E-Procurement Adoption in Local Governments of the United States(1)
By Eric Prier and Clifford P. McCue(2)
In many U.S. local governments, one of the most exciting advancements has been the increased use of communications technology that involves the Internet and other Web-based technologies. Progress on this front is believed to be helpful, based on the premise of making government more transparent by elaborating to constituents what government agencies are doing. Online technology also introduces new methods of procuring goods and services that may ultimately lead to increased efficiencies, effectiveness, and accountability.
To address these topics, we surveyed individuals working in a centralized, mixed, or decentralized purchasing system, to determine whether they had the same views about the strengths, weaknesses, and obstacles of e-procurement. Our belief was that those in decentralized purchasing systems would contend that the greatest benefits of e-procurement were quicker purchasing times, simpler process requirements, and lower prices. We further believed that those working in centralized purchasing systems would cite improved compliance, lower prices, and improved overall purchasing efficiency as benefits of e-procurement. We were unsure what to expect from individuals in mixed purchasing systems.
In order to understand the current state of e-procurement adoption in local governments, a survey was mailed to approximately 2,000 local government procurement professionals during the Spring of 2006. Only local governments with populations greater than 40,000 were selected for this study. After five weeks, 104 usable responses from local governments were returned.(3) Of the local governments responding, 49 were municipalities and 50 were county governments, while the remaining respondents worked for either a town or a metropolitan government.
Although the practices and processes of digitally procuring government goods and services are referred to with various names, the survey used the following definition for electronic procurement (herein e-procurement) as “the use of electronic-based information and communication technologies in order to support operational and stra-tegic procurement activities.” If the respondents did not understand this definition, they were directed to apply whatever standard they used in defining e-procurement.
As might be expected, there was some diversity in the formal titles of individuals working in the field. Of the respondents, 27.9 percent stated that they were currently procurement directors, while 24 percent were procurement managers and 14.4 percent were procurement agents. An additional 29.8 percent of respondents were categorized as “Other,” and they included clerks, finance managers, and administrative directors.
Overall, these professionals were in charge of annual purchasing budgets that ranged from less than $5 million to more than $500 million. Approximately 32 percent of respondents spent $25 million or less on government purchases, 20 percent spent between $25 and $50 million, and 45 percent spent more than $50 million on purchases.
We were also interested in determining the environment in which these individuals worked. We found that 58.7 percent of respondents stated that their purchasing agencies were a combination of centralized and decentralized procurement arrangements. An additional 20.2 percent were classified as centralized procurement agencies, while 21.2 percent described their agencies as solely decentralized.
Moreover, about half (51 of 104) of respondents worked for governments that had adopted e-procurement, and of these, 36.5 percent adopted their systems at least three years ago. Furthermore, senior management beat out other stakeholders, such as suppliers and political leaders, in being tagged as having the most influence on their entity’s adoption and use of e-procurement.
Of those who had not yet adopted the technology, about one in five respondents stated that they intended to implement some kind of e-procurement within the next three years.
Moreover, the level of e-procurement adoption and integration with other systems varied. For instance, one in nine respondents indicated that they used some form of e-procurement, but they noted little integration with other systems.
However, an additional one in three respondents stated that they had deployed an e-procurement system that was integrated with financial management or other information systems.
Opinions on E-Procurement
To find out what practitioners felt were the benefits of e-procurement, we asked the following question: “Whether or not you currently use any form of e-procurement, in your opinion, what do you see as the benefits from its use?” (4)
Table 1 (above) identifies the top ten perceived benefits, whether or not the respondent had adopted e-procurement. The column labeled “All” indicates the combined results for all 104 respondents, while the last three columns show how these benefits to e-procurement adoption vary by type of procurement system.
Perhaps not surprisingly, the perceived efficiency gains from using e-procurement dominate. However, this top overall choice was not uniformly the first choice across all types of procurement arrangements. As the number in parentheses reveals, efficiency gains were ranked number two for those in a decentralized purchasing structure.
In fact, although it is not reported in the table, 81.8 percent of those in a decentralized system mentioned increased use of their own entity’s contracts as the number one benefit. This benefit was not in the top ten overall, probably because only 19.7 percent in a mixed system and 19 percent in a centralized purchasing system identified this consequence as a benefit of e-procurement.
However, despite this exception, improved overall purchasing efficiency, streamlining of the purchasing process, and shorter purchasing processing times were the top three choices across the other purchasing systems.
Looking more closely at Table 1 reveals that those practitioners in a decentralized system tended to diverge from fairly close agreement on the perceived benefits of e-procurement for those working in the other two systems.
For example, if we count those respondents who work in a mixed system as the baseline for determining the benefits of e-procurement, we can calculate deviations for the decentralized and centralized systems from this baseline by simply obtaining their respective differences in percentages from the mixed system. Thus, the deviations for improved overall purchasing efficiency are calculated by the following formulae:
85.2% – 77.3% = 7.9%
85.2% – 76.2 % = 9%
Repeating this calculation for all ten benefits cited in Table 1 results in an average deviation for the decentralized system of 11.73 percent, and an average deviation of .33 percent for the centralized system. To clarify this point, consider that the largest deviation for the decentralized system is 30.7 percent for the perceived benefit of transmitting timely public information (44.3 percent – 13.6 percent). Now, compare the largest deviation for the centralized system found for the benefit of reduced order times. Since this figure is only 10.6 percent (34.4 percent – 23.8 percent), what can be gleaned from this?
All in all, the percentage may suggest that those who work in a decentralized purchasing system may not understand the benefits from e-procurement, compared to those who work in a more centralized or at the very least, a mixed system.
This conclusion is consistent with results in Table 1, especially when looking at the relatively few people (27.3 percent) in a decentralized system who identified e-procurement as helping to compensate for a lack of purchasing staff, or the relatively low number of individuals (22.7 percent) who see the benefit of increased competition from bidders. These results could be an artifact of the respondent pool, or they could be the consequence of organizational dynamics. Further study is needed to resolve speculation.
In addition to perceived benefits of e-procurement by all practitioners, we wanted to focus on those who had adopted e-procurement to determine satisfaction levels with their purchasing systems. By asking respondents to identify and rate which of 25 e-procurement tools they currently use, the top ten tools used by local governments are reported in Table 2 (below). The tools are listed in order of those most often used.
Table 2 reveals that 44 of the 104 respondents use e-procurement in their government to post bids and quotes, making this application the top use of e-procurement. The top ten group concludes with 17 respondents saying that they use e-procurement to maintain online profile and contact information for suppliers. Overall, it appears that most of these e-procurement activities are basic tools that help to initiate and maintain relationships with suppliers.
Moreover, results in Table 2 report high satisfaction rates for these e-procurement activities, and they suggest that at least a majority of respondents who use these tools are typically very satisfied. Those who report that they are not at all satisfied are limited to no more than one in six adopted forms of e-procurement (for an electronic contracts database). Indeed, three of the top ten tools of e-procurement avoided being rated unsatisfactory by users.
These results are striking in that they reveal strong satisfaction rates across the board. Findings further suggest that when adopted, e-procurement leads to satisfied users of their systems. This conclusion is further bolstered by the fact that of the 25 tools listed, the percentage of those who were not at all satisfied did not rise above 18.8 percent for any of the tools.
Finally, we focused on identifying major impediments to adopting e-procurement in local governments. To pinpoint hindrances, we asked all respondents (whether or not they currently used any form of e-procurement): “What is/are the primary obstacles to implementing e-procurement?”
Table 3 reports the top ten impediments to implementing e-procurement in U.S. local governments. Again, the column labeled “All” indicates the combined results for all 104 respondents, while the last three columns show how these obstacles to e-procurement adoption are categorized by type of procurement system.
Whether or not the respondent uses e-procurement, it is perhaps little surprise that the number one obstacle to adopting e-procurement centers on the perceived high cost of implementing e-procurement procedures. Among all respondents (41.3 percent), this view does not appear to vary much among practitioners in procurement operations that are centralized, mixed, or decentralized. Those working in each purchasing operation cited the perceived expense of e-procurement as the major impediment to implementation.
However, when excluding the obstacle of expense, procurement systems differ in terms of respective rankings for other impediments to e-procurement adoption. For instance, in decentralized systems, the second obstacle encountered most often was governing body resistance. However, individuals working in a centralized system cited the inability to integrate with the financial system (herein labeled “lack of financial system interoperability”) as the second hindrance to implementation. Those working in a mixed system cited limited resources as the second obstacle.
For the third perceived obstacle to e-procurement implementation, results varied by procurement type. Findings reveal that in a decentralized system, a capacity or skills shortage across the entity is relatively more obstructive than the seven other obstacles identified in Table 3. Those working in a mixed system identify the lack of financial system interoperability as the third impediment to implementation. Moreover, those in centralized systems felt that finance department resistance was the third biggest impediment to adoption.
Not included in Table 3 is data indicating that although 80 percent of respondents identified at least one other impediment, such as resistance by the information technology department, none of these other obstacles was identified by more than 17 percent.
Summary and Analysis of Findings
We sought to identify the greatest benefits, tools most often used, and obstacles to adopting e-procurement by local government procurement practitioners. Although the number of usable respondents leaves us slightly cautious about findings reported, responses strongly suggest that adopting e-procurement is perceived as leading to efficiencies in the procurement process.
Moreover, those adopting e-procurement tend to be overwhelmingly satisfied with e-procurement tools at their disposal. Nonetheless, whether these individuals are accurate or mistaken, many respondents believe that the greatest obstacle to adopting e-procurement is the perceived high cost of implementation. Having said this, it is noteworthy that the findings suggest differences in many of the respondents’ perceptions about e-procurement, based upon whether they work in a centralized, decentralized, or mixed purchasing organization. Consequently, we believe that future research should explore this aspect of e-procurement in local government.
1.Funding for this research was provided by a generous grant from Tier Technology, Inc. The authors would like to thank Mr. Theodore Grable and Mr. Woodrow “Sonny” Angle for their continued support of this project.
2. Eric Prier, Ph.D., is an Associate Professor of Political Science at Florida Atlantic University. His research interests are in anti-corruption, good governance, and public procurement. Clifford P. McCue, Ph.D., is an Associate Professor, School of Public Administration, Florida Atlantic University. His research interest is in public finance, budgeting, and procurement. The order of authorship for this paper was determined by a coin toss.
3. If the respondent failed to identify the type of government for which (s)he worked, it was excluded from the analysis.
4. For tables reported in this article, the rankings were obtained by aggregating those who identified the choices. The more who identified it, the higher the ranking.