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The Government is still prepared to 'pull the plug' on the $7.5 million GoProcure project if there's strong resistance from its own agencies and marketplace suppliers by October next year.
The first stage of the e-procurement system will be fully operational with five government agencies by October next year when it will become mandatory for other departments to conduct all their purchasing of goods and services from the hub. Crown and other agencies will be 'strongly encouraged' to join them.
However the project may yet be dumped if phase one doesn't satisfactorily address the outstanding issues and concerns of agencies and suppliers. "If they aren't happy it won't be worth going ahead," says Brendan Boyle head of the State Services Commission e-government unit.
While those more familiar with the proposal are 'generally' keen to proceed, there's still uncertainty about the benefits and a reluctance to commit. Mr Boyle says no-one has actually said they don't like it and most agree they'd like to do e-procurement one day but don't necessarily want to be 'first cab off the rank".
The main concerns are around flexibility and compatibility with existing government IT systems. The plan is therefore to have a large core department, a small to medium agency, a couple of Crown entities including representation from the health sector integrate with the hub over the next year before the system is promoted to all government agencies.
"It's still a little bit chicken and egg. You need to have something up and running to showcase an operational system but in order to do that you need to make a certain amount of investment," says Mr Boyle.
The Oracle Exchange-based system pitched by a consortium of CAP Gemini Ernst & Young and Oracle was selected in February and was only going to go ahead after commitment from the majority of departments. Cabinet gave the go-ahead for phase one of the GoProcure project this month after a 'lab-based' pilot initially 'exposed the system' to about 50 agencies.
The Government is now deciding how the cost will be spread and which five agencies will provide the best test case to prove promised efficiencies and cost savings. GoProcure is expected to save the Government about $6.5 million through efficiencies and bulk order discounts for stationary and office products for example.
Departments were initially told they'd be required to contribute between $50-$100,000 a year over the next five years. That figure will be based on the 'procurement spend'.
Government departments currently spend around $1.25 billion a year with suppliers overall but the wider state sector is 'being strongly encouraged' to be involved. With Crown entities and the health sector involved overall spend is more like $3 billion annually. However says Mr Boyle that doesn't mean everything will be channeled through GoProcure. It is estimated that up to $250 million per annum will be channelled via GoProcure.
The core offering is the transaction hub, which everyone will be required to participate in. While Government departments will be 'directed' to link up with the hub they may still purchase from other sources and run different financial systems, although they'll have to pass that information through the transaction hub.
While larger agencies and department will want to have full integration into the hub including back-ending their financials into it, others may not want to go that far. "If you are someone who has a lawn mowing contract for Winz in Rotorua for example, that information can still be put through the hub via fax, text or email," says Mr Boyle.
He says the approach provides standards for the procurement process, the technology and the way information is presented to enable purchasing decisions. It starts to consolidate things and establish some 'best practice'.
Every effort is being made to avoid the e-procurement hub failing through lack of support or crippling transaction costs like several commercial marketplace ventures in recent years.
Greg Nicholls, the government's e-procurement project manager says suppliers wanting to deal with the government need to be part of the hub with every effort made to ensure this is simple as possible. There will be no charge for posting catalogues and no transaction fees.
While larger departments and suppliers such as OTC and Corporate Express already use XML and full integration to hook into back end systems there are a range of choices for other players including web-based tools on GoProcure enabling supplier to load and manage a catalogue from an Excel spreadsheet for example.
Integration can be quite cheap, even a flat file can be converted into the right format. "There'll be options to 'punch out' to existing functionality from some sites - at others a supplier might still want to use fax or email. Until volumes are at an appropriate level re-keying will remain an option.
Mr Nicholls says the hub is designed to make it easy for suppliers to do business with government. Even if a government department is operating SAP and the supplier has another incompatible system the hub knows the format required and will handle purchase orders and electronic invoices. "That's the way it's set up - it knows everyone's format," he says.
He says the government wants to encourage the growth of e-commerce not hinder it. "It's the cost of transactions that have slowed down the uptake of e-commerce but we are a buyer-funded model and are paying our own costs. We believe we can make our own processes more efficient," says Mr Nicholls.
"We're essentially a collaboration of medium sized entities who have banded together to achieve efficiencies but we still need volume and to have the agencies and suppliers to get behind us and make it work." |
