Electronic Commerce for the Procurement of Construction and Architect-Engineer Services: Implementing the Federal Acquisition Streamlining Act (1997)

Bosquet N. Wev, Jr.
Fairfax Electronic Commerce Resource Center (ECRC)

The main subjects I will address are the Electronic Commerce Resource Centers (ECRCs) and value-added networks (VANs).

The ECRC program is intended to meet the critical need for assisting small to medium businesses and small government offices in introducing electronic commerce practices and principles into their business. In short, the mission of the ECRC network is simply to help businesses and government offices move into electronic commerce. The ECRC network has 11 centers around the country,⁶ sponsored and managed currently by the Advanced Research Projects Agency (ARPA), and as of October 1996, by the Defense Logistics Agency (DLA), and funded by the Department of Defense (DOD). One of the requirements for the establishment of an ECRC is to be associated with an institution of higher learning. Our center, the Fairfax ECRC, was established in 1993 in association with Dimensions International (the prime contractor and an 8A firm), George Mason University (GMU), and Iris, Limited Liability Company. Our ECRC operates as a seamless (or a "virtual") organization and currently have several doctoral students from GMU who work for us full-time. They operate our lab, and do most of our enterprise integration and process change work. Our contract has been extended to 2002.

Each ECRC has a contractually defined area of core functions and technology expertise. The Fairfax ECRC area of expertise is information technology. My company, Iris, is the third party in our center, and we are the experts in CALS. CALS stands for Continuous Acquisition and Lifecycle Support. The concept originated in DOD in 1985, to take a weapons system and operate it from birth to death—from design, to manufacture, to implementation, to operation, to repair parts, to phase-out—using applied technology. We think of CALS more generically, as a way to do business.

The Fairfax ECRC mission is to work with the small to medium-sized enterprises and government offices in the electronic commerce area, to help them do business as trading partners through the application of methods and information technologies that enable process improvements. We do a lot of work for DOD, but we are starting to work with other federal agencies as well.

First, the ECRC provides consultation and training to the enterprises and government offices. Second, we develop strategies for business process improvements; and third, we recommend and help implement enabling technologies.

That order is very important. We have seen and consulted with companies who have gone out with great pride, bought 10 personal computers, and installed and networked them all, so that they can very nicely do bad things quicker. We have to uninstall all of that and look at their business process. It must be changed to do what they want.

Most of you have heard of the "as is" and the "to-be" ("as is'' being the way a business process works today, and "to-be" the way it should work to take advantage of today's technology). We apply these concepts all the time, and it works. We look at a company and determine the "as is,'' and only then do we help the company determine the "to be." Once the company is reorganized, then we assist in installing the technology to suit.

We have an intensive training and education program, and conduct numerous courses both on-and off-site. We also provide technical support.

Our outreach activities include trade shows, expositions, conferences, and seminars. The 25 people of the Fairfax center are all involved in outreach. We use outreach activities to find the companies requiring assistance.

Consultation and technical support is provided as a follow-on service. We answer many questions by phone, and when necessary, go to the offices of a company or government agency and work with them at no charge for up to 40 hours. Much work can be accomplished in 40 hours. Beyond those hours, the ECRCs are permitted to negotiate fee-for-service arrangements.

Subjects we often address are legacy data management and legacy management conversion. Every time someone writes a check, a piece of legacy data is created. Legacy data fill offices, file cabinets, computers, storerooms, boxes, and so on. We teach people how to manage such data in adapting to the world of electronic commerce.

The ECRC network is a cooperative rather than a competitive network. The ECRCs regularly call one another for help—scanning and conversion help, automated design help, help in whatever the problem area happens to be. A team from another ECRC may come in to help find the solution.

Once we find a company or agency who is interested in our services, we complete an initial assessment with them. Then there are a number of further steps in our strategy to work with a company:

• Initial team agreement with the client
• "Tiger Team" formation (such a team is composed of selected personnel from the client and the ECRC, with the team leader always from the client)
• Planning, high-level and business case analysis
• Final agreement with the client
• Detailed analysis
• Implementation planning
• Implementation.

We feel that an 80 percent solution today is better than a 100 percent solution some day, and much better than no solution at all.

Many people, including those in government offices, are afraid to set-up electronic commerce for fear they will look foolish. Our suggestion is, let's all do it together.

Even those in remote locations, such as Fort Ritchie in northern Maryland, have now had vendor conferences, and they are excited about getting involved, even though they began with little knowledge about electronic data interchange (EDI).

What are the three most important things in real estate? Location, location, location. The three biggest problems we have today in electronic commerce are culture, culture, culture. The principal reason people fail to become involved is that they refuse to stop doing what they have been doing for the last 25 years. Automating a business is rarely a technology issue, but almost always a cultural issue.

Some businesses would not, in fact, benefit from our technological improvements, and we help identify these cases as well. If there is not a business case that points to automation, we do not recommend it.

There has been much discussion about the costs of the Defense Information Systems Agency (DISA) infrastructure and the difficulty of implementation. But there are no rose gardens in this field. It is hard. The DISA infrastructure (the Federal Acquisition Computer Network, FACNET) has had vigorous growing pains. However, the system is getting better by the day, because responsible people recognized the problems and are working extremely hard to resolve them.

What challenges must be overcome for businesses to work with government via EDI? Again, culture is the biggest problem. Companies and government agencies must also demonstrate both management and financial commitment. Managing legacy data is another major challenge. How many office files must be converted to digital information?

Standards, such as ANSI [American National Standards Institute] X12 and UN EDIFACT [United Nations rules for Electronic Data Interchange for Administration, Commerce and Transport] are still another issue. When you pick up the telephone, are you surprised by the dial tone? Of course not. It is a standard around the world. The standards are in place. ANSI X12 is the standard for EDI.

The sharing of information is important. Today the power is neither in the sword nor the pen, but in information, more specifically, information retrieval and the sharing of information. Business process and organizational structure are very important as well.

At the ECRC, we can only achieve our mission if we can demonstrate measurable success in our client organizations. We work often with small manufacturing firms, primarily in southwest Virginia and in North Carolina, and help them change their processes. About 85 percent of those firms will let us analyze their profits and loss statements. We may review these accounts monthly, to help the businesses continually improve. Whenever possible, we like to measure our success by more than mere compliments, however genuine. While a large number of specific benefits may result from a business's use of electronic commerce, they all derive from reducing costs, improving quality, and decreasing time to market. If electronic commerce is well implemented, it can certainly produce these three results.

Value-added networks (VANs) are part of the DISA infrastructure for electronic commerce. A VAN provides trading partners a common environment through which to transmit, receive, and store EDI messages. DOD has a certification program that all VANs must go through; 26 VANs have now been certified.

There are certain qualifications that VANs will have to meet. VANs need to transmit, receive, and store EDI messages, with a two-hour maximum for government transmission to supplier mail boxes. The VANs must be open 24 hours a day, 7 days a week, and they must be able to archive data for at least 30 days. They must to be able to protect data and have a backup and recovery plan

in the event of a "crash." To be certified, VANs must also handle "one-to-all interested parties" transaction sets. This means VANs must be able to connect with all other people in the network, and all other functional areas.

A VAN is little more than an electronic mailbox. The government, on one side, goes through a so-called gateway, which does nothing more than translate business information into ANSI X12, the standard for EDI. From the gateway this information goes to the Network Entry Point (NEP), where it is distributed to the VANs, which in turn distribute it to the vendors.

Value-added service (VAS) adds significant value to the basic VAN function of storing and forwarding EDI data. Typically, a VAS provides communications and translation software. Choosing a VAN or a VAS is largely a filtering process in which you identify those features that best meet your business needs. There are two general approaches. You can sign up with a VAN that has the software you need included (so-called bundled software); or, you can choose a VAN and a third party's software. The software selected must be compatible with your own system, so that you can connect to the DOD and commercial VANs you want to reach.

Some commercial entities already do business like this. K-Mart, Wal-Mart, Sam's, J.C. Penny, Sears—they all have their own VANs. If you want to sell your widgets to Wal-Mart, you have to do it electronically. This is a consideration if you are going to do business not only with the government, but also with a commercial entity. Your choice should also depend in part on the volume of business that you expect to do. You should estimate VAN costs for light, moderate or heavy use, as appropriate.

Cost. There are several kinds of costs to consider in choosing a VAN. The initial set-up fee is usually about $200. For electronic mailboxes, there are account, access, and storage fees. You might select a per character charge, a volume discount, or a flat rate. And there are interconnect fees. Of the 26 VANs we have talked to, we find people are generally moving toward the flat rate because it is easier.

Reporting. Everybody wants to look at reports. But you need to consider exactly what it is you want to see, because you will pay for it. Ask for a sample invoice and a sample monthly report. Are they easy to read and understand? Look at report features such as characters transmitted, connection time, failed transmissions, and failed log-on attempts.

Our ECRC maintains a list of 20 questions to ask a VAN, as follows.

Other criteria. Another important criterion to consider is market coverage. Can the VAN connect with your trading partners, commercial and otherwise? The Defense Logistics Agency (DLA) uses a special system, as does the Air Force. Does the VAN provide training with its bundled software? Are

there other value-added services? You should obtain and check references of the VAN that are businesses similar to yours.

Special needs. You should consider whether you have other special needs. Fax-to-EDI is one capability. If you have a very low volume of transactions, and are not EDI-capable, then for a minimal VAN fee you can arrange with your VAN that, if it receives an EDI transaction from a buyer (either the government or a commercial enterprise) that relates to what you sell, the VAN can fax that transaction to you. Then you can write up a quote, fax it back to the VAN, and the VAN will send it back to the buyer via EDI.

VANs can also be Internet service providers. They can scan bulletin boards. They can translate your business information to other softwares (such as to commercial VANs, such as those of K-Mart or Wal-Mart).

Activity level. In choosing a VAN, you need to weigh the costs and benefits by activity level. What does that mean, activity level? If you have various departments within your company—say, accounting, finance, shipping and receiving, inventory, and manufacturing, and a request for quote, or some other EDI transaction set comes in, you would like to know whether you should route that information to any or all of your departments. You cannot do this routing unless you have an integrated database. This is the type of issue to be considered in this context. EDI cost/benefit is usually volume-based.

Translation software. The software you select to go with the VAN must be able to translate data into and out of standard EDI formats. In this case, the ANSI X12 standard is what is used. There are several DOD versions of ANSI X12, so you must be sure that your software, whether it is bundled into a VAN or provided by a third party, has the capability to look at all versions. Again, you may want to be able to exchange data not only with DOD, but also with commercial trading partners.

The simplest and least expensive way to do business is to use a stand-alone personal computer and EDI translation software, either bundled with a VAN or as third party software. This software takes business information (either from the buyer or the seller), and, through the ANSI X12 standard, translates it into computer language and transmits it to the recipient (either the buyer or seller). Once received, the information is translated back into business information that can be read. The process is proceeds continually, back and forth. This approach is straightforward to implement.

Of the many software vendors out there, roughly half offer DOS systems, and half offer Windows-based software. But many are moving to

Windows, and the DOS environment will likely eventually fade away in the EDI world. The drawback of the stand-alone personal computer approach is the lack of integration with existing software. Integrated EDI software is similar to stand-alone software, but can integrate with other applications and allow the integration of a company's entire database, so that all departments can communicate with one another.

Information goes into the system once, but you use it many, many times. You can route an incoming request for a quote through all the departments automatically. The information goes all the way through, and if you happen to win the bid and get a purchase order, the same thing happens again. The information can go directly to manufacturing and to shipping and receiving.

I recently took a tour through the local Safeway warehouse in Landover, Maryland. It was an amazing experience. Almost their entire process is automated. They have little buggies running around on the floor with magnetic tracks. They have high-rise buildings with forklifts that go up five stories and grab a crate of whatever, bring it down, and put it on a little cart. The cart runs over, dumps the crate on a truck, and the order is gone. No one has touched it. The whole operation has been run from an operations center. That's the kind of operation we are headed for. They are saving enormous amounts of money using this system.

Finally, a company can develop its own proprietary software. We highly discourage this option. Proprietary software is written to fit a specific use in a specific company or pad of a company. This software usually is poorly documented and becomes obsolete very quickly. If and/or when the author leaves the company, the documentation left behind is rarely adequate for successors to maintain or troubleshoot the software.

People are concerned about the privacy of their information. But information can be fire-walled, or compartmented. The only information that is available and shared with everyone else is the information that you want them to see. It is not hard to arrange this, simply more expensive.

Other EDI software capabilities. It is also valuable to have built-in communications software included with the software package, so this software does not have to be bought separately.

You might also want to arrange for unattended batch transmissions. If you are going to be receiving large batch transmissions of transaction sets from the VAN during off-hours, then you want to be able to say when to do that. You arrange this, by the way, when you register using the Trading Partner Profile

transaction set (TS 838). You can provide a lengthy list of times when you want to talk to people.

It is important to ensure that the EDI communications software you choose allows multiple VAN connections in case you wish to do business with both government and commercial enterprises.

In software system utilities, if you want security, you want to arrange for a password. It is also helpful that your VAN or third party software have automatic recovery and restart capability, so that if the VAN (or third party software) crashes, they can recover, and the crash is transparent to you. Installation routines should be fairly simple. It also helps if the software package allows manipulation of the screen, so that you like what you see.

With regard to system maintenance, the software should provide automatic purging and archiving. It should be able to save information for an adequate period, say, for about 10 days; and the program should be updatable when ANSI X12 standards are updated. The software should have good phone support, with extended hours and knowledgeable technical support staff. Error reports, which tell you of any errors the software may be experiencing, are important. Be sure you can receive these error reports. There should be inbound/outbound transaction set reporting. You ought to be able to receive a report at periodic intervals that indicates all the transaction sets you have received and sent over any given period.

Functional acknowledgments. Functional acknowledgments can be important, but you must sometimes pay for this feature (depending on the VAN). Acknowledgment is something developers have struggled with, though it is nothing more than a notice indicating that someone received what you sent them. The problem is that such messages fail to go end-to-end; they only go from the gateway to the VAN and back. They do not travel the full route from the agency to the vendor and back. If you want such capability, it will generally cost you extra money. The better VANs will pass this feature along as part of their flat rate plan.

There is also a transaction set called an 836, which is an awards, or unsuccessful bidders, notice. It tells you who won and for how much, so that if you are not the winner, you can learn more about the competition. This communication can be a useful marketing tool.

Cost considerations. Regarding software costs, you should consider the initial cost, whether maintenance is ongoing (and whether you should get a contract or not), and whether you will be charged for upgrades in the software.

When transaction set 841 (Technical Information) is finally approved, will you have to pay the VAN extra to receive it, or will it be received as part of the flat rate package? Sooner or later the costs of developing the new transaction sets will have to be passed along. Will an ANSI X12 standards update be possible, and how much will it cost?

The total costs of EDI vary greatly, depending on your choices. You can buy a personal computer today for $1,000, and it will do the job. You can get a 486 model with everything you need, and a modem for $100, and have the capacity to do EDI. A VAN, after the initial investment of about $200, should not cost more than $50 to $100 per month. Software can be expensive, particularly the more advanced integration software.

Good assessments of software are available, and the ECRCs can also be readily accessed through our Fairfax center's home page (http://www.ecrc.gmu.edu ). The Dayton ECRC is building a valuable matrix with cost comparison charts, to help both vendors and government agencies to select VANs and software vendors.