Electronic Commerce: Small Business Participation in Selected On-line Procurement Programs
Published: 2001-10-29T00:00:00

Fast Facts:

Highlights:
section_title: What GAO Found
paragraphs: The federal government has been pursuing electronic initiatives to strengthen its buying processes, reduce costs, and create a competitive "virtual" marketplace. Small businesses, however, may have difficulty participating in federal on-line procurement programs. Furthermore, the government's business outreach and education programs related to electronic commerce may not be adequately coordinated. For the three federal on-line procurement programs GAO 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. Although small businesses successfully participated in these three programs, they still face obstacles in conducting electronic procurements with the government. The federal government is taking steps to 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 GAO examined had taken steps to educate its clients on electronic commerce as part of its operations. However, GAO could not fully determine the extent of these activities because they are conducted by hundreds of local and regional offices, and only one of the programs collected performance metrics specific to electronic commerce.

section_title: Letter
paragraphs: This letter responds to your request that we explore issues related to small business participation in government on-line procurement programs and electronic commerce 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.
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.
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. 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.
subsections: section_title: Background
paragraphs: 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.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.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.”
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 sites provided various information on federal procurement, including bid opportunities. 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!. 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.
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), 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.
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, and the National Institutes of Health Intramall program. The private sector also offers on- line 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.
section_title: Small Businesses Actively Participate in Federal Electronic Procurements, but Obstacles Reportedly Remain
paragraphs: 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.
subsections: section_title: Small Business Share of Awards in Three On-line Procurement Programs is Greater Than Reported Share of Governmentwide Procurement Awards
paragraphs: 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. These on-line procurement programs also exceeded the governmentwide goal of a 23-percent share for small businesses. 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.)
section_title: Obstacles to Small Businesses Conducting Electronic Procurements With the Government Reported
paragraphs: 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 electronically with the federal government. 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.
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 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 Web- based 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.
section_title: Federal Programs Provided Locally Coordinated Electronic Commerce Education to Businesses
paragraphs: 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.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.
subsections: section_title: Business Assistance Programs Provided Electronic Commerce Education
paragraphs: 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 of electronic commerce assistance activities provided by the six local offices in each program we contacted. For example, local offices provided formal training as well as counseling or technical assistance to individual clients.
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.
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 two- thirds of non-DOD training were   Hypertext Markup Language (HTML), (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);   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.
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.
section_title: Business Assistance Programs Coordinated Activities at the Local Level
paragraphs: 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. In 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.
section_title: Conclusions
paragraphs: 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.
section_title: Agency Comments
paragraphs: 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 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.
section_title: Appendix I: Scope and Methodology
paragraphs: 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. We assessed the reliability of the GSA Advantage!, 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 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).
For each program except ECRCs, we chose at least two offices serving less populous areas, based on the Office of Management and Budget’s classification of a metropolitan area.
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 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.
section_title: Appendix II: Reported Small Business Obstacles to Conducting Federal Procurements Electronically
paragraphs: 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.
subsections: section_title: Electronic Commerce Readiness
paragraphs: 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. 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.
Limited Technical Expertise. A June 2000 Organization for Economic Co- operation and Development report on enhancing the competitiveness of small and medium-sized enterprises noted that many small businesses do not know how to profitably develop their electronic commerce capabilities or how to cope with the “complex rules” governing this area. 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.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. Similar to other studies, our survey found the availability of broadband technology to be most prevalent in large metropolitan areas.
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.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.
section_title: Federal Electronic Procurements
paragraphs: 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 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. 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 third- party 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. As of mid-August, GSA Advantage!, 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. 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 validated 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), 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 DLA official, SBA’s PRO-Net was provided access to CCR small business vendor information data on August 24, 2001. 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 CD- ROMs 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 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. Moreover, the National Electronic Commerce Coordinating Council suggests that organizations implement a customer relations management structure.
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 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.
section_title: Appendix III: Comments From the Defense Logistics Agency
section_title: Appendix IV: Comments From the U.S. Small Business Administration
section_title: Appendix V: Comments From the Secretary of Commerce
section_title: Appendix VI: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: Barbara Johnson, Rosa Johnson, Beverly Ross, Patricia Slocum, and Glenn Spiegel made key contributions to this report.