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. 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. 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.) 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. 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. 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).