That's the conclusion of a research report released Wednesday by Jupiter Media Metrix. Despite high-profile efforts by the Clinton administration to increase the number of transactions between businesses and the government, only 1 percent of federal spending occurred over the Internet in 2000.
Jupiter researchers anticipate that public agencies will spend $286.1 billion by 2005 in online purchasing, or e-procurement. By contrast, private-sector business-to-business e-commerce will reach $6.3 trillion by 2005.
E-procurement has become a hot buzzword for businesses with large purchasing budgets. The most popular e-commerce transaction happens in an online marketplace, or exchange. Industry-specific Web portals typically feature catalogs, auctions, virtual conference rooms and other tools that help purchasing representatives buy and sell goods, track and source supplies, and manage logistics via the Internet.
Despite the gap in online spending between the federal government and private organizations, Jupiter researchers applauded the e-procurement efforts of state and local governments. According to the study, suppliers hoping to sell the government goods and services online should target state, county and city agencies.
"I was surprised to see how much activity was actually happening at the state level," said Tim Clark, the Jupiter Media Metrix analyst who wrote the report. "It is spotty, but active."
Politically savvy state officials often push underlings to purchase goods online because it saves money and could help them win elections, according to the report.
State agencies in North Carolina and California allow counties, cities, school districts and nonprofit agencies to use e-procurement systems under state-negotiated contracts. Several states in the Midwest and East Coast have embraced e-commerce as an image-boosting means of recruiting high-tech companies and retaining technology workers who might defect to tech meccas such as California's Silicon Valley, Seattle, or Austin, Texas.
By 2005, nearly 17 percent of the total government purchasing will happen online, up from just 2 percent in 2001, according to the study.
Researchers at Jupiter said they're unclear about the future of federal e-procurement under the new presidential administration, which has not yet named all key technology appointments. Although President George W. Bush is theoretically in favor of pushing all significant federal purchasing to the Internet, he has earmarked a relatively small $100 million in the next three years for the development of government e-procurement.
In addition to funding, another formidable hurdle to federal e-procurement is the lack of standard formatting for sellers and buyers. The lack of standard interfaces means that each government agency and network operator must use a separate connection to enter sites and conduct transactions.
Jupiter researchers said the federal government should set a standard for all U.S. agencies--and and that they hope state and local agencies will adopt the same standard.
The government might take a cue from Covisint, the giant auto parts exchange established by Detroit's automakers, Clark said. The exchange is pushing automobile suppliers and other automakers to adopt a single online procurement model as the new standard for buying and selling parts and supplies.