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Federal agencies look to pool buying power online

Uncle Sam is moving online with a new Web site launching next month that will allow the government to save money on small IT-related purchases for its widely dispersed agencies.

Tech Industry
Uncle Sam is moving online with a new Web site launching next month that will allow the government to save money on small IT-related purchases for its widely dispersed agencies.

The site, found at both Buyers.gov and Buy.gov, will give traditional government bureaus such as the Department of Energy, the Armed Forces, and the Veterans Administration a central location online to use some of the Net's most popular e-commerce services: auctions and power buying.

"The government has never been able to leverage the buying power they have. Now we have the opportunity," said Manny DeVera, director of IT solutions for the Federal Technology Service (FTS), which is piloting the site for the U.S. General Service Administration (GSA).

"We're looking at negotiating those low-volume, high-dollar purchases to get better prices on commodities," DeVera said. "When there's competition, there's savings."

To start, the site will allow government agencies to purchase IT goods such as PCs, printers and toner cartridges through private auctions and reverse auctions, or a program called eFast, which lets agencies pool their buying power to get lower prices on commonly purchased items.

The pilot site, which is being tested by the FTS this month, will operate with technology and services from companies including Oracle, FreeMarkets, MobShop, Spectrum International, Frictionless Commerce and KPMG.

Buyers.gov's motives are simple: savings and efficiency.

"It's a natural thing for the government to do, because like B2B companies, they're looking to competitively source their supplies and manage their data processes better," said Andrew B. Whinston, director for the Center for Research in Electronic Commerce at the University of Texas at Austin.

A business-to-government Web site should provide the same advantage as highly touted business-to-business sites, Whinston said.

In doing this, "we hope that the people who run the government will be thinking of us taxpayers," he said.

The potential for savings could be enormous. Federal, state and local governments' e-commerce spending is expected to grow to more than $6.2 billion by 2005 from $1.5 billion in 2000, according to a report from technology research firm Gartner. That is just a fraction of the $30 billion to $40 billion spent on IT products annually and an even smaller portion of the $200 billion spent on goods and services.

However, about 80 percent of government purchases are for less than $2,500. By centrally pooling those purchases and tracking the sales, it could also significantly reduce those agencies' paperwork.

Resellers will benefit from the bulk purchasing, too.

"When Dell sells a computer online it costs them about $30 to process the order. And if they sell 1,000 computers online it would cost them $30,000," DeVera said. "But if the government bought 1,000 computers it would cost Dell just $30."

The FTS said it intends for the site to increase competition among suppliers and, in turn, drive down prices. The site will also be able to track buying trends and current prices on products, a useful tool for future purchases of the same product.

Another agency of the GSA, Federal Supply, is looking at putting together a similar service for buying more general goods such as paper clips and adhesive notes, according to William Early, GSA's chief financial officer.

Buyers.gov will process the credit card transactions and pay suppliers, which already include big-name manufacturers including Dell Computer, Gateway, Sony, Compaq Computer and Hewlett-Packard. The site's technology providers will be paid based on the success of their services.

"After several months we'll be able to see which of the enablers are succeeding," DeVera said. "The greatest challenge will be encouraging buyers to use the tool. This will require effective planning, changes in management and training."

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