Electronic Commerce

July 1996


Electronic Commerce

FACNET Falters as Buyers Turn to the Internet for Procurements

Three years ago, President Clinton issued an executive order mandating that all federal agencies conduct procurements electronically by January 1997. The subsequent Federal Acquisition Streamlining Act called for the creation of a governmentwide Federal Acquisition Network (FACNET) to help agencies reach that goal. But recent technological and legislative developments have dashed hopes that agencies will become FACNET-compliant before the year-end deadline.

FACNET traffic has been well below the Administration's expectations for several reasons. Electronic data interchange (EDI)-the underlying FACNET technology-has proven difficult and expensive to implement. Special software has to be used to convert procurement transactions to the ANSI X12 EDI standard so that agencies can interact with vendors. Agencies have voiced concerns about the reliability of that software and the security of EDI transactions.

Only about 100 vendors have registered as FACNET electronic trading partners. Companies, particularly small businesses, claim they have encountered costly problems in building appropriate network infrastructures for routing transactions. The General Accounting Office has criticized FACNET's architecture as "ill-defined."

Advances in Internet technology, meanwhile, have made the World Wide Web a more popular vehicle for federal procurement activities. Government buyers, who have been given greater spending authority by recent procurement-reform legislation, are doing on-line shopping via a variety of Web sites such as the Federal Supply Service's GSA Advantage and the Defense Information Systems Agency's Electronic Shopping System.

Although several federal organizations such as the Environmental Protection Agency and NASA have had considerable success with electronic commerce, their bid and evaluation procedures were routed through the Internet-not FACNET. Other agencies, such as the Energy Department, are using proprietary electronic-commerce systems that provide gateways to FACNET.

The changing dynamics of electronic commerce has caused the Office of Federal Procurement Policy to re-think its position on FACNET. For now, the office is encouraging the use of electronic bulletin-board systems and on-line catalogs from which buyers can purchase items using the government's IMPAC credit card.

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