ERP vendors and those keen to supply government agencies with goods and services are anxious to hear whether the State will dictate a proprietary e-procurement solution or keep the business 'open' for standards-based interconnection.

The fear is government departments may be locked in to a $7.5 million Oracle-based solution, which may require suppliers to invest in upgrades to their own ERP or back office systems, or deploy document exchange bureaus or translation gateways. This could add cost to each sale and act as a deterrent for those who have traditionally sold goods to government.

And whilst nobody doubts the quality of the Oracle solution and the perceived benefits of e-procurement, there is growing concern that the business model is inappropriate for our state sector.

Yet would a whole bunch of different e-procurement systems be any better?

The decision was to be based on a positive response from at least 20 government departments, Crown entities, including health and tertiary education and local authorities. At the August 31 deadline it appeared many had actually given the piloted solution Go Procure the thumbs down.

A report recommending whether GoProcure should proceed to full rollout is currently with Cabinet. State Services Commission e-government unit chief Brendan Boyle and State Services minister Trevor Mallard have both declined to comment, saying a statement will be made at the end of the month.

The government sought proposals for a managed e-procurement system on 31 August 2000 so its agencies could transact $1.25 billion a year with suppliers over the internet. An e-procurement pilot contract with a consortium led by CAP Gemini Ernst & Young and Oracle with its GoProcure offering was finally signed in February this year.

GoProcure, initially run as a four-month pilot, was supposed to be extended to five public agencies Treasury, Winz, Inland Revenue, the Ministry of Fisheries and the NZ Fire Service for a further six month trial before a proposed full service roll out from October 2002.  There is some doubt as to whether this has been completed.

Government departments are being asked to commit between $50-$100,000 a year for the next five years to cover the cost of the new e-procurement system which was only to go ahead if the majority agreed. But there's growing concern the Government may now mandate all departments use GoProcure.

No-one wanted to talk to iStart on the record for fear of government backlash against their organisations which may endanger other deals. One major vendor said any plan to force departments to adopt GoProcure would be 'scandalous' and go against the original intent of the government and the conditions under which vendors originally bid for the business. 

"We believe the only department that has given conditional go-ahead is the Internal Affairs but they're a minnow in terms of e-procurement. We don't believe the system has been properly piloted and that the government misrepresented what it was doing. It should have settled on a standards-based approach rather than going into competition with private enterprise with State Services pushing a particular solution to everyone. That's a huge change since the mid-1980s where CEOs were made accountable for outcomes," said the chief executive who did not wish to be named.

"Government should mandate standards not solutions in a de-centralised environment. To say you must use a particular component of an ERP system and bolt it on to another that may be a bitter enemy may be problematic for the government department involved," said one ERP supplier who has a number of high profile clients.

The GoProcure software development in its present form is only part of the overall package- there's still work to be done to develop databases with the various government agencies, plus training and support. The overall price tag is $7.5 million although there are suggestions the government is baulking at this and seeking to reduce its outlay.

The decision on the way forward for government e-procurement comes in the wake of high profile failures by OneZone and Southfresh which failed to get sufficient throughput of transactions from purchasing organisations.  Both said they faced a lack of commitment from customers despite being able to prove a business case on paper.

Vendors spoken to by iStart warned that New Zealand is too small to support multi-million dollar e-procurement solutions and the way forward should be a standards-based, modular approach.

The government e-procurement solution is meant to provide a way for government agencies to collaboratively buy goods and services to leverage better processing and terms and conditions. It's also meant to help define best practice so agencies can more efficiently organise 'back-office' procurement including requisitioning, tender, fulfillment, payment, and accounting processes. Ultimately everything from requisitions and approvals, catalogues, data collection and reporting and interfacing to supplier back end systems will be done electronically.

Under the current proposal suppliers would load their catalogues into the Oracle procurement application or use business-to-business marketplace software, Exchange to update their informaiton automatically. The system is expected to run on Compaq Tru64 hardware, managed by Datacom.

October 2002
By Keith Newman

Hon Paul Swain