GoProcure.It ’s a vital reference project, not only for the $7.5 million a year in potential government savings, but also because it will provide serious critical mass for e-business in general in New Zealand.

But let’s get one thing straight – GoProcure is not an e-marketplace, nor is it a device designed to help agencies hit up their suppliers for volume discounts. It’s simply a tool to facilitate more cost-effective, efficient trading between government agencies and their suppliers. The key to the project is an Oracle-based ‘Transaction Hub’ which hosts supplier catalogues, provides the tools for suppliers to manage those catalogues, and exchanges transaction documents between agencies and suppliers.

The ‘Early Adopters Phase’ of six months, beginning June 2003, will be used to get the system and business processes working smoothly and establishing positive business cases for the wider roll out and possible government mandating of its usage later this year. The five-year GoProcure project was finally signed by Cabinet in November 2002 after 18 months of shifting plans. An initial pilot was canned in favour of a workshop with 50 different government agencies outlining how GoProcure would make it easier to track and analyse spending, establish best practice and consolidate technology standards and the way information is presented to enable purchasing decisions to be approved. The following diagram illustrates how the early adopter agencies (on the left) will interact with their suppliers (on the right) via GoProcure.

June 2003

Agency options open

Agencies choose for themselves how they automate their internal processes to streamline their e-procurement capabilities but must use the transaction hub to achieve the consolidated approach to suppliers.

They have the choice of integrating their existing or future procurement system, using the hosted Oracle iProcurement application with its native integration to the Transaction Hub or, for smaller agencies, directly accessing the Transaction Hub itself to transact.

Some agencies including Defence and Police already have their own e-procurement systems such as SAP or PeopleSoft. “It would be unfair to ask them to throw out what is already working for them,” says Cap Gemini senior manager Phillip Worsley. “They will raise the required purchase orders on their own systems and link back to the Transaction Hub to pass the transactions through this way and where appropriate manage their content.”

The six early adopter agencies will be involved in a staggered implementation starting this month with processes that are already geared for electronic trading. It’s hoped that by the end of the first phase in November other agencies will be convinced of the viability of using the e-procurement hub.

“We’re constantly working this through with other agencies, explaining what’s going to be required and potential timelines,” says State Services Commission head of e-government Brendon Boyle, who wouldn’t be drawn on any points on the theoretical timeline beyond November.

“Ministers have already made a decision that if it goes ahead all government agencies will be involved in it,” he added.

It is expected to cost agencies up to $100,000 each per year over the next five years. Costs will depend on the functionality used and volumes transacted. There are costs for the agencies involved in the first phase but Boyle wouldn’t say what those financial arrangements are.

The State Services Commission will keep them informed about progress, arranging site tours and coordinating feedback. The target market is 90 agencies – an agency includes Crown entities, tertiary institutions, the state owned enterprises (SOEs) and 42 government departments.

“There’s a need for strong sponsorship in the establishment phase,” says Worsley (pictured right). “Agencies will have to monitor use to ensure they’re conducting all their business with suppliers using the hub, and suppliers will need to ensure they also encourage their staff and agencies to use the hub in order to achieve the critical mass necessary to make the project successful.”

He says it ’s important to dispel the suggestion that GoProcure is anything like an e-marketplace.“It is only designed to work between suppliers and the agencies they already deal with. It is not an opportunity for suppliers to suddenly be exposed to all 90 agencies.”

Having said that,having catalogues on GoProcure could be a key differentiator for suppliers when it comes time to retender for existing supply contracts and win new government business. This trend has already been seen within the fiercely competitive office suppliers market, as Corporate Express general manager Brian Rosenberg explains.

“I don’t see how you could work in the commercial environment without it [online ordering] – it’s become a standard request from clients.”

Smart suppliers set to prosper

So let’s have a look at what ’s involved from the supplier side. This is where it gets interesting because smart suppliers have a lot to gain if they’re early adopters and are prepared to leverage that positioning. Corporate Express, for example, will be fully integrated with the hub in order to support its existing agency customers. “Our back-end system will integrate into GoProcure and we’re in the process of file mapping with them now,” says Rosenberg.

Similar kinds of interfaces have been achieved with other large clients and this will make it easier to replicate with the Government, which is a big customer. “It provides a reduction in the supply chain,” he says, “as well as improved payments because of the accuracy of the order invoice process. It eliminates a lot of the manual reconciliation that typically bogs things down.”

If other suppliers take a similar approach to getting their catalogues available online then all of a sudden there’s going to be the critical mass on the supply-side in New Zealand to justify more e-procurement implementations by private sector organisations, further fuelling economy-wide efficiencies.

Rosenberg says suppliers integrating with GoProcure only need to do so once to be accessible by all agencies, although each agency is treated differently depending on the arrangement negotiated. Once the initial investment has been made to integrate the systems there will be no further costs involved.

This simplification of dealings with government agencies is another reason suppliers should be proactive in getting their catalogues on to GoProcure.

Rosenberg says another key point suppliers should take comfort from is that GoProcure is designed to facilitate the existing supply relationships negotiated. One agency will not have access to view the pricing suppliers have negotiated with other agencies. It’s not intended to be a mass government buying facilitator.

Agencies will still go to RFP and tender process before suppliers get to put their catalogues up and then that catalogue pricing will only be accessible to that agency.

There is also no charge for suppliers, although some cost may be incurred to get catalogues ready or to integrate systems internally. This should be quickly compensated for by the simplicity of only managing one catalogue with differing pricing schedules for each agency.

Lower volume suppliers can choose to load catalogues themselves onto GoProcure using Excel template spreadsheets. Others will choose to have their catalogue on a third party e-commerce platform such as GSB Supplycorp, Conduit, Marketeer or e://volution.

“We will work with third party aggregators or consolidators, where necessary punching out to a supplier’s website so the shopping cart data from a third-party website is returned to GoProcure,” says Worsley.

Punchout possibilities

‘Punchout ’ (sometimes known as “Round-tripping”) is particularly valuable where the supplier ’s products or services need configuring or building. A purchase of a Dell computer or an air flight would be typical examples.

Worsley says the functionality will not be available in the first phase. The argument against using it now is that the buyer experience becomes inconsistent where multiple supplier site formats need to be navigated. However this argument ignores the fact that many suppliers have invested heavily in sophisticated functionality to enrich the buying experience – this will not be possible to replicate on GoProcure. In the end the market will decide – this project needs critical mass and if Punchout provides it then it’s highly likely to be made available. Either way, the stalemate could be broken by the next version of Oracle’s Punchout functionality, which is expected to provide a more consistent buyer experience.