The Power of E-Procurement: Revolutionizing State Procurement

What Is E-Procurement?

More than just a digitization of buying and selling, e-procurement represents a radical re-envisioning of the way that government goes about IT procurement and other forms of purchasing in order to meet the mission of citizen service.

“e-procurement is taking the procurement process itself — from requisition and sourcing, all the way to the end of the process with payment — and making that an electronic, online process,” says Shane Caudill, director of Virginia’s e-procurement Program, eVA.

“It’s taking that entire procurement business process and putting it into software, an electronic format,” he says.

True e-procurement will effectively automate all activities related to government purchasing.

“It includes everything from suppliers registering to bid to building sourcing events, inviting suppliers, suppliers’ bidding online, evaluating bids and proposals, awarding to a contract or purchase order, and building the contract and managing it,” says Bob Sievert, NASPO CIO. “And it’s all done in this system electronically.”

The approach promises to “streamline and automate” the public procurement process, says Andrea Patrucco, assistant professor of supply chain management at Florida International University College of Business.

For state and local governments, “it goes beyond the traditional automation of order delivery and invoice cycles,” he says. “Today, it encompasses the digitalization of all procurement activities, including requisitioning, sourcing, bidding, payment and invoicing.”

An e-procurement strategy can potentially add more rigor to the purchasing process. Suppose an employee needs to order office supplies, for example.

“The e-procurement system is going to integrate with the finance system to check the budget and get approvals,” Sievert says. “And there are tools for reporting and spend analytics to give insight from an operational perspective, like workload, as well as from a strategic standpoint: Where are the taxpayer dollars going, where can we leverage state spending?”

e-procurement delivers “predefined rules based on the type of product or service that you’re buying, your level of authority, the dollar values,” Caudill says. “The system is routing that to the appropriate checks and balances, and it’s all happening electronically.”

All of this “allows you to get more with the state dollars, to do analysis and be smart about spending,” he says. “With manual processes and piecemeal systems, they don’t have the data all in one bucket in a way they can categorize it and analyze it. E-procurement gives you all that.”

READ MORE: How other forms of digitization are helping agencies drive IT modernization.

What’s the Difference Between E-Commerce Websites and EDI?

For state and local entities exploring a move to e-procurement, it’s important to understand some key pieces of terminology. There will likely be talk about e-commerce websites, as well as electronic data interchange, or EDI. It’s helpful to know what these are, in terms of e-procurement, and how they operate.

The e-commerce website is the place where buyers interact with the system. It is “all about buying electronically, most typically via a shopping cart. I’m shopping, picking, buying and paying, and it’s sent it to me,” Sievert says.

On an e-commerce site, “I’m conducting a very specific transaction,” Caudill says. In Virginia, “we have catalogs that allow our end users to go into a supplier’s website to buy goods like office products. Then, we bring those items out of that e-commerce site into our e-procurement system for those approvals.”

EDI refers to a specific format for the digital exchange of information. It is “a standardized approach for the electronic exchange of documents between buyers and suppliers,” Patrucco says.

“EDI follows specific standards like ANSI X12 or UN/EDIFACT. It is just one of the data formats that can be used within an e-procurement platform, which may also use formats like HTML, XML or others,” he says.

The important thing to know is that both of these, together, contribute to the whole of e-procurement.

What Is an SPO?

The state procurement office, or SPO, will play in a key role in bringing e-procurement to life.

In e-procurement, “the SPO is going to be configured as the approver. They’re going to be potentially rolling out the checkpoints, the electronic approval flow,” Caudill says. “The procurement office has a lot of oversight: granting access into the e-procurement system, making sure people have the right delegated authority, things like that.”

In planning for e-procurement, “those SPOs have to make sure that procurement processes work well with finance and other key processes” to ensure that procurement is “as efficient as possible, so that people can get what they need to do their jobs when they need it,” Sievert says.

The impact of the SPO will be keenly felt as states look to acquire specific e-procurement software and services.

“The state procurement office plays a crucial role in driving the requirements and functionality needed in an e-procurement platform,” Patrucco says. “They determine the scope of the platform and the inclusion of specific modules.”

WATCH: More states take the CIO as a broker approach to technology implementation.

How Are Agencies Successfully Implementing E-Procurement? 

A number of states have put e-procurement into action.

This summer, North Carolina plans to launch its electronic Vendor Portal (eVP). The system will provide “an innovative, cost-saving and efficient method of purchasing” for state agencies and others in the public sector, the state notes. It will allow government entities “to aggregate their purchasing data in order to obtain better prices from suppliers.

Additionally, NC eProcurement allows greater visibility into statewide procurement information, allowing the state to determine what other goods and services should be placed on contracts.”

Arizona already has created the Arizona Procurement Portal as its system for suppliers and state agencies to conduct procurement business.

Virginia’s eVA e-procurement system uses “a configurable e-procurement suite. That includes requisitioning, automated approvals, purchase order generation and electronic delivery to our suppliers,” Caudill says.

DISCOVER: State and local governments improve customer experience for citizens.

There are multiple options out there for states seeking such a turnkey solution. “The industry has evolved a lot. There are a lot of really good products in the market, as well as managed services and service integrators to help configure those products,” Caudill says.

He noted that certain traits help to distinguish the best offerings. A service provider should “help translate your business requirements into the configuration that’s needed, so that the system meet the needs of your state agencies, local governments and your supplier community,” he says.

Modern e-procurement systems “offer the flexibility to automate various activities based on your specific needs. They encompass a range of functionalities, such as online catalogs, supplier database management and request-for-proposal systems to automate contract management,” Patrucco says.

Successful state e-procurement efforts typically take advantage of the robust service offerings presently available. “It’s almost like a menu,” Sievert says. “They’re going to have implementation services which include configuration of the system, testing of the system, launching the system and then training users.”

With the right partner, state and local government can get to e-procurement quickly and seamlessly, in support of more efficient purchasing processes and greater overall financial control.