A top purchasing manager for the U.S. Department of the Interior was
interviewed recently on WTOP radio in Washington.  He discussed the
relatively new practice of making federal purchases by credit card.
Proposed federal purchasing regulations that implement Section 508
guidelines would exempt purchases less than $2,500 for two years because
of the widespread use of the federal credit card, which promotes
decentralized purchase decisions.  This exemption would end in 2003.

kelly



URL: http://www.wtopnews.com/askcio.shtm

Paul Dennett is the Director of Administration and senior
   Procurement Executive for the Department of the Interior. He is our
   guest on this week's "Ask the CIO".

   WTOP: The entire government procurement process has taken a giant leap
   forward in recent years thanks to information technology and
   legislative efforts. Tell us about direction from Washington that has
   mandated simplifying the procurement system.

   DENNETT: In the last several years, we've had the passage of the
   Federal Acquisition Streamlining Act and the Klinger-Cohen Act and a
   lot of emphasis to implement procurement best-practices throughout the
   government; finding what somebody is doing
   best and emulating and copying it, streamlining and reducing the
   number of procurement
   people. In the current environment with information technology, there
   [are] even greater
   contributions that procurement practices can [make]. We have greater
   emphasis on
   value and results as opposed to process as the real push. Getting rid
   of thousands of
   government specs has been a major initiative and a giant step forward.
   We now just buy
   commercial products off the shelf. That's the famous thing where Gore
   went on the
   Tonight Show with an ashtray and was saying how many pages went into
   describing what
   a government ashtray would be like and the additional expense related
   to that rather than
   just buying an off-the-shelf ashtray. And that covered the full gamut
   of things throughout
   the federal government. A major one for us at Interior, and throughout
   the federal
   government, is endorsing the use of the Purchase Card as a way of
   making
   micro-purchases. Much of what the government buys falls under the
   $2,500
   micro-purchase threshold. For example, here at the Department of
   Interior, we have
   55,000 cardholders. I think we are unique in the federal government.
   Early on, we made
   the decision to combine our Fleet Card, our Purchase Card and our
   Travel Card into one
   card. We worked with Bank America, one of the banks made available
   through the
   General Services Administration. And as a result of that, we really
   couldn't have
   survived without the card. The whole process took a giant step forward
   by turning us
   loose with those cards. At Interior alone, we did almost $600 million
   worth of purchase
   card transactions last fiscal year. Actually, the number of
   transactions was over
   3 million. So when you look at the downsizing throughout the federal
   government,
   including the procurement area that supports all the CIOs and their
   numerous dependents
   on various IT services and products, the card was a real Godsend to
   us. Without it, we
   wouldn't have survived. But with it, we are able to get many of the
   smaller items quickly
   to the person. In many cases they have a card and are even able to buy
   it themselves.

   WTOP: Of course it's also good for taxpayers. Not just for making your
   life easier.

   DENNETT: Absolutely.

   WTOP: Tell me how security issues come into play when it comes to
   e-procurement
   procedures.

   DENNETT: Obviously, it's extremely important that if we go into this
   e-procurement
   throughout the federal government - and it's going to grow and grow
   geometrically in the
   coming years - it's absolutely essential to make sure that we guard
   the financial data and
   other proprietary information. Many vendors have talked to us and
   expressed concern
   about that. So they're studying very closely the things that we're
   doing on the Internet; to
   have padlocks, unbroken keys, URL indicators and various addresses to
   make sure that
   things are going where they are supposed to and getting back to where
   they are supposed
   to. That makes it even more important that we deal with very reputable
   vendors in the
   beginning. We do have to be on guard with the advent of our increased
   reliance on
   e-procurement to make sure that we don't allow [disreputable] vendors
   to slip in there and
   muck it up for the rest of us. We use things such as registration of
   DUNS numbers. We
   use password protection. But in spite of our attempts in this area
   there is still, in my
   opinion, a general reluctance among many of the vendors to submit
   offers over the
   Internet at this stage. They're still watching this evolve, tracking
   those that are
   experimenting with it and seeing how the security works. We really
   have to be able to
   understand the issue of IT security and communicate with the business
   people to make
   sure that we come up with a solution that's acceptable to them.
   Because if it's not
   acceptable to them, the use will not be anywhere near what we need it
   to be.

   WTOP: Is there particular concern among vendors, or is it a number of
   security
   issues?

   DENNETT: I think it's a number of them. The ones I've mentioned. They
   want to know
   if they have an attachment to their offer that's proprietary that it's
   going to have the same
   safe keeping as when they did it the old fashioned way is one that
   I've heard several of
   them express. Although we're posting and putting out our bids and
   proposals - many of
   them are receiving them electronically through FedBiz and other
   methods - a lot of
   them are still sending it in paper-wise. From what I understand, Air
   Force is probably
   one of the leaders today of actually trying to get the proposals back
   electronically. We're
   doing some of it at Interior. We're going to have to do a lot more of
   it. President Bush
   has listed as one of things he wants to have all significant
   procurements to be done
   through the Internet in the next three years. So that's going to cut
   out a lot of work for us
   and make us accelerate the use of e-procurement.

   WTOP: Has e-procurement leveled the playing field for vendors?

   DENNETT: In some cases it certainly has. Over time, like anything
   else, vendors earn
   favor by delivering good products and services on time. And we tend to
   go back to the
   ones that have successfully served us. I think e-procurement has
   broadened the base of
   people that are aware of the things that the government is buying. So
   we certainly have
   located a lot of additional sources. I think that has helped level the
   playing field. It saves
   costs for people who want to break in. Even though we don't require
   it, many vendors
   will invest in costly, glossy brochures and things like that, that
   really have nothing to do
   with the value of what they're offering. So certainly e-procurement
   has leveled the field
   in that we've found more sources and they know that the emphasis is on
   what they're
   offering and not how they package it. The timeliness is better with
   e-procurement. You
   push a button and everybody has it at the same time. That certainly,
   in my opinion, also
   helps level the playing field. Instead of somebody maybe becoming
   aware of it several
   days later and having a slight disadvantage. Certainly using the
   credit card allows for
   faster payment on invoicing by the government. That has to help a lot
   of medium and
   small businesses that have to be very conscious of their cash flow. So
   I think that also
   contributes to a level playing field.

   WTOP: You mention security as one of the big issues for vendors. What
   are some of
   the other ongoing complaints?

   DENNETT: One of the ones that they complain about... bundling is a hot
   issue now.
   With the advantages of e-procurement and our putting a lot of one-zees
   and two-zees
   together into larger procurements, many among the small business
   community have
   objected and feel that deprives them of the opportunity to pick up the
   smaller ones; that
   sometimes they get too large. ... We're tracking that now to see to
   what degree that
   really is true. I don't think we have the facts yet to say for
   certainty what the impact of
   that is.

   WTOP: Anything you would like to add about e-procurement and how it
   will
   continue to evolve and serve both the government and the taxpayer?

   DENNETT: I think it's a real boon for the taxpayer. Anytime you
   broaden our base of
   suppliers it's going to result, in the long run, in better products
   and prices. We in the
   government have to do an even better job of using commercial types of
   applications.
   The public expects government e-procurement systems to be easy to use,
   to provide many
   features that area available to them through commercial sources like
   they're starting to
   get from their banks and everywhere else. We're going to have to be
   aggressive about
   using it commercially as many ways as possible. We're going to have to
   try to raise the
   dollar amount of the $2,500 micro-purchase. I gave you some statistics
   earlier. But
   almost everyone I talk to in the procurement community and general
   public and vendors
   think it would be an improvement to raise it to $10,000. It's not
   without controversy.
   Again, some small businesses feel that they may not get their share of
   the amount of
   things that are transacted at that increased amount. But it's
   certainly something to take a
   hard look at. Invoicing and receipt reports, a lot of the stuff on the
   back-end is going to
   have to be polished and used to a greater fashion with e-procurement.
   The technology is
   there. It's just a matter of us embracing and utilizing it.

   WTOP: Anything else?

   DENNETT: I guess I'd like to put in a plug for a program called the
   Javits-Wagner-O'Day Act. It's called JWOD. That's a program where the
   federal
   government acquires goods and services from people that are disabled
   and blind.
   E-procurement at first, really shook that special interest group up
   that has statutory
   support for the government to buy from it. Because they were using the
   old GSA
   warehouses. But they now have a web site, JWOD.com ( www.jwod.com ) ,
   and they're getting all their products and services online and
   allowing the government to have access to it through e-procurement. I
   think all of our programs, as they adopt and hook up, will find that
   e-procurement is the way of the future, and it will help them. There
   is a 75%
   unemployment rate amongst blind and disabled people. The use of
   e-procurement to
   place orders with JWOD.com will not only give us good products and
   services rapidly
   through e-procurement, but allow us to support these very worthy
   social programs at the
   same time.


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