E-Commerce with the Feds
Study finds small businesses may be more e-commerce savvy, but barriers still exist.

A new study indicates that small companies may rely more on e-procurement tools for obtaining federal contracts than their larger counterparts do. The U.S. Small Business Administration Office of Advocacy released the findings in June.

The study defines “electronic commerce” to include all aspects of buying and selling electronically, including marketing, end-to-end transactions with consumers and online auctions. It is transacted through a variety of technologies, including electronic data interchange (EDI), electronic mail, electronic funds transfer and Web-based applications.

The research team found evidence that in those industries where electronic commerce is a significant part of the business, small companies were as successful as large companies in obtaining business from the federal government using simplified acquisition and electronic procurement tools and techniques. These conclusions do suggest that small business may have adopted e-procurement tools and techniques at least as rapidly if not more so than large firms, according to the report.

Based on the data analyses, the report’s authors concluded that certain barriers do appear to exist that may prevent small business from embracing e-commerce; however, the data do not suggest any significant lag in the actual adoption of e-commerce by small business. The barriers include shifts in the government’s e-procurement system, the expense of monitoring procurement offerings and confusion over multiple points of entry to procurement systems.

The report also concluded that small companies appear to rely much more heavily on e-procurement tools than large companies. In FY 2000, only about 2 percent of all small business procurement dollars were obtained through e-procurement. However, the number increased to 6.3 percent in FY 2001 and to 6.5 percent in FY 2002.

Large business, on the other hand, only obtained about 1 percent of procurement dollars through simplified acquisition procedures in FY 2000, and that has remained relatively constant over the three-year period analyzed.

Recommendations
The findings led the research team to recommend that policy makers ensure that the federal government acts with certainty in implementing changes in its procurement policy, including moving decisively toward a single interface and a single point of registration for small businesses that wish to do business with the federal government.

Policy makers should continue to work with trade industry groups to provide training, support and networking opportunities for small businesses as they learn how to use the new e-commerce and e-procurement tools successfully, according to the report. Finally, priority should be given to training federal employees in the benefits of true implementation of electronic commerce, so that their work habits can foster more rapid adoption.

The report also made other policy recommendations, based on the findings:

Single Portal
Small businesses have limited resources (i.e., time, technology infrastructure, capital) with which to conduct their businesses, and to develop new business. Successful selling to the federal government must begin with certainty about how the federal government intends to purchase products and services from potential (small) suppliers. The federal government has altered its course many times over the last decade, moving toward Internet-based postings via numerous individual portals, and finally arriving at a single interface (FedBizOpps.gov) for posting all opportunities in one location that is accessible to all via the Internet.

Central Registration
Central registration needs to become a reality. There continues to be numerous places where small businesses must register in order to obtain information about potential opportunities to sell to the federal government.

Small businesses would be willing to register themselves at SBA PRO-Net or SUB-Net if that meant the information would be used to populate other databases with individual agencies, Department of Defense supply centers, or prime contractors. Similarly, the Central Contractor Registration process should be used to populate these other databases as well, so that a small business would not need to visit each of these sites to seek business opportunities with the federal government.

Training Needed
Small businesses, especially those that do not regularly use e-commerce to conduct their business, need training, support and networking opportunities in order to successfully use these tools to obtain business with the federal government. The Small Business Administration can play an important role in providing training opportunities and facilitating networking events for small businesses.

While small businesses need training, so do federal workers. Federal government procurement officers must have substantial training to use the electronic commerce tools to their full potential.

The Office of Advocacy funded the report, Trends in Electronic Procurement and Electronic Commerce and Their Impact on Small Business, which was written by Innovation & Information Consultants. Visit www.sba.gov/advo/research/rs240tot.pdf to access the report.

Bill Williams is the managing editor of Kansas City Small Business Monthly.