Electronic Commerce: Implementing the Federal Acquisition Streamlining Act

Ms. Delores (Dee) Smith
Department of Defense Electronic Commerce Program

The Electronic Commerce Program has had an eventful beginning in the Department of Defense (DOD) during the last two years. The experience has been quite a challenge—in engineering, contracting, and business areas—for both the department and industry.

This new electronic commerce infrastructure grew out of a Process Action Team (PAT) that started in June 1993. DOD has a two-year program paralleling the Federal Acquisition Streamlining Act (FASA) of 1994. The DOD program goal has been to implement simplified purchases during this time, at 244 sites that carry out 98 percent of simplified procurements. Initially, these purchases were defined as up to $25,000. However, during implementation, the Deputy Under Secretary of Defense for Acquisition Reform worked with the Office of Federal Procurement Policy to have legislation raise the threshold, up to $100,000, for simplified purchases by electronic commerce. This is a rare event: legislation being written in cooperation with a department division, and executed at the same time.

Cooperation among the program's direct participants was also high. Together they established not only the interim electronic commerce capability called for by FASA—the Federal Acquisition Computer Network (FACNET)—but also had the infrastructure in place with sites beginning to deploy. Within the department alone today, 286 sites are up and operating.

While there have been many program initiatives, however, the current volume of ANSI X12 transactions is still low. The delay has been attributed especially to infrastructure problems. However, there have been many other problems as well, which are currently being resolved just as the infrastructure issues have been. This next year is likely to be a very aggressive program year for the department, as well as for the 37 participating federal agencies' sites.

The other problems in implementing electronic commerce derive from the general paradigm shift, the move from paperwork to electronic commerce. To date, the new system offers little new from the operational viewpoint of DOD contracting officers. They do not have an advantageous method of execution



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--> Electronic Commerce: Implementing the Federal Acquisition Streamlining Act Ms. Delores (Dee) Smith Department of Defense Electronic Commerce Program The Electronic Commerce Program has had an eventful beginning in the Department of Defense (DOD) during the last two years. The experience has been quite a challenge—in engineering, contracting, and business areas—for both the department and industry. This new electronic commerce infrastructure grew out of a Process Action Team (PAT) that started in June 1993. DOD has a two-year program paralleling the Federal Acquisition Streamlining Act (FASA) of 1994. The DOD program goal has been to implement simplified purchases during this time, at 244 sites that carry out 98 percent of simplified procurements. Initially, these purchases were defined as up to $25,000. However, during implementation, the Deputy Under Secretary of Defense for Acquisition Reform worked with the Office of Federal Procurement Policy to have legislation raise the threshold, up to $100,000, for simplified purchases by electronic commerce. This is a rare event: legislation being written in cooperation with a department division, and executed at the same time. Cooperation among the program's direct participants was also high. Together they established not only the interim electronic commerce capability called for by FASA—the Federal Acquisition Computer Network (FACNET)—but also had the infrastructure in place with sites beginning to deploy. Within the department alone today, 286 sites are up and operating. While there have been many program initiatives, however, the current volume of ANSI X12 transactions is still low. The delay has been attributed especially to infrastructure problems. However, there have been many other problems as well, which are currently being resolved just as the infrastructure issues have been. This next year is likely to be a very aggressive program year for the department, as well as for the 37 participating federal agencies' sites. The other problems in implementing electronic commerce derive from the general paradigm shift, the move from paperwork to electronic commerce. To date, the new system offers little new from the operational viewpoint of DOD contracting officers. They do not have an advantageous method of execution

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--> yet; the principal difference for them so far is simply the nature of their connection with industry in requests for quotes, purchase orders, and delivery orders. The problem for the buy in itself, and for the acceptance of the new approach, is that additional accompanying processes have not been improved or electronically adapted to date. In other words, when contracting officers execute an EC/EDI award, they must also send papers to the Defense Finance Accounting Service (DFAS), contract administration, and still other offices. Currently, then, contracting officers simply have a broader means to advertise information for goods and services. However, they also have the opportunity to reduce procurement lead times significantly. In simplified purchases, we are seeing reduction of 15 to 20 days in the procurement process. More and more, we are generating an award within 24 hours of closing a solicitation. So we are supporting our business goal, and supporting the warfighter. Even under a peacetime or peacekeeping scenario, it is very important that we respond to our customers quickly—procurement is at the end of the process. The requisite user of goods and services does not see the tremendous lead time in front of the procurement officer. In the last two and one-half years, we have embarked on outreach efforts of $2.5 million with the Small Business Administration (SBA), training over 1,000 small business centers, 106 procurement technical assistance centers, and 11 Electronic Commerce Resource Centers (ECRCs). All these people have also joined with us in vigorous educational outreach to industry, and additionally, for that matter, in helping me personally to understand the technical issues and internal workings of the relevant activities. In 1993, the electronic commerce infrastructure that DOD Secretary Perry specified was one supporting all business areas. The first area addressed was contracting, because this business area was the first to reduce personnel in streamlining. A defense management review directive in 1990 eliminated numerous positions and salaries. To accomplish the old paper pushing process was impossible, and some type of streamlining had to be done. Unfortunately, we could not carry out a true business process re-engineering in the streamlining. I would simply say we paved the cow path in this first effort. Today, most of DOD sends out engineering technical data whether the recipient wants them or not. In fact, many of the technical data and aperture card submissions end up in trash cans.4 Most of those who receive this 4   Aperture cards are 3" × 3" microfilm incorporating technical engineering data.

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--> information already maintain it in some way. They may need only certain parts of it for the purposes of the bid. So we will need to determine policies about how such information is provided in the future. The ANSI X12 (841) is the transaction set for engineering technical data; its review by the Standards Management Council (SMC), as well as the Federal Standards Management Council, is complete. For the last two years, my office has sponsored funding of the prototype for engineering technical data that crosses DOD. We just released a $1.6 million prototype demonstration that will deploy this capacity in the next 9 months to our DLA sites, which are four large Inventory Control Points (ICP). Some of that information on those types of documents is coming out very soon. We will be able to force the envelope again, to determine the cost-effectiveness, the speed, the service, and the medium through which we will transfer engineering data in the future. Another big issue affecting the buyer at the moment is our downsizing and right-sizing. Many are afraid for their jobs. Bases will be closing, in keeping with the Base Closure and Realignment Act. This kind of environment in many ways subverts an aggressive approach to putting electronic commerce in place. To be sure that buyers' requirements are satisfied, I have visited most of the 286 sites for feedback on the quality of the information they received both in their in-house administered training and through all the outreach activities. This feedback, now arriving, indicates that a good number of people were not able to attend; and many want further information. In short, while electronic commerce/electronic data interchange (EC/EDI) may not sound that difficult, it has been quite hard to execute and demonstrate adequately. For these reasons, we have numerous outreach efforts underway, including through all the educational capabilities that we have—universities, Defense Acquisition University, Defense System Management College (DSMC), other institutionalized training and materials, and even an 800 number, for procurement people and others. Educational outreach is certainly very important, including activities like this conference. We try to support as many as we can. I currently spend all day answering the telephone, sending out anything from bits of information in response to specific requests, to an overall general view. We have fact sheets and we have full handbooks available to the public, either through our 1-800-EDI-3414 hotline or World Wide Web site. If you ask industry about the new system today, you hear a wide variety of opinions. It is surprising that not more of them are negative, given the thousands of transactions and processes that have been involved, and the pressure to establish the system. We are hearing many success stories. Last

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--> week, we heard about 25 from the Burlington area of Washington State alone, from small businesses of 1 to 500 people, who through working with the Procurement Technical Assistance Center (PTAC) and Electronic Commerce Resource Centers (ECRC) have recouped their investment, documenting up to 500 percent savings in basic business areas. Most businesses today are computer-equipped and ready to participate. In fact, even six or more years ago, small businesses serving the Air Force had startlingly high computing power. These organizations are not bureaucratically encumbered in changing their legacy systems. They can move relatively swiftly. Our value-added networks facilitate the industry side of that EC/EDI as well. We also work with the Computer Aided Logistic System (CALS) Industry Steering Group (ISG), for prime contractors. We are very interested in these organizations' requirements for EC/EDI, and in their requirements for their subcontractors and sub-tiers. A meeting today in Los Angeles is addressing this issue, so that we can all work better as a team. At least within DOD, 60 percent of our purchases are actually through large contractors, so this type of teaming with contractors at all levels—not just with small businesses—is important. We are very proud of our development of the Central Contractor Registration (CCR). The PAT, in its 60-day study, did not specify this capability, but only recommended its use. Our top contracting officers came up with ideas that they felt would be particularly helpful to them in streamlining acquisition. CCR was one of them. DOD form 129 is only one part of the transaction set 838. Actually, we have already replaced about three or four other forms with the 838 transaction. Nevertheless, if you were doing business with 10 DOD sites, you had to fill out 10 DOD forms 129 separately as well as submit them separately to those sites. Moreover, this would have to be done annually, updating 10 separate certifications and representations. I once worked in an office that collected such information, and buyers were always in and out, trying to find out whether a contractor was registered. I can assure you that this arrangement has not changed today. It is a very paper-intensive process, extremely expensive for contractors to keep updated, and a tremendous problem if you want to do business with much more than one DOD site. CCR gives us the capability of registering once to capture the information for all potential DOD and federal buyers. Annual updating is also done just once. In addition, CCR is not just for those who are doing EC/EDI; our intent is to cover all DOD registration. It would certainly facilitate our work if contractors registered with CCR, even if they are not EC/EDI compliant yet.

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--> The Federal Acquisition Regulations (FAR) do in fact state that a contracting officer is not required to provide a solicitation to anyone who is not CCR-registered. However, such refusal is often not made, as I hope it never has to be. Our primary concern is simply to get the CCR fully operational and populated. At least, after numerous challenges, it is now operational. We still do not have some of the features that we want in on-line capability. For example, we want to have World Wide Web capability to register in October 1996. This software was released just three weeks ago to our ECRCs. Also, about 18 months ago we began looking at every data repository across all federal agencies. After a year of analysis, we found 208,000 contractors doing business with DOD and the federal agencies who have been active with us in the last two years. I sent letters to these contractors, informing them of the CCR, the outreach efforts, and ways to obtain more information, and asking them to register with the CCR. We are now receiving 38,000 faxes and over 750 phone calls per week. Some 18,000 have received information brochures and are queued for assistance to register. The 18,000 who are queued are interested in EC/EDI, as well as registration. There are still other repositories that we are trying to add to the system. We will be converting one Air Force system that has remained outside our infrastructure—the Government Acquisition Through Electronic Commerce (GATEC) system at Wright-Patterson Air Force Base, which has 4,000 record files—and it will be running on FACNET within the next 45 days. Again, the ECRCs are helping us to populate the CCR with this information. CCR applications are also being considered in areas other than contracting. California and eight other states are very actively seeking to use this repository for state procurements, and for sourcing of documents and other functions. The CCR may well be used not only federally, but in other environments where it appears to be useful. The one critical issue is that the CCR's integrity be maintained. The PAT also briefly covered the issue of past performance, but offered no recommendations given its limited timeframe. In July of 1996, the Under Secretary of Defense for Acquisition and Technology, Dr. Kaminski, mandated that past performance be used in making acquisition procurements. I believe on source selections of procurements it is in excess of $1 million. There is currently no one past performance system in DOD. In the last two years, we have been analyzing the current seven contract writing systems to see what capabilities DOD and the federal agencies have to assess past performance. The Arthur D. Little Company will be issuing a related business case study, to be delivered to us at the end of May 1996. We have a $1.6 million contract requirement to

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--> prototype and demonstrate this report's recommended actions for the Secretary of Defense within the next 12 months. The area of contractor performance, then, represents potentially additional data elements for the CCR, or at least a data pool of some sort, so that we can better analyze and manage this parameter. Another activity is PASS, supported by the SBA. PASS was originally slated to lose all of its funding last month, though it was subsequently funded for some time. Because of concerns about the disappearance of this process, the Office of Federal Procurement Policy asked our office to see if we could manage the PASS data as well as the CCR—and not only the PASS data points, which represent perhaps less than 10 percent of the quantity of information already in the CCR, but other PASS functionality. We therefore have an ongoing analysis of this area. Additionally, we have over 15 other ongoing projects and prototypes in all business areas, such as contracting, logistics and transportation, that have been active for anywhere from 4 to 6 months. We will be adapting all types of instruments, including 18 different contractual instruments. We need a lot of business process re-engineering. Ultimately, our goal is to eliminate the paper process for our buyers, facilitating their development of smarter contracting instruments. The new system should allow them to process administrative details efficiently, permitting industry and the contracting officer both to develop more innovative contractual instruments, streamlining the current high volume of procurement. Electronic cataloguing of goods and services, for example, is one new idea. My three-year assignment is up in June 1997. By then we should have the sites operational, but we may not have the volume of transactions hoped for because of the difficulties. However, we continue to promote EC/EDI aggressively, at least on the DOD side, with the services and agencies. The electronic commerce processing nodes that other speakers will report on today may in fact help allow us a success story. At the same time, we have the challenge of getting much greater registration in the CCR—3,500 registrants is not very many. Still, there is significant action in these areas, and we may well accomplish much in the next 12 months in contracting alone. Project results in the other functional areas are also exciting, particularly because, when different business areas begin sharing information, the synergy has tremendous value. There are activities in financial transfer capability and engineering technical data. We just funded what we call "EDI Afloat." All Navy ships will have translators (a total of 330 translators, one for each ship), which will transmit requirements back and forth via satellite in the next 18 months, primarily for the procurement of goods and services. This

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--> should greatly reduce administrative lead time, and speed up the process for both the Navy and the industries involved. Another area that is already on-line is within the Defense Commissary Agency. They have been up and on-line with ANSI X12 for the last 12 months and have done some business process re-engineering in eliminating the invoicing process. There are real opportunities to bypass transactions completely. An interesting sideline to this case is that, while there was concern originally about industry partners who did not use ANSI X12, most were found to be moving to this standard—in fact, today they are moving aggressively to the more internationally oriented UN EDIFACT standard. Another large return on our investment for us within DOD will be the material safety data sheets. A variety of information is available in this area. Ongoing projects are looking at three different phases of material safety data sheets, in what is essentially a proof-of-concept, prototype demonstration within the business areas of our interest. Once these projects have been completely demonstrated and briefed, through all services and agencies and the Office of the Secretary of Defense, requirements will be provided to the Slidell EC node for a proof-of-concept test on the infrastructure itself.5 If all goes well, the information will then be provided to appropriate sites for deployment. Material data sheets do not relate to EC in any way. This document is just another business form being transmitted by EC/EDI in a transaction set eliminating the paper document and providing an opportunity to import data once in any system via EC/EDI and use it multiple times without rekeying. In all these major activities underway, we work very closely with the D7 section of the Defense Information Systems Agency, our counterpart within the DISA infrastructure who helps define functional users' requirements with the functional user and my office. I am an constituent of the Office of the Secretary of Defense, with the role of facilitating oversight and review of all functional areas. I do have dollars for prototyping demonstration, as well as deployment, and can obtain out-year funding for the requirements of the services and agencies once a package is put together for preparation. Dr. Michael Mestrovich is the deputy director of D7 and his office works very actively with us in those areas, with the goal of providing a full package to a systems engineer, to be sized not only for today, but for the future requirements of the capability. 5   Slidell, Louisiana, is our third electronic commerce procuring node and will support prototypes. The other two nodes are in Columbus, Ohio, and Ogden, Utah.

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--> In short, this is where DOD is going. We seem to have a good and forceful plan. We now have, for the first time, a DOD draft strategic plan on electronic commerce, which is currently circulating within the department. A DOD directive also institutionalizes roles and responsibilities by office; there have been some problems in this area over the last three years. Those federal agencies who work with us are certainly aware of the problems in trying to figure out who is responsible and accountable for what. These issues are best defined among ourselves. In general, I do believe we are well on the road to success.