Working group to study online procurement

At the request of lawmakers, the Office of Management and Budget is creating a working group to review the regulations and business considerations that accompany commercial online procurement systems.

In a memorandum to chief acquisition officers and senior procurement executives, Paul Denett, OMB's procurement chief, asked them to assign representatives to participate in the working group. He said the group is particularly interested in members with expertise in using "creative online procurement services."

Agencies are expected to submit a representative's name and contact information by Oct. 31. The group will meet periodically over a three or four month period starting in November.

Language in the conference report accompanying the fiscal 2006 National Defense Authorization Act asks OMB's Office of Federal Procurement Policy, in consultation with the Federal Acquisition Regulatory Council, to review the use of online procurement services, such as reverse auctions. The review will be aimed at pinpointing the types of commercial items suitable for purchase online, and the features that systems would need.

At a minimum, the working group is required to examine the lessons learned from agencies that use online procurement services, develop a set of model requirements to support the acquisition of such services, create and issue a best practices guide, draft any necessary Federal Acquisition Regulation changes for effective use of online services and find out how the private sector uses such systems.

Several private sector officials said lawmakers included this requirement in the authorization act because government-run online acquisition sites such as the General Services Administration's Advantage site, and the Pentagon's E-Mall, compete against the private sector for agencies' business. Some believe the government systems have an unfair edge.

One industry source, who requested anonymity, said that the custom systems set up by GSA and the Defense Department do not make sense since the private sector has invested a significant amount of money developing its own solutions. The source said the government should evaluate the cost and added benefit of running GSA Advantage and E-Mall instead of commercial solutions.

Warren Suss, president of Suss Consulting Inc. in Jenkintown, Pa., said the focus on Internet-based buying stems from a belief the government can save money by reducing transaction costs. But this places emphasis in an area that is already working well, he said. Congressional overseers need to concentrate on reforming the acquisition process for large complex systems and programs, he said.

The outcome of the working group's study is far from predictable, said Larry Allen, executive vice president of the Washington-based Coalition for Government Procurement. One question that could be examined is whether the government is offering a service that could be provided more efficiently by the private sector, he said.

"Is the government taking advantage of the best technology in the electronic commerce arena?" Allen said. "Those are fair questions and you certainly want the government to take advantage of the best technologies."

Questions also remain about the "fairness proposition" in privately operated e-commerce systems, Allen said. If the private sector is operating the online procurement system, then how do agencies ensure that companies have an equal opportunity to be listed and who pays the cost for maintaining the system?