internet

Service Improves Access to Contracting Information (GAO/NSIAD-99-37, February 9,

1999) and the statement of the former Administrator for Federal Procurement Policy

before the House Subcommittee on Government Programs and Oversight, Committee on

Small Business, April 11, 2000.

10Attitudes of SME Owners and Managers Toward Doing E-Business with DOD and

Prime Contractors within IDEs and Trading Exchanges (Argentieri Marketing Research,

June 5, 2001).
Appendix II: Reported Small Business

Obstacles to Conducting Federal

Procurements Electronically

Page 29 GAO-02-1 Electronic Commerce

DMLSS E-CAT, and others were in the initial stages of considering

implementing a single catalog process for medical materiel.

• Lack of a Single Vendor Registration System. Vendors who want to

conduct business with more than one government office generally must

complete multiple registrations and profiles, providing redundant business

information to each site in different formats. Officials from several

business assistance programs and organizations representing small

businesses spoke of the need for the government to set up a single point of

vendor registration. Many reiterated the point made in a 1994 government

report on electronic commerce that it is much easier for a business to

maintain its single repository of registration information than to submit

the same information or some variation of it many times to numerous

contracting activities.11 Moreover, the Federal Acquisition Streamlining Act

of 1994 required the establishment of a “single face to industry” for

conducting procurements.

To help address concerns about multiple vendor registrations, DOD

developed a centralized, electronic registration process—the Central

Contractor Registration (CCR) system—as the single registration point for

vendors that want to conduct business with DOD. As part of its efforts to

expand electronic government, the Administration has tasked agencies in

fiscal year 2003 to use the CCR as the single validated12 source of data on

vendors interested in contracting with the government. According to an

OMB official, the governmentwide single point of vendor registration

should help to standardize the registration process, eliminate

redundancies, and provide a common method of gathering and reporting

vendor information.

Even if a single governmentwide registration system is implemented, small

businesses may still wish to register on SBA’s Procurement Marketing and

Access Network (PRO-Net),13 that is an Internet-based database of

information on thousands of small businesses which federal buyers can

use to search for small businesses fitting specific profiles. According to a

 11Final Report: Streamlining Procurement Through Electronic Commerce (Federal

Electronic Commerce Acquisition Team, October 13, 1994).

12Vendors provide data to the CCR, which performs a validation of selected data elements

by checking them against DOD and private sector databases.

13While registering in PRO-Net is optional for most small businesses, firms applying for

8(a), HUBZone, or small disadvantaged business certifications are required to register.
Appendix II: Reported Small Business

Obstacles to Conducting Federal

Procurements Electronically

Page 30 GAO-02-1 Electronic Commerce

DLA official, SBA’s PRO-Net was provided access to CCR small business

vendor information data on August 24, 2001.14 SBA officials told us that

they did not yet know how they were going to use the CCR data but that

vendors cannot be automatically registered in PRO-Net without their

consent. Accordingly, small businesses wanting to register in both CCR

and PRO-Net will have to reenter some of the same information in both

systems.

• Problems Related to Technical Data and Drawings. Posting technical data

and drawings (required by businesses preparing bids) on the Web or

otherwise making them available electronically is beneficial because

vendors do not have to visit contracting offices to obtain copies or have

technical data packages mailed to them. However, business assistance

program officials and industry groups voiced concerns about the

difficulties, frustration, and time involved in locating, transmitting,

downloading, and printing on-line specifications and drawings. Some of

the problems reported included incomplete and inadequate technical data

packages for manufactured items, on-line manuals that are difficult to

decipher and use, out-of-date drawings, or the lack of availability of CDROMs containing drawings that are too large to download. A

representative from one trade organization noted that there can be

technical problems with downloading specifications in that often a fast

Internet connection and powerful computer system are needed, and the

software versions required by different agencies may differ or conflict with

one another. ECRC and PTAC officials said that many agencies fail to

recognize that small businesses have limited electronic resources and

need more simplification and software standardization for on-line

solicitation materials to be readily accessible. In a mid-August meeting,

DLA officials agreed that the quality of electronic technical data and

drawings and the delivery of this information were problems.

• Difficulty in Obtaining Help With Problems and Marketing Assistance.

Another obstacle for many small businesses attempting to participate in

on-line government purchasing programs is not knowing where to go for

help or not having knowledgeable contacts. According to officials of

 14According to a DLA official, vendors who register in PRO-Net will not be automatically

registered in CCR because CCR requires additional information, such as the vendor’s

electronic funds transfer account, which is not in PRO-Net. However, DLA has started an

initiative to use PRO-Net data to validate the representations of certain vendors that they

have been certified by SBA as 8(a), HUBZone, or small disadvantaged businesses. A DLA

official stated that the implementation date for this initiative is currently being determined.
Appendix II: Reported Small Business

Obstacles to Conducting Federal

Procurements Electronically

Page 31 GAO-02-1 Electronic Commerce

several business assistance programs and trade association

representatives, small businesses often have difficulty reaching someone

at the buyer’s or program office who is able and willing to help,

particularly with technology-related problems and/or marketing questions.

For example, one trade organization representative said that small

businesses trying to market in an on-line environment have problems

reaching federal procurement officials to discuss their products and

services. When they call to arrange meetings with buyers, they may be

referred instead to Web sites, which can be complex and confusing and

may not contain the information they really need. In other cases, phone

calls and e-mails were not returned when there was a problem. In

particular, two industry groups and five business-assistance program

officials mentioned difficulties in obtaining assistance to deal with

problems associated with GSA Advantage!. For example, one ECRC

official said that the GSA Advantage! Web site explanations are insufficient

to address vendor questions and GSA technical support staff are also

unable to answer questions from vendors about getting their products

listed. In mid-August, GSA officials stated that improvements in GSA

Advantage! vendor support and assistance were made in the spring and

summer of 2001, such as increasing help-desk staffing, employing

classroom training, and implementing a lab in which vendors are helped in

loading their data onto the system.

In earlier testimony on electronic government initiatives, we pointed out

that the government’s use of Internet and Web-based technologies should

force organizations to reconsider their customers—specifically, how their

customers need, perceive, and digest information and services in a

viewable, electronic format.15 Moreover, the National Electronic

Commerce Coordinating Council suggests that organizations implement a

customer relations management structure.16

• Uncertainty About the Government’s Electronic Procurement Strategy.

Industry groups and business assistance program officials told us that

since government agencies are pursuing different approaches to

implementing electronic purchasing, small businesses hesitate to invest in

any one electronic commerce system. According to one PTAC program

 15Electronic Government: Challenges Must Be Addressed With Effective Leadership and

Management (GAO-01-959T, July 11, 2001).

16E-Government Strategic Planning: A White Paper (National Electronic Commerce

Coordinating Council, December 13, 2000).
Appendix II: Reported Small Business

Obstacles to Conducting Federal

Procurements Electronically

Page 32 GAO-02-1 Electronic Commerce

official, when businesses look closely at their government customers’

electronic commerce capabilities, they find a “very mixed bag.” In

addition, officials in four of the six ECRC offices we contacted noted that

the government has pursued many different electronic commerce

solutions and has not adopted a uniform “single face” approach to the

vendor community. ECRC officials cited the government’s Federal

Acquisition Computer Network—better known as FACNET—and

electronic data interchange initiatives as examples of electronic commerce

initiatives that were not fully implemented or were changed before

investment returns were realized. For example, in our 1997 report on

FACNET implementation, we discussed the limited use of FACNET by

government agencies and the need for a coherent strategy and

implementation approach for carrying out the agencies’ acquisition

requirements using various electronic commerce technologies and

purchasing methods.17

 17Acquisition Reform: Obstacles to Implementing the Federal Acquisition Computer

Network, (GAO/NSIAD-97-26, January 3, 1997).
Appendix III: Comments From the Defense

Logistics Agency

Page 33 GAO-02-1 Electronic Commerce

Appendix III: Comments From the Defense

Logistics Agency
Appendix IV: Comments From the U.S. Small

Business Administration

Page 34 GAO-02-1 Electronic Commerce

Appendix IV: Comments From the U.S. Small

Business Administration
Appendix IV: Comments From the U.S. Small

Business Administration

Page 35 GAO-02-1 Electronic Commerce
Appendix IV: Comments From the U.S. Small

Business Administration

Page 36 GAO-02-1 Electronic Commerce
Appendix V: Comments From the Secretary of

Commerce

Page 37 GAO-02-1 Electronic Commerce

Appendix V: Comments From the Secretary

of Commerce
Appendix V: Comments From the Secretary of

Commerce

Page 38 GAO-02-1 Electronic Commerce
Appendix VI: GAO Contacts and Staff

Acknowledgments

Page 39 GAO-02-1 Electronic Commerce

David L. McClure, (202) 512-6357

David E. Cooper, (202) 512-4587

Linda J. Lambert, (202) 512-9556

Hilary C. Sullivan, (214) 777-5652

Barbara Johnson, Rosa Johnson, Beverly Ross, Patricia Slocum, and Glenn

Spiegel made key contributions to this report.

Appendix VI: GAO Contacts and Staff

Acknowledgments

GAO Contacts

Acknowledgments

(310404)
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