News Column

Investing in New Technology: a Smart Decision

Aug 1 2000 3:16PM

By Jennifer Riley

In his 21 years as president of RGMA, a Chicago-based management consulting firm that advises minority businesses on technological and strategic issues, Ralph G. Moore has seen three technological revolutions. First, the PC came along and made business more efficient. Then e-mail and the Internet made communications easier for businesses. And most recently, e-commerce has broken down geographical and time barriers to conducting business. As is the case with most revolutions, failure to change with the times could be deadly.

When it comes to procuring new business, today's companies have to move faster, be better informed, and be willing to consider their domain as extending beyond their local vicinity. Consequently, many people feel that technology has created a burden for smaller, minority-owned businesses that might not have the resources or know-how to keep up with such rapid changes. But Mr. Moore is not one of them.

"It's a tremendous opportunity for minority businesses to participate in procurement if they can master technology," he says. "The good news is, this technological race is still new. If in fact we pounce on the technology, there's an opportunity for us to replace a whole generation of aging smokestack businesses. Minority businesses have been in the back of the line and can't move any further back. Technology will dictate who moves up."

So what technology must small, minority-owned businesses have? According to Mr. Moore, whose firm also helps large firms implement supplier diversity programs, a business must be able to consummate a transaction over the Internet, must have a Web site with an e-catalog and software that enables it to interface with the customer, and must be EDI-capable.

EDI (electronic data interchange) is the modern-day equivalent of the telephone when it comes to procurement. Without this technology, which enables businesses to electronically exchange purchase orders, invoices, shipping orders, confirmations, and other business documents in a standardized format, a firm is not eligible to compete for most government contracts and is likely unable to compete for corporate ones. In order to be fully EDI-capable, a company must have a computer, a modem, EDI translation software or access to an EDI translation service, EDI implementation conventions, and subscription to a Value Added Network (VAN), which facilitates data transmission through EDI networks. There are about 7,500 EDI-capable small businesses registered on the Small Business Administration's (SBA) Pro-Net.

The advent of the Internet an open system of electronic communication challenges some elements of EDI, which operates on a closed system. For example, companies must incur the cost of software and a VAN subscription in EDI, but the Internet is free. The fact that EDI's closed system is more secure than the Internet, however, helps explain why it is still an essential element of the procurement process.

The 1994 Federal Acquisition Streamlining Act sealed the fate of businesses seeking government contracts: go electronic or go without. As a result of this legislation, most federal agencies developed electronic procurement systems through which they could post Requests for Proposals (RFPs) and receive bids from contractors. But with separate systems for each agency, the procurement process was only slightly less complicated than it had been in its paper-based form.

FACNET, the Federal Acquisition Computer Network, seemed to be the answer. Developed in the mid-1990s as a government-wide system, FACNET was intended to facilitate electronic commerce and EDI between all federal agencies and the private sector by employing a uniform data format and providing universal user access. But the project was abandoned two years ago after the disparate systems proved too difficult to unite.

The Electronic Posting System (www.eps.gov) a new joint venture between the General Services Administration, NASA, the Department of Transportation, and other agencies is a second attempt to create a system through which contractors can see RFPs from a variety of government agencies and through which they can submit bids. Although still in its pilot stage, EPS is expected to demonstrate that the Internet can be used to meet the needs of different agencies while providing a "single face to industry," as its executive summary puts it. The design allows the interconnection with, rather than the replacement of, agencies' existing posting systems.

"FACNET was going to be much more comprehensive, with bill paying and soliciting as well, but the scope exceeded the ability of the federal government to retool what had already been done [by individual agencies] and then retool it again under one umbrella," explains the SBA's D.J. Caulfield. In addition to EPS, he says, there are three major databases that a small business would be interested in: the SBA's Pro-Net, the Defense Department's Central Contractor Register, and the Treasury Department's Office of Small and Disadvantaged Business Utilization. Second-tier postings, Mr. Caulfield points out, include the Department of Transportation's Small and Disadvantaged Business listing (http://osdbuweb.dot.gov) and the Department of Commerce's Minority Business Development Agency business listings (www.mbda.gov).

"There's a new process resulting from the Federal Procurement Reform of 1994 in which a procuring agency will identify a broad need of government and pre-qualify companies that are all capable of supplying a major portion of this contract for example, telephone services," Mr. Caulfield explains. "This Government-Wide Acquisition Contract [GWAC] reduces the paperwork the government has to go through to get a single contract executed. In the case of a GWAC for telephone services, rather than advertising and getting bids, all companies are pre-screened and the contracting officer just has to go pick one. We're finding that these are being used more and more."

Pro-Net (www.pronet.sba.gov), introduced by the SBA in 1997, was one of the first interactive Web-based databases where businesses could register as government contractors and compete for federal contracts. Pro-Net also offers small businesses an outlet through which they can market themselves by creating a "hotlink" to their Web sites, and it serves as an online venue where several small businesses can cooperatively compete for larger contracts.

The Defense Department's Central Contractor Register (www.ccr2000.com) is a single point of entry for contractors who wish to participate in any procurement activity with the DOD (by far the largest source of government contracts, accounting for 55 percent of all federal contracts in 1999). The Treasury Department's Office of Small and Disadvantaged Business Utilization (www.treas.gov/sba/) is a link to both procurement opportunities and information on Electronic Funds Transfer and other financial activities related to electronic commerce.

"The Internet changes everything when it comes to procurement," says Jane McGinnis, director of the California Central Valley Procurement Technical Assistance Center (PTAC), which advises upwards of 300 firms each year. "Small businesses can use it for marketing, to find opportunities, to prepare a better proposal, or to find pricing history. From the government standpoint, they have streamlined the process so that a small business can tap into these resources."



Source: Hispanic Business magazine


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