Electronic Commerce: Small Business Participation in Selected	 
On-line Procurement Programs (29-OCT-01, GAO-02-1).		 
								 
The federal government has been pursuing electronic initiatives  
to strengthen its buying processes, reduce costs, and create a	 
competitive "virtual" marketplace. Small businesses, however, may
be facing difficulties in participating in federal on-line	 
procurement programs. Furthermore, the government's business	 
outreach and education programs related to electronic commerce	 
may not be adequately coordinated. For the three federal on-line 
procurement programs GAO reviewed, the dollar share of awards to 
small businesses exceeded the overall small business share of	 
total federal contract dollars awarded in fiscal years 2000 and  
1999. Although small businesses successfully participated in	 
these three programs, they still face obstacles in conducting	 
electronic procurements with the government. The federal	 
government is taking steps to address some of these obstacles,	 
such as implementing a single point of entry on the Internet for 
vendors to access information on available government business	 
opportunities greater than $25,000. Each of the four business	 
assistance programs GAO examined had taken steps to educate its  
clients on electronic commerce as part of its operations.	 
However, GAO could not fully determine the extent of these	 
activities because they are conducted by hundreds of local and	 
regional offices, and only one of the programs collected	 
performance metrics specific to electronic commerce.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-1						        
    ACCNO:   A02379						        
  TITLE:     Electronic Commerce: Small Business Participation in     
Selected On-line Procurement Programs				 
     DATE:   10/29/2001 
  SUBJECT:   Consumer education 				 
	     Electronic commerce				 
	     Federal procurement				 
	     Internet						 
	     Small business					 
	     Web sites						 
	     DLA Defense Medical Logistics Standard		 
	     Support E-CAT Program				 								 
	     DLA Electronic Business Program			 
	     DLA Electronic Commerce Resource Center		 
	     Program						 								 
	     DLA Procurement Technical Assistance		 
	     Program						 								 
	     DOD EMALL Program					 
	     GSA Advantage!					 
	     GSA Federal Business Opportunities Web		 
	     Site						 								 
	     GSA Federal Procurement Data System		 
	     GSA Information Technology Solutions		 
	     Shop Program					 
								 

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GAO-02-1
     
Report to the Ranking Minority Member, Committee on Small Business and
Entrepreneurship, U. S. Senate

United States General Accounting Office

GAO

October 2001 ELECTRONIC COMMERCE

Small Business Participation in Selected On- line Procurement Programs

GAO- 02- 1

Page i GAO- 02- 1 Electronic Commerce Letter 1

Results in Brief 2 Background 4 Small Businesses Actively Participate in
Federal Electronic

Procurements, but Obstacles Reportedly Remain 8 Federal Programs Provided
Locally Coordinated Electronic

Commerce Education to Businesses 14 Conclusions 19 Agency Comments 19

Appendix I Scope and Methodology 21

Appendix II Reported Small Business Obstacles to Conducting Federal
Procurements Electronically 25

Appendix III Comments From the Defense Logistics Agency 33

Appendix IV Comments From the U. S. Small Business Administration 34

Appendix V Comments From the Secretary of Commerce 37

Appendix VI GAO Contacts and Staff Acknowledgments 39 GAO Contacts 39
Acknowledgments 39

Tables

Table 1: Selected Federal On- line Procurement Programs: Services, Products,
and Process 6 Table 2: Actual and Estimated Sales in Three On- line
Procurement

Programs Dollars in thousands 6 Contents

Page ii GAO- 02- 1 Electronic Commerce

Table 3: Agency/ Program, Focus, and Target of Business Assistance Programs
Studied 8 Table 4: Commonly Reported Obstacles for Small Businesses in

Federal Electronic Procurements 13 Table 5: Number of Local Offices
Providing Various Types of

Electronic Commerce Assistance [Out of Six Offices We Selected for Each
Program] 15 Table 6: Electronic Commerce Topics Covered by Local Offices

[Out of Six Offices We Selected for Each Program] 16 Table 7: Types of
Coordination Performed by Local Offices [Out of

Six Offices We Selected for Each Program] 18

Figures

Figure 1: Fiscal Year 2000 Small Business Share of Procurement Dollars for
Three On- line Procurement Programs Compared to Governmentwide Share 10
Figure 2: Fiscal Year 1999 Small Business Share of Procurement

Dollars for Three On- line Procurement Programs Compared to Governmentwide
Share 11

Abbreviations

CCR Central Contractor Registration DLA Defense Logistics Agency DMLSS
Defense Medical Logistics Standard Support DOD Department of Defense ECRC
Electronic Commerce Resource Center FAR Federal Acquisition Regulation
FedBizOpps Federal Business Opportunities FPDS Federal Procurement Data
System GSA General Services Administration HTML Hypertext Markup Language
ITSS Information Technology Solutions Shop MEP Manufacturing Extension
Partnerships NIST National Institute of Standards and Technology PRO- Net
Procurement Marketing and Access Network PTAC Procurement Technical
Assistance Center SBA Small Business Administration SBDC Small Business
Development Center

Page 1 GAO- 02- 1 Electronic Commerce

October 29, 2001 The Honorable Christopher S. Bond Ranking Minority Member
Committee on Small Business and Entrepreneurship United States Senate

Dear Senator Bond: This letter responds to your request that we explore
issues related to small business 1 participation in government on- line
procurement programs and electronic commerce 2 education activities covered
by selected federal programs for businesses in general. Over the past
several years, the federal government has pursued various electronic
initiatives to strengthen its buying processes in order to reduce costs and
create a competitive ?virtual? marketplace. These efforts have been
augmented by the Administration?s announcement in early 2001 that expanding
the application of on- line procurements in the federal government was one
of its major reform initiatives. Moreover, the use of electronic commerce in
the U. S. economy at large is growing. For example, according to the U. S.
Census Bureau, for the second quarter of 2001, retail electronic commerce
increased 24.7 percent over the sales of the second quarter of 2000. 3

Because of concerns that small businesses may be facing difficulties in
participating in federal on- line procurement programs, you asked us to
ascertain the share of procurement dollar awards made to small businesses in
selected programs and to identify whether obstacles exist for small
businesses in participating in electronic procurements. In addition, you
were concerned about the extent of the government?s business outreach and
education programs related to electronic commerce and whether these programs
are adequately coordinated.

1 For the purposes of government procurement, a small business is a concern
that is independently owned and operated, is not dominant in the field of
operation in which it is competing for government contracts, and is
qualified as a small business under criteria and size standards prescribed
by the Small Business Administration (FAR, sec. 19. 001).

2 Electronic commerce encompasses all aspects of buying and selling
electronically, including marketing end- to- end transactions with
consumers, and on- line auctions. It is transacted through a variety of
technologies, including electronic data interchange, electronic mail,
electronic funds transfer, and Web- based applications.

3 United States Department of Commerce News, August 30, 2001.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 1 Electronic Commerce

Accordingly, our objectives were to (1) determine, for three federal on-
line procurement programs, the differences between the small business share
of federal prime contract dollars awarded by these programs and the small
business share of all federal contract dollars awarded and to identify what,
if any, obstacles exist for small businesses in conducting electronic
procurements with the federal government and (2) review what steps four
federal business assistance programs have taken to educate businesses on
using electronic commerce and the extent to which these programs have
coordinated their efforts.

To determine the comparative small business share of dollar awards at the
three selected federal on- line purchasing sites, we calculated the
percentage of small business awards to total awards for each program and
compared them to the governmentwide small business share for federal
procurements, as reported by the General Services Administration?s (GSA)
Federal Procurement Data System (FPDS)- the central repository for
governmentwide procurement data. We addressed the reliability of the data of
the selected programs by performing data consistency checks and reviewing
reports on general system controls. To gather information on obstacles to
small businesses in participating in federal electronic procurements, we
performed a literature search and obtained comments from officials in
selected federal business assistance programs and organizations representing
or working with small businesses. 4 To review what steps selected assistance
programs have taken to educate businesses in using electronic commerce and
the extent to which they have coordinated their efforts, we reviewed
documentation and interviewed headquarters and local and regional office
officials for four federally funded programs. Appendix I provides more
information on our scope and methodology.

For the three federal on- line procurement programs we reviewed, the dollar
share of awards to small businesses exceeded the overall small business
share of total federal contract dollars awarded in fiscal years 2000 and
1999. 5 For fiscal year 2000, the small business share was 61 percent for
the Defense Medical Logistics Standard Support E- CAT, 51 percent for GSA
Advantage!, and 39 percent for GSA?s Information

4 Some of these organizations also include members that are not small
businesses. 5 The three on- line programs in our review accounted for about
0.5 percent and 1 percent of total federal procurement dollars in fiscal
years 1999 and 2000, respectively. Results in Brief

Page 3 GAO- 02- 1 Electronic Commerce

Technology Solutions Shop, compared to the overall 22 percent governmentwide
small business share. 6 While these figures indicate that small businesses
successfully participated in these three programs, officials from
organizations representing or working with small businesses, as well as
related literature, still report that such businesses face obstacles in
conducting electronic procurements with the government. Some of these
reported obstacles pertain to the general capability of small businesses to
conduct business transactions electronically (for example, having limited
technical expertise), while others relate to difficulties with participating
in the federal government electronic procurement environment, such as having
knowledge of the government?s multiple procurement Web sites. The federal
government has taken, or is in the process of taking, actions to help
address some of these obstacles, such as implementing a single point of
entry on the Internet for vendors to access information on available
government business opportunities greater than $25,000.

Each of the four business assistance programs we examined had taken steps to
educate its clients on electronic commerce as part of its operations. We
could not fully determine the extent of these activities because they are
conducted by hundreds of local and regional offices, and only the Defense
Logistics Agency?s (DLA) 7 Electronic Commerce Resource Center (ECRC)
program collected performance metrics specific to electronic commerce.
Nevertheless, all but 1 of the 24 local and regional offices we contacted
reported that they provided some type of electronic commerce education,
including sponsoring or participating in conferences, training, consulting,
and technical assistance. The extent and content of electronic commerce
education at the local and regional level varied but typically included (1)
general introductory material; (2) technical issues, such as electronic data
interchange; or (3) governmentspecific subjects. In addition, although
coordination among the headquarters offices of these programs was limited,
local and regional

6 GSA?s calculation of the small business share of government procurements
excludes certain types of procurements. For more information about the
exclusions and the goalsetting process, see Small Business: More
Transparency Needed in Prime Contract Goal Program (GAO- 01- 551, August 1,
2001).

7 The ECRC program was operated by DLA through the Defense Electronic
Business Program Office. The Department of Defense Chief Information Officer
has overall functional responsibility for the Defense Electronic Business
Program Office, but the office receives its funding and personnel through
DLA and the Defense Information Systems Agency. The ECRC program was
terminated on September 30, 2001.

Page 4 GAO- 02- 1 Electronic Commerce

offices generally reported extensive coordination and cooperation. This
included referring clients to other programs and providing specialized
training (e. g., in some cases, Electronic Commerce Resource Centers
conducted training for other assistance programs? staff and/ or clients).

Commenting on a draft of this report, the Defense Logistics Agency, the
Office of Management and Budget?s Office of Federal Procurement Policy, GSA,
and the Small Business Administration stated that they generally agreed with
our report. The Department of Commerce provided updated online sales
statistics.

Although it is still a small part of the U. S. economy, electronic commerce
is growing rapidly. For example, according to the U. S. Census Bureau,
retail electronic commerce dollar volume, though less than 1 percent of
overall U. S. retail sales, increased in all but two of the last six
quarters. 8 Moreover, while precisely predicting future electronic commerce
volume is difficult, in June 2000 we reported that business- to- consumer
Internet sales were estimated to increase to between $78 billion and $143
billion in 2003, and that business- to- business Internet sales were
estimated to increase to between about $1. 5 and $2.2 trillion in that same
timeframe. 9 According to GartnerGroup, a private research firm, through
2006 the pace of innovation will increase as enterprises institutionalize
electronic business, and small businesses ?must embrace this transition or
risk their long- term viability and survival.? 10

The federal government is taking steps to increase its use of electronic
commerce, particularly in the area of conducting procurements on- line. For
example, the President has designated expanding the application of on- line
procurement a major reform for fiscal year 2002. Further, according to a
recent Congressional Research Service report, agency Web

8 United States Department of Commerce News, August 30, 2001. 9 Sales Taxes:
Electronic Commerce Growth Presents Challenges; Revenue Losses are Uncertain
(GAO/ GGD/ OCE- 00- 165, June 30, 2000). To obtain sales estimates, we
reviewed academic, government, and private sector studies. In the case of
2003 business- toconsumer Internet sales, the lower range of the estimate
was from Jupiter Communications while the higher end of the range was from
Forrester Research, Inc. For the 2003 estimate for business- to- business
Internet sales, we used a Forrester Research, Inc. estimate and assumed a
20- percent margin of error because it was the only source for these data.

10 Ten Imperatives for SMB E- Business Success (GartnerGroup, COM- 13- 0713,
March 9, 2001). Background

Page 5 GAO- 02- 1 Electronic Commerce

sites provided various information on federal procurement, including bid
opportunities. 11 Moreover, procurement opportunities for small businesses
and for women- and minority- owned businesses were also often identified on
these Web sites. Among the major federal agencies maintaining procurement
Web sites are DLA, GSA, and the National Aeronautics and Space
Administration.

One type of on- line procurement program is a multivendor Internet- based
purchasing site, sometimes called an ?electronic mall.? An example of an
electronic mall is GSA Advantage!, in which government buyers can search
listings, compare prices, and purchase items on- line much as a private
individual might purchase an item from an on- line retailer. As of July 1,
all vendors on the GSA schedule were required to electronically submit
product descriptions and price information to GSA Advantage!. 12 Another
electronic mall is DLA?s Defense Medical Logistics Standard Support (DMLSS)
E- CAT program, which operates in a similar manner to GSA Advantage!, except
that vendors must have an indefinite delivery/ indefinite quantity contract
with DLA to participate. A different type of on- line procurement program
model is GSA?s Information Technology Solutions Shop (ITSS) program, which
is used for larger or more complex purchases. The ITSS on- line purchasing
program maintains an inventory of contractors through which federal buyers
can get quotations in response to requirements documents. Table 1 summarizes
how each of these on- line programs works and the products that can be
obtained using them.

11 Electronic Government: A Conceptual Overview (Congressional Research
Service, July 9, 2001). 12 According to GSA, as of August 30, 82 percent of
the vendors on the GSA schedule on January 31 have electronically submitted
product data to GSA Advantage!. Vendors that made a good faith effort to
comply with the July 1 requirement were given an extension to provide their
information electronically to GSA Advantage!. In addition, vendors with new
contracts are not required to submit data electronically to GSA Advantage!
until 6 months after contract award.

Page 6 GAO- 02- 1 Electronic Commerce

Table 1: Selected Federal On- line Procurement Programs: Services, Products,
and Process Agency/ program Services Products Acquisition process

DLA/ DMLSS E- CAT

Primarily a Web- based catalog ordering system Labware, dental and optical

consumable products, and medical equipment

Customers browse, compare, select and order items electronically, and orders
are shipped directly from the vendors. GSA/ GSA Advantage!

Web- based catalog ordering system Over 2 million commercial products

and services, many of which are office supplies and information technology
products and services

Customers browse, compare, select, and order items electronically, and
orders are shipped directly from the vendors or a GSA warehouse. GSA/ ITSS

Web- based contracting services Information technology products and

services, from computer monitors to complete network installations

Customers enter requirements on- line. GSA staff solicit quotes, issue
purchase orders, and authorize payment electronically.

Source: GAO, based on DLA and GSA documentation.

These three on- line procurement programs are small but growing in
comparison to overall federal procurement dollars. According to the Federal
Procurement Data System (FPDS), 13 the government procured about $232
billion and $209 billion in goods and services in fiscal years 2000 and
1999, respectively. The three on- line programs in our review grew as a
percentage of total federal procurement dollars from about 0.5 percent in
fiscal year 1999 to about 1 percent in fiscal year 2000. Table 2 shows
actual and estimated dollar volumes for the three programs and their growth
over three fiscal years.

Table 2: Actual and Estimated Sales in Three On- line Procurement Programs

Dollars in thousands

Fiscal year sales On- line procurement program

(Actual) 1999

(Actual) 2000

(Estimated) 2001

DMLSS E- CAT $2,475 $14,057 $24,000 GSA Advantage! 85,687 a 124,892 b
250,000 ITSS 977,472 2, 258,709 3,700,000 a This total includes about $17
million in direct sales by vendors and $69 million in sales of GSA

purchased stock items. b This total includes about $30 million in direct
sales by vendors and $95 million in sales of GSA

purchased stock items. Source: GSA and DLA.

13 FPDS collects data on all federal contract actions and calculates the
governmentwide percentage of federal procurements awarded to small
businesses based on procurement information received from the agencies.

Page 7 GAO- 02- 1 Electronic Commerce

Other on- line procurement Web sites also support government purchasing.
These sites include the Department of Defense?s (DOD) EMALL program, which
is planned as the single DOD electronic mall, 14 and the National Institutes
of Health Intramall program. The private sector also offers online
procurement Web sites that support government buying activities.

Beyond its on- line procurement programs, the federal government also
supports electronic commerce by sponsoring programs that provide electronic
commerce education to businesses. For example, each of the four federally
funded business assistance programs that you asked us to review provides
electronic commerce education as part of its operations. Each program also
uses nonfederal organizations such as nonprofit organizations or contractors
to perform its education services. However, as shown in table 3, the
programs differ in focus and the target clients served.

14 The Strom Thurmond National Defense Authorization Act for Fiscal Year
1999- P. L. 105261, sec. 332, 112 stat. 1920, 1968 (1968)- called on DOD to
develop a single, Defense- wide electronic mall system.

Page 8 GAO- 02- 1 Electronic Commerce

Table 3: Agency/ Program, Focus, and Target of Business Assistance Programs
Studied Agency/ program Service providers

Number of offices Focus Target clients

SBA/ Small Business Development Center (SBDC)

States, colleges and universities, and non profit organizations

About 1000 a Business management and technical assistance Small businesses

Dept. of Commerce/ National Institute of Standards and Technology (NIST)
Manufacturing Extension Partnerships (MEP)

States, colleges and universities, and non profit organizations

About 400 Transfer of advanced manufacturing technologies and related
management and implementation processes to manufacturers

Small and medium- sized manufacturers

DLA/ Procurement Technical Assistance Center (PTAC)

States, colleges and universities, and non profit organizations

90 Assistance in contracting with federal, state, and local governments

Individuals or businesses, especially small and/ or disadvantaged businesses
DLA/ Electronic Commerce Resource Center (ECRC) b

Contractors 17 Assistance in adopting electronic commerce, particularly with
DOD

The U. S. civilian- military industrial base, including small and medium-
sized businesses, DOD, and other government organizations a SBA has
cooperative agreements with about 60 lead offices which, in turn, contract
with about 1,000

local service providers. b The ECRC program was terminated on September 30,
2001. Before that date, it was operated by

DLA through the Defense Electronic Business Program Office. DOD?s Chief
Information Officer has overall functional responsibility for the Defense
Electronic Business Program Office but the office receives its funding and
personnel through DLA and the Defense Information Systems Agency.

Source: GAO, based on SBA, NIST, and DLA documentation.

The small business share of federal procurement dollars awarded through
three on- line procurement sites was higher than the governmentwide small
business share, as reported by FPDS, the central repository of
governmentwide procurement data. However, obstacles to conducting electronic
business with the federal government continue to be cited by organizations
representing or working with small businesses and business assistance
program officials. Some of these obstacles relate to the general readiness
of small businesses to conduct electronic commerce while others are specific
to how the government has implemented electronic procurement activities. The
government has taken, or plans to take, actions that are expected to address
some of the government- specific obstacles. Small Businesses

Actively Participate in Federal Electronic Procurements, but Obstacles
Reportedly Remain

Page 9 GAO- 02- 1 Electronic Commerce

As figures 1 and 2 illustrate, the share of procurement dollars awarded to
small businesses through the three on- line programs in fiscal years 2000
and 1999, respectively, was greater than their governmentwide share, as
reported by FPDS. 15 These on- line procurement programs also exceeded the
governmentwide goal of a 23- percent share for small businesses. 16 Most of
the contract awards made through DMLSS E- CAT and GSA Advantage! were small,
which may at least partially account for the relatively large share of
dollars awarded to small businesses in these programs. Small businesses
generally obtain a greater percentage of contract awards of $25,000 or less
(e. g., 43 percent for non- credit- card awards in fiscal year 2000), and,
in fiscal year 2000, 91 percent of DMLSS E- CAT awards and 93 percent of GSA
Advantage! awards were $25,000 or less. (Only 3 percent of ITSS awards were
$25,000 or less.)

15 SBA directed GSA to exclude several types of contracts when calculating
the percentage of federal procurements awarded to small business in FPDS.
These exclusions fall within three types of contract actions: (1) those for
which small businesses? chances to compete are limited or nonexistent, (2)
those using nonappropriated funds, and (3) those made by agencies that are
not subject to the Federal Acquisition Regulation or are otherwise exempted
from statute from following procurement rules. The governmentwide percentage
also does not include credit card sales because federal agencies do not
report detailed data on purchase card expenditures to FPDS.

16 The governmentwide goal for participation by small business concerns must
be established at not less than 23 percent of the total value of all prime
contract awards for each fiscal year. 15 U. S. C. sec. 644( g)( 1). Small
Business Share of

Awards in Three On- line Procurement Programs is Greater Than Reported Share
of Governmentwide Procurement Awards

Page 10 GAO- 02- 1 Electronic Commerce

Figure 1: Fiscal Year 2000 Small Business Share of Procurement Dollars for
Three On- line Procurement Programs Compared to Governmentwide Share

Note: For a discussion of data reliability, see appendix I. a The GSA
Advantage! percentage is based on direct sales by vendors (about $30 million
in fiscal year

2000). b As reported by FPDS.

Source: GAO analysis, based on data provided by GSA and DLA.

Page 11 GAO- 02- 1 Electronic Commerce

Figure 2: Fiscal Year 1999 Small Business Share of Procurement Dollars for
Three On- line Procurement Programs Compared to Governmentwide Share

Note: For a discussion of data reliability, see appendix I. a The GSA
Advantage! percentage is based on direct sales by vendors (about $17 million
in fiscal year

1999). b As reported by FPDS.

Source: GAO analysis, based on data provided by GSA and DLA.

Although small businesses received a higher share of awards in the three on-
line procurement programs than the governmentwide share, some small
businesses still face reported obstacles to successfully participating in
on- line government purchasing activities. Obstacles reported generally fall
into two categories: (1) those relating to general readiness- the
willingness and ability of small businesses to conduct business
electronically and (2) those specific to conducting procurements Obstacles
to Small

Businesses Conducting Electronic Procurements With the Government Reported

Page 12 GAO- 02- 1 Electronic Commerce

electronically with the federal government. 17 Table 4 lists the reported
obstacles by category. While these obstacles were reported in the context of
small businesses, some- such as security and privacy- also apply to all
businesses.

17 In addition to obstacles pertaining to conducting procurements
electronically, small business organizations cited other concerns related to
federal contracting in general, such as contract bundling. This is the
consolidation of two or more procurement requirements previously provided
under separate smaller contracts into a solicitation of offers for a single
contract that is likely to be unsuitable for award to a small business
concern. For more information on bundling, see Contract Management: Small
Businesses Continue to Win Construction Contracts (GAO- 01- 746, June 29,
2001) and Small Businesses: Limited Information Available on Contract
Bundling?s Extent and Effect (GAO/ GGD- 00- 82, March 31, 2000).

Page 13 GAO- 02- 1 Electronic Commerce

Table 4: Commonly Reported Obstacles for Small Businesses in Federal
Electronic Procurements Number of sources citing obstacles

Reported obstacle Studies and

surveys a (out of 6

total) Business

assistance providers (out of 24

total) Organizations

representing or working with small

businesses b (out of 8 total) Obstacles Related to General Electronic
Commerce Readiness

Need to make a business case: Small businesses may be reluctant to make the
investment to implement electronic commerce. 6 7 4 Limited technical
expertise: Small businesses can lack the necessary technical skill sets. 6 8
5 Internet access issues: Small businesses may have difficulty obtaining
affordable high speed Internet access. 4 6 4 Concerns about security and/ or
privacy: Small businesses are concerned about inappropriate disclosure of
proprietary business information that governments collect from companies,
consumer fraud, and the adequacy of security afforded a transaction on the
Internet. 3 5 3

Obstacles Related to Conducting Electronic Procurements With the Government

Monitoring various federal procurement information Web sites for business
opportunities: The government has multiple Web sites that list contracting
opportunities. 1 3 5 Differing requirements for on- line purchasing
programs: The government has multiple on- line purchasing Web sites that
have different formats and procedures. 1 4 2 Lack of a single vendor
registration system: Vendors must generally complete multiple registrations
and profiles to do business with more than one government office. 0 6 2
Problems related to technical data and drawings: Businesses can have
difficulty in locating, transmitting, downloading, and printing on- line
specifications and drawings. 1 4 4 Difficulty in obtaining help with
problems and marketing assistance: Vendors can have difficulty reaching
someone at the buyer?s or program office who is able and willing to help,
particularly with technology- related problems and/ or marketing questions.
1 9 2 Uncertainty about the government?s electronic procurement strategy:
Since government agencies are pursuing different approaches to implementing
electronic purchasing, small businesses hesitate to make investments in any
one electronic commerce system. 1 5 5

a These studies and surveys were published between early 2000 and mid 2001.
b Some of these organizations also include members that are not small
businesses.

Source: GAO analysis.

As the relatively large small- business share of awards made through the
three federal on- line procurement programs shows, some small businesses are
overcoming these reported obstacles. Still, as the federal government
continues to implement electronic procurement initiatives, it is essential

Page 14 GAO- 02- 1 Electronic Commerce

that it consider the obstacles that some small businesses face and work to
implement solutions that address these obstacles. Small businesses, in turn,
must act to develop, maintain, operate, and evolve effective Webbased
approaches to improve the likelihood of their successfully conducting
business with the government.

Appendix II provides additional information on these reported obstacles and
various government actions being taken to address some of them. An example
of such an action is GSA?s Federal Business Opportunities (FedBizOpps) Web
site, which has been designated the single governmentwide point of
electronic entry on the Internet where vendors can access all the
information they need to bid on available government business opportunities
greater than $25,000.

Each of the four federally funded business assistance programs in our review
provided electronic commerce education as part of its operations, although
the level of involvement varied. Three of these business assistance programs
are oriented toward management issues and addressed electronic commerce as
only one part of their responsibilities. 18 In contrast, the fourth program,
ECRC, focused entirely on electronic commerce. The ECRC program was
terminated September 30, 2001. While coordination at the headquarters level
for these programs was limited, the local offices generally coordinated
their various electronic commerce activities.

Although officials from the three management- oriented programs stated that
they expect local offices to address electronic commerce issues, the
standard agreements for these three programs do not require local entities
to report performance metrics associated with electronic commerce.
Accordingly, nationwide statistics on the electronic commerce education
activities for the three management programs are not available. As a result,
we contacted six local offices for each of these programs to determine
whether they provided electronic commerce education. All but one of the
local offices we contacted indicated that they offered electronic commerce
education or assistance to their clients. Table 5 shows the types

18 In addition to addressing management issues, the MEP program provides U.
S. manufacturers with implementation services to assist them in adopting
new, more advanced manufacturing technologies. Federal Programs

Provided Locally Coordinated Electronic Commerce Education to Businesses

Business Assistance Programs Provided Electronic Commerce Education

Page 15 GAO- 02- 1 Electronic Commerce

of electronic commerce assistance activities provided by the six local
offices in each program we contacted. 19 For example, local offices provided
formal training as well as counseling or technical assistance to individual
clients.

Table 5: Number of Local Offices Providing Various Types of Electronic
Commerce Assistance [Out of Six Offices We Selected for Each Program]

Number of local offices providing service Type of service provided SBA/ SBDC
NIST/ MEP DLA/ PTAC

Counseling, consulting, or technical assistance 5 6 5 Conference
sponsorship, presentation, and/ or exhibitor 4 4 6 Classroom training a 5 15
On- line training 2 1 1 Other 3 5 3 a In some cases, this training was fully
dedicated to electronic commerce while in others it was just

one of several topics covered in the course. Source: GAO analysis.

Subjects covered by the three management- oriented programs? local offices
in their electronic commerce assistance activities are shown in table 6.
These subjects ranged from general introductory material to technical or
government- specific topics. According to local and regional office
officials, offices tailor the types of topics offered to meet local and
individual client needs.

19 Because the local offices of the management- oriented programs generally
did not specifically track electronic commerce assistance and because
electronic commerce content was often embedded in other training, we were
unable to determine how many clients received electronic commerce education
or assistance.

Page 16 GAO- 02- 1 Electronic Commerce

Table 6: Electronic Commerce Topics Covered by Local Offices [Out of Six
Offices We Selected for Each Program]

Number of local offices providing service Topic covered SBA/ SBDC NIST/ MEP
DLA/ PTAC

Introduction to electronic commerce, including marketing on the Internet 4 6
5 Web- site development 4 3 1 Electronic data interchange 0 1 4 Selling to
the government 2 0 6 DOD electronic commerce initiatives 0 0 2 On- line
vendor registration with the government 2 06 Other 1 1 1

Source: GAO analysis.

As for the ECRC program, each of the centers was required to make available
a standard set of training courses that was centrally maintained. Standard
training courses that ECRCs provided included introductory material as well
as technical and DOD- specific courses. In fiscal year 2000, ECRCs reported
providing 3,468 training courses with a total enrollment of 53,800 students
of whom 37,968 were DOD staff and 15,832 were non- DOD staff, including
business owners or employees (some of these may be multiple courses taken by
the same client). Among non- DOD staff, the courses with the highest number
of participants, accounting for about twothirds of non- DOD training were

 Hypertext Markup Language (HTML), 20 (2,987 non- DOD participants); 
Marketing on the Internet (2,907 non- DOD participants);  Internet as a
business platform, (1,772 non- DOD participants);  Getting started with
electronic commerce (1,620 non- DOD participants);

and  Business opportunities with DOD through electronic data interchange

(1,494 non- DOD participants) The six regional ECRCs we contacted also
reported providing other types of electronic commerce education, such as
one- on- one technical assistance, conference presentations, and on- line
training in electronic commerce.

20 HTML is the language used to create World Wide Web pages.

Page 17 GAO- 02- 1 Electronic Commerce

The following examples illustrate how the four assistance programs helped
businesses in the electronic commerce arena and also demonstrate the
differences in approach between the more management- oriented SBDCs and MEPs
and the more federally and technically oriented PTACs and ECRCs.

 An SBDC helped two high school students set up an Internet advertising
business. The company is now incorporated, and the proprietors received the
2001 SBA Young Entrepreneur of the Year Award.  A MEP helped a small
cabinet manufacturer develop a complete marketing

plan, introduced it to electronic business, and designed a company Web site.
 A PTAC helped clients with the on- line DOD central contractor registry

and trained them on how to search FedBizOpps.  An ECRC provided hands- on
training on DLA bid boards and showed the

client the award notification menu on one bid board that displayed a
contract award to the client, issued 5 weeks earlier, of which the client
had been unaware.

The ECRC program was discontinued on September 30, 2001. Reaction to this
decision at the local offices of the management- oriented programs was
mixed- six were concerned about losing access to expertise or about not
having the staff or resources to address issues handled by the ECRCs, while
four did not have such concerns (most of the remaining eight offices did not
express an opinion). According to DLA officials, materials for the ECRC
training courses will be turned over to its PTAC program, which plans to
make them available to local PTACs via downloads from a DLA Web site.
Neither DLA?s Electronic Business Program Office nor its PTAC program plans
to keep the course materials up to date.

The four business assistance programs generally coordinated their efforts
through, for example, referrals and jointly delivered training; however,
such coordination occurred largely at the local level. At the headquarters
level, there is no ongoing process for coordinating electronic commerce
activities, although discussions on specific issues have taken place. 21 In

21 While SBA and DLA signed a memorandum of understanding in which they
agreed to work cooperatively to help small businesses benefit from the
procurement and electronic commerce assistance they provide, a DLA official
stated that the agreement was intended only to document an existing
relationship and that no action to implement it was necessary or planned.
Business Assistance

Programs Coordinated Activities at the Local Level

Page 18 GAO- 02- 1 Electronic Commerce

contrast, all but one of the local offices we contacted reported that they
coordinated with at least one of the other programs. Coordination at the
local level is important because each program has its own specific focus and
may lack expertise found in the other programs. In one example, two ECRCs
reported that they trained the local staffs of two of the management-
oriented programs on selected electronic commerce issues. In other cases,
ECRC staff provided electronic commerce training for the clients of these
business assistance programs. Finally, in one other case, the regional rural
area management- oriented business assistance offices met quarterly to
determine the most appropriate program to address the clients? needs.

Table 7 indicates the types of coordination activities with one or more of
the other programs that the local offices of each of the business assistance
programs reported. While the local offices of the four programs generally
coordinated their efforts, this coordination was not universal in that we
found instances in which such coordination was not occurring. For example,
in five cases, the local or regional official we spoke with was not familiar
with one or more of the other business assistance programs.

Table 7: Types of Coordination Performed by Local Offices [Out of Six
Offices We Selected for Each Program]

Number of local offices reporting various coordination activities

Type of coordination SBA/ SBDC NIST/ MEP DLA/ PTAC DLA/ ECRC a

Referrals from one program to another 5 566 Joint sponsorship of conferences
or seminars 3 435 Participation as speaker or exhibitor in the other?s
events and/ or including the other organization in their events 2 3 6 5
Training developed and/ or delivered jointly 4 235 Shared staff, facilities,
or other resources b 2 433 Other 0 0 1 3 a The ECRC program was operated by
DLA through the Defense Electronic Business Program Office.

DOD?s Chief Information Officer has overall functional responsibility for
the Defense Electronic Business Program Office but the office receives its
funding and personnel through DLA and the Defense Information Systems
Agency. b In nine cases, the local offices of two or more of these programs
were part of the same organization.

Source: GAO analysis.

Page 19 GAO- 02- 1 Electronic Commerce

As the federal government?s electronic procurement presence grows, the
participation of small businesses in this activity is critical if the
government is to meet its small business procurement goals. Small businesses
successfully obtained a relatively large share of federal procurement
dollars in three specific on- line procurement programs, compared to the
governmentwide share of federal procurements that were awarded to small
businesses. At the same time, concerns about obstacles to small business
participation in electronic procurements are still expressed in studies and
surveys and by organizations representing and working with small businesses.
These entities report that small businesses continue to face obstacles in
conducting electronic procurements with the federal government, including a
lack of (1) technical expertise and (2) knowledge about the government?s
electronic procurement strategy. Key to the success of small businesses?
participation in government electronic procurements is that both parties-
the government and the businesses themselves- continue to work on overcoming
these and any future obstacles that may arise. The government has taken, or
plans to take, actions that are expected to address some of these obstacles.

In the larger electronic commerce arena, federally funded programs are
providing assistance to businesses in a variety of ways. For four specific
programs, this assistance included not only helping businesses with federal
electronic procurements but also providing assistance in performing
electronic commerce in the economy at large. The four business assistance
programs in our review also were coordinating their activities at the local
level.

In oral comments on a draft of this report, officials representing GSA and
the Office of Management and Budget?s Office of Federal Procurement Policy
stated that they generally agreed with our report. In written comments, DLA
and SBA also stated that they generally agreed with our report. DLA
submitted technical corrections, which have been included in the report. In
written comments, the Department of Commerce provided updated online sales
statistics and stated that they believed the services provided by the
Electronic Commerce Resource Centers should be continued. SBA also included
information on their electronic government vision. The written comments we
received from DLA, SBA, and Commerce are reprinted in appendixes III and IV,
respectively.

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report for 30 days. At that
Conclusions

Agency Comments

Page 20 GAO- 02- 1 Electronic Commerce

point, copies of this report will be sent to the Chairman, Senate Committee
on Small Business and Entrepreneurship; Chairman and Ranking Minority
Member, Senate Committee on Governmental Affairs; Chairman and Ranking
Minority Member, House Committee on Small Business; Chairman and Ranking
Minority Member, House Committee on Government Reform; Chairman, House
Subcommittee on Technology and Procurement Policy, Committee on Government
Reform; and other interested congressional committees. We are also sending
copies to the Secretaries of Defense and Commerce, the Administrators of the
General Services Administration and the Small Business Administration, and
the Director of the Office of Management and Budget and other interested
parties. We will also make copies available to others upon request.

If you have any questions on matters discussed in this report, please
contact David McClure at (202) 512- 6257 or David Cooper at (202) 5124587 or
by email at mcclured@ gao. gov and cooperd@ gao. gov, respectively. Other
contacts and key contributors to this report are listed in appendix V.

David L. McClure Director, Information Technology

Management Issues David E. Cooper Director, Acquisition and

Sourcing Management

Appendix I: Scope and Methodology Page 21 GAO- 02- 1 Electronic Commerce

To determine the small business share of procurement dollars awarded by
three on- line procurement programs (GSA Advantage!, ITSS, and DMLSS E- CAT)
and the small business share of all federal contract dollars awarded, we
obtained fiscal year 1999 and 2000 award data for these programs and
interviewed applicable GSA, DLA, and contractor officials. We calculated the
percentage of small business awards to total awards for each program and
compared them to the governmentwide small business share, which we
calculated based on the aggregate FPDS data reported in GSA?s Federal
Procurement Report for fiscal years 1999 and 2000. 1 We assessed the
reliability of the GSA Advantage!, 2 ITSS, and DMLSS E- CAT data by (1)
performing electronic tests of relevant fields (for example, we tested for
completeness by checking key fields for missing data and checked for
accuracy and reasonableness by examining summary statistics for values that
were in proper and expected ranges) and (2) requesting and reviewing, if
available, related program and system design documentation, audit and system
reviews, and reports. The results of our assessment showed that the DMLSS E-
CAT data were reliable enough for use in this report. However, the results
of our assessment of the GSA Advantage! and ITSS data were inconclusive in
large part because of concerns related to limitations on available
documentation and security weaknesses reported in GSA?s Fiscal Year 2000
Annual Report. Nevertheless, we determined that the reliability of the data
provided is adequate for the comparative purposes of this report. We will be
providing additional information on the GSA Advantage! and ITSS document
limitations in a separate letter.

To identify what, if any, obstacles exist for small businesses in conducting
electronic procurements with the federal government, we performed a
literature search. We also interviewed selected SBDCs, PTACs, ECRCs, and
MEPs about their clients? experiences with obstacles and officials from
SBA?s Office of Advocacy and Office of Government Contracting. In addition,
we obtained comments from organizations representing or working with small
businesses to obtain their members? views on

1 The FPDS Federal Procurement Report is published annually and contains
?snapshot? statistics on the procurement activities of over 60 agencies. The
figures in the Federal Procurement Report are only as accurate, timely, and
complete as the data provided by the reporting agencies.

2 In June, GSA launched a new version of GSA Advantage!. We did not assess
the data reliability of the new version. Appendix I: Scope and Methodology

Appendix I: Scope and Methodology Page 22 GAO- 02- 1 Electronic Commerce

obstacles. The following are the organizations that provided information on
small business obstacles:

 Association of Government Marketing Assistance Specialists  Coalition for
Government Procurement  Contract Services Association of America  National
Black Chamber of Commerce  National Small Business United  U. S. Pan Asian
American Chamber of Commerce  Small Business Legislative Council  U. S.
Hispanic Chamber of Commerce

We contacted 13 other organizations, such as the U. S. Chamber of Commerce
and the National Women?s Business Council, but they did not provide us with
any information on obstacles small businesses had in performing electronic
procurements with the federal government.

In addition, to review what steps four federal business assistance programs
have taken to educate businesses on electronic commerce and the extent to
which they have coordinated their efforts, we interviewed headquarters staff
of the programs and reviewed applicable program documents, such as grant and
cooperative agreements and contracts. We also interviewed officials from 24
local and regional offices of these programs and obtained and reviewed
available documentation from these offices. We judgmentally selected six
offices from each program based on the following:

 For each program, we chose at least one office from each of the four U. S.
census regions. Overall, we chose at least two local offices from each
census Division. The census divides the United States into four regions and
nine divisions- Northeast region (New England and Middle Atlantic
divisions), Midwest region (West North Central and East North Central
divisions), South region (West South Central, East South Central, and South
Atlantic divisions), and the West region (Pacific and Mountain divisions).

Appendix I: Scope and Methodology Page 23 GAO- 02- 1 Electronic Commerce

 For each program except ECRCs, 3 we chose at least two offices serving
less populous areas, based on the Office of Management and Budget?s
classification of a metropolitan area. 4

Based on the above criteria, we interviewed officials from the following
offices:

ECRCs

Bremerton, WA Cleveland, OH Dallas, TX Fairfax, VA Scranton, PA

MEPs

Arkansas Manufacturing Extension Network California Manufacturing Technology
Center Idaho Techhelp Iowa MEP Maine MEP Maryland Technology Center

PTACs

Alabama Small Business Development Consortium California Central Valley
Contract Procurement Center Minnesota Project Innovation National Center for
American Indian Enterprise Development New Hampshire Office of Business &
Industrial Development George Mason University Procurement Technical
Assistance Program

SBDCs

Bronx SBDC of Lehman College Danville Area SBDC (Illinois) Joplin SBDC
(Missouri) Northern Virginia SBDC Western Kentucky University SBDC Wyoming
SBDC, Region 2

3 Because ECRCs serve multi- state regions, they serve both rural and urban
areas. 4 A metropolitan area consists of a large population nucleus,
together with adjacent communities having a high degree of social and
economic integration with that core.

Appendix I: Scope and Methodology Page 24 GAO- 02- 1 Electronic Commerce

We performed our work at SBA headquarters in Washington, DC, GSA offices in
Crystal City, VA, and Washington, DC; DLA headquarters at Fort Belvoir in
VA; Defense Supply Center, Philadelphia; NIST in Gaithersburg, MD; and the
offices of business assistance providers and business organizations in
Maryland, Virginia, and Washington, DC. We conducted our review between
January and August 2001 in accordance with generally accepted government
auditing standards.

Appendix II: Reported Small Business Obstacles to Conducting Federal
Procurements Electronically

Page 25 GAO- 02- 1 Electronic Commerce

Obstacles reported by various studies and surveys as well as from comments
provided by officials in selected federal business assistance programs and
organizations representing or working with small businesses generally fall
into two categories: (1) those related to general readiness- the willingness
and ability of small businesses to conduct business electronically and (2)
those specific to conducting procurements electronically with the federal
government.

Commonly cited obstacles for small businesses in this category include the
following.

 Need to Make a Business Case. Our literature search and discussions with
industry groups and business assistance program officials indicated that
some small businesses may have difficulty in making a business case for
adopting electronic commerce because of their inability to ascertain costs,
benefits, and risks. They may have little working knowledge of the Internet
and other electronic commerce technologies and insufficient information
about the benefits and applicable implementation strategies appropriate for
their business models. As a result, such businesses may be reluctant to make
the investment to implement electronic commerce. For example, an August 2000
survey of 50 Idaho manufacturers? use of Internet technologies showed that
of the 23 respondents with Web sites, 74 percent were not engaged in
electronic commerce. 1 The primary reasons companies with Web sites cited
for not moving to electronic commerce were a lack of knowledge and a concern
that implementation was too time- consuming and costly. One researcher
concluded that for small businesses, adopting electronic commerce requires
low, predictable cost; minimal changes in employee behavior; and compelling
benefits over alternatives. 2

 Limited Technical Expertise. A June 2000 Organization for Economic
Cooperation and Development report on enhancing the competitiveness of small
and medium- sized enterprises noted that many small businesses do

1 Survey of Idaho Manufacturers? Use of Internet Technologies and eBusiness
Principles

(Idaho TechHelp Manufacturing Extension Program, August 2000). While this
survey was not limited to small businesses, 92 percent of its respondents
were businesses with 550 or fewer employees.

2 The Five Immutable Laws of Universal Supply Chain Connectivity by Larry R.
Smeltzer (Arizona State University, February 2001). Appendix II: Reported
Small Business

Obstacles to Conducting Federal Procurements Electronically

Electronic Commerce Readiness

Appendix II: Reported Small Business Obstacles to Conducting Federal
Procurements Electronically

Page 26 GAO- 02- 1 Electronic Commerce

not know how to profitably develop their electronic commerce capabilities or
how to cope with the ?complex rules? governing this area. 3 This report and
other studies point out that the lack of appropriate human resources, in
terms of technical and/ or managerial staff familiar with the information
technology environment, constitutes a major barrier for small businesses
wanting to adopt electronic commerce technologies and strategies. 4 Business
assistance program officials also noted that their small business clients
lack the skill sets necessary to participate in electronic commerce. They
stated that small businesses need help with building Web sites, selecting
Web site designers and Internet service providers, and integrating
electronic commerce into their business processes. However, small businesses
may not have such experience and expertise on staff and may not be able to
afford to recruit and retain technical staff with these skills.

 Internet Access Issues. PTAC, MEP, ECRC, and SBDC business assistance
program officials reported that small businesses, particularly in rural
areas and on Indian reservations, have difficulty obtaining affordable high-
speed Internet access sufficient for electronic commerce activities. For
example, a PTAC official in a rural state said that many individuals and
companies in his state have only dial- up modem service. Moreover, according
to an official working on programs to assist American Indian enterprise
development, reservations often lack Internet infrastructure. She estimated
that only 40 percent of her clients on reservations have e- mail service.
The continuing expansion of electronic commerce requires widespread high-
speed Internet access. However, as we noted in February 2001, there is less
availability of broadband high- speed, high- capacity connection to the
Internet in the rural areas of America. 5 Similar to other studies, our
survey found the availability of broadband technology to be most prevalent
in large metropolitan areas. 6

3 Realizing the Potential of Electronic Commerce for SMEs in the Global
Economy

(Organization for Economic Co- operation and Development, June 2000). 4 See
also Towards Digital eQuality, (U. S. Government Working Group on Electronic
Commerce Second Annual Report, December 1999) and Survey of Small and Mid-
sized Businesses, Trends for 2000 (Arthur Anderson and National Small
Business United, June 2000).

5 Telecommunications: Characteristics and Choices of Internet Users (GAO-
01- 345, February 16, 2001). 6 See also Falling Through the Net: Toward
Digital Inclusion (Department of Commerce, October 2000).

Appendix II: Reported Small Business Obstacles to Conducting Federal
Procurements Electronically

Page 27 GAO- 02- 1 Electronic Commerce

 Concerns About Security and/ or Privacy. Ensuring the security of payments
and proprietary information and privacy of personal data are a top priority
for small businesses considering electronic commerce as a means to sell
their products and services. According to the U. S. presentation before the
Free Trade Area of the Americas electronic commerce committee, because of
their small size and limited financial resources, small businesses may not
be prepared to take on the kinds of security and privacy risks that larger
companies can more easily face. 7 Security and privacy concerns of small
businesses include inappropriate disclosure of proprietary business
information that governments collect from companies, consumer fraud, and the
adequacy of security over a transaction on the Internet. For example, some
small businesses fear bidding on- line because they do not believe that it
is secure. They want assurances that their pricing and other proprietary
information would be accessed only by intended recipients and not by
competitors. These concerns are not unjustified. For example, we have
designated information security a governmentwide high- risk area since 1997.
Our latest high- risk report noted that progress in strengthening federal
information security has been mixed. 8

Commonly cited obstacles in this category include the following. 
Monitoring Various Federal Procurement Information Web Sites for

Business Opportunities. The federal government has multiple Web sites that
list contracting opportunities and related procurement information that
businesses need for deciding whether to pursue a business opportunity. For
example, an August 2001 search for federal ?contracting opportunities? on
www. firstgov. gov- the federal government?s portal for accessing government
on- line information- provided links to over 1,000 Web sites listing
procurement opportunities and related information. Among the first 10 ?hits?
were links to sites with information on contracting opportunities for the
Departments of Housing and Urban Development, State, and Transportation, the
Army Corps of Engineers, and GSA. Organizations representing or working with
small businesses

7 Issues Faced by SMEs In Utilizing the Internet as a Medium for Electronic
Commerce

(U. S. presentation before the Free Trade Area of the Americas Joint
Government- Private Sector Committee of Experts on Electronic Commerce,
April 30, 2000).

8 High- Risk Series: An Update (GAO- 01- 263, January 2001). Federal
Electronic

Procurements

Appendix II: Reported Small Business Obstacles to Conducting Federal
Procurements Electronically

Page 28 GAO- 02- 1 Electronic Commerce

point out that small companies with limited resources and staff cannot
afford to spend several hours a day ?surfing the Net? for potential work.

To help address this issue, a May 2001 Federal Acquisition Regulation change
designates the FedBizOpps Web site as the single governmentwide point of
electronic entry on the Internet where vendors can access all the
information they need to bid on available government business opportunities
greater than $25,000. After subscribing, vendors can receive various
announcements automatically via email, including solicitations and post-
award notices. Agencies must provide access to all applicable actions by
October 1, 2001. Because the requirement to use FedBizOpps is new, its
impact on simplifying access to the government?s procurements is not yet
known. 9 Moreover, information about contracting opportunities expected to
be $25,000 or less does not have to be posted on FedBizOpps. As noted
earlier, small businesses generally obtain a significantly higher share of
these contract opportunities.

 Differing Requirements for On- line Purchasing Programs. The federal
government has multiple on- line purchasing programs that federal buyers can
access to search vendor catalogs and purchase goods and services from
suppliers with government contracts. According to three business assistance
program officials, the process for posting listings on these sites is
inconsistent and time- consuming because vendors may have to upload their
electronic catalogs to multiple sites, involving different formats and
procedures. For example, the GSA Advantage! and DMLSS E- CAT programs have
different requirements for formatting catalog data. An industry group
representing companies that conduct business with the federal government
told us that small businesses often must hire thirdparty service providers
because they lack the ability to manage multiple electronic catalog formats,
revisions, and uploads. Moreover, according to one research report, some
commodity suppliers may perceive an on- line catalog to be impractical, due
to the sheer number of their products and the complexity of their pricing.
10 As of mid- August, GSA Advantage!,

9 Past surveys of small business users? feedback to the centralized
electronic posting of contract opportunities have been positive. See
Acquisition Reform: NASA?s Internet Service Improves Access to Contracting
Information (GAO/ NSIAD- 99- 37, February 9, 1999) and the statement of the
former Administrator for Federal Procurement Policy before the House
Subcommittee on Government Programs and Oversight, Committee on Small
Business, April 11, 2000.

10 Attitudes of SME Owners and Managers Toward Doing E- Business with DOD
and Prime Contractors within IDEs and Trading Exchanges (Argentieri
Marketing Research, June 5, 2001).

Appendix II: Reported Small Business Obstacles to Conducting Federal
Procurements Electronically

Page 29 GAO- 02- 1 Electronic Commerce

DMLSS E- CAT, and others were in the initial stages of considering
implementing a single catalog process for medical materiel.

 Lack of a Single Vendor Registration System. Vendors who want to conduct
business with more than one government office generally must complete
multiple registrations and profiles, providing redundant business
information to each site in different formats. Officials from several
business assistance programs and organizations representing small businesses
spoke of the need for the government to set up a single point of vendor
registration. Many reiterated the point made in a 1994 government report on
electronic commerce that it is much easier for a business to maintain its
single repository of registration information than to submit the same
information or some variation of it many times to numerous contracting
activities. 11 Moreover, the Federal Acquisition Streamlining Act of 1994
required the establishment of a ?single face to industry? for conducting
procurements.

To help address concerns about multiple vendor registrations, DOD developed
a centralized, electronic registration process- the Central Contractor
Registration (CCR) system- as the single registration point for vendors that
want to conduct business with DOD. As part of its efforts to expand
electronic government, the Administration has tasked agencies in fiscal year
2003 to use the CCR as the single validated 12 source of data on vendors
interested in contracting with the government. According to an OMB official,
the governmentwide single point of vendor registration should help to
standardize the registration process, eliminate redundancies, and provide a
common method of gathering and reporting vendor information.

Even if a single governmentwide registration system is implemented, small
businesses may still wish to register on SBA?s Procurement Marketing and
Access Network (PRO- Net), 13 that is an Internet- based database of
information on thousands of small businesses which federal buyers can use to
search for small businesses fitting specific profiles. According to a

11 Final Report: Streamlining Procurement Through Electronic Commerce
(Federal Electronic Commerce Acquisition Team, October 13, 1994). 12 Vendors
provide data to the CCR, which performs a validation of selected data
elements by checking them against DOD and private sector databases. 13 While
registering in PRO- Net is optional for most small businesses, firms
applying for 8( a), HUBZone, or small disadvantaged business certifications
are required to register.

Appendix II: Reported Small Business Obstacles to Conducting Federal
Procurements Electronically

Page 30 GAO- 02- 1 Electronic Commerce

DLA official, SBA?s PRO- Net was provided access to CCR small business
vendor information data on August 24, 2001. 14 SBA officials told us that
they did not yet know how they were going to use the CCR data but that
vendors cannot be automatically registered in PRO- Net without their
consent. Accordingly, small businesses wanting to register in both CCR and
PRO- Net will have to reenter some of the same information in both systems.

 Problems Related to Technical Data and Drawings. Posting technical data
and drawings (required by businesses preparing bids) on the Web or otherwise
making them available electronically is beneficial because vendors do not
have to visit contracting offices to obtain copies or have technical data
packages mailed to them. However, business assistance program officials and
industry groups voiced concerns about the difficulties, frustration, and
time involved in locating, transmitting, downloading, and printing on- line
specifications and drawings. Some of the problems reported included
incomplete and inadequate technical data packages for manufactured items,
on- line manuals that are difficult to decipher and use, out- of- date
drawings, or the lack of availability of CDROMs containing drawings that are
too large to download. A representative from one trade organization noted
that there can be technical problems with downloading specifications in that
often a fast Internet connection and powerful computer system are needed,
and the software versions required by different agencies may differ or
conflict with one another. ECRC and PTAC officials said that many agencies
fail to recognize that small businesses have limited electronic resources
and need more simplification and software standardization for on- line
solicitation materials to be readily accessible. In a mid- August meeting,
DLA officials agreed that the quality of electronic technical data and
drawings and the delivery of this information were problems.

 Difficulty in Obtaining Help With Problems and Marketing Assistance.

Another obstacle for many small businesses attempting to participate in on-
line government purchasing programs is not knowing where to go for help or
not having knowledgeable contacts. According to officials of

14 According to a DLA official, vendors who register in PRO- Net will not be
automatically registered in CCR because CCR requires additional information,
such as the vendor?s electronic funds transfer account, which is not in PRO-
Net. However, DLA has started an initiative to use PRO- Net data to validate
the representations of certain vendors that they have been certified by SBA
as 8( a), HUBZone, or small disadvantaged businesses. A DLA official stated
that the implementation date for this initiative is currently being
determined.

Appendix II: Reported Small Business Obstacles to Conducting Federal
Procurements Electronically

Page 31 GAO- 02- 1 Electronic Commerce

several business assistance programs and trade association representatives,
small businesses often have difficulty reaching someone at the buyer?s or
program office who is able and willing to help, particularly with
technology- related problems and/ or marketing questions. For example, one
trade organization representative said that small businesses trying to
market in an on- line environment have problems reaching federal procurement
officials to discuss their products and services. When they call to arrange
meetings with buyers, they may be referred instead to Web sites, which can
be complex and confusing and may not contain the information they really
need. In other cases, phone calls and e- mails were not returned when there
was a problem. In particular, two industry groups and five business-
assistance program officials mentioned difficulties in obtaining assistance
to deal with problems associated with GSA Advantage!. For example, one ECRC
official said that the GSA Advantage! Web site explanations are insufficient
to address vendor questions and GSA technical support staff are also unable
to answer questions from vendors about getting their products listed. In
mid- August, GSA officials stated that improvements in GSA Advantage! vendor
support and assistance were made in the spring and summer of 2001, such as
increasing help- desk staffing, employing classroom training, and
implementing a lab in which vendors are helped in loading their data onto
the system.

In earlier testimony on electronic government initiatives, we pointed out
that the government?s use of Internet and Web- based technologies should
force organizations to reconsider their customers- specifically, how their
customers need, perceive, and digest information and services in a viewable,
electronic format. 15 Moreover, the National Electronic Commerce
Coordinating Council suggests that organizations implement a customer
relations management structure. 16

 Uncertainty About the Government?s Electronic Procurement Strategy.

Industry groups and business assistance program officials told us that since
government agencies are pursuing different approaches to implementing
electronic purchasing, small businesses hesitate to invest in any one
electronic commerce system. According to one PTAC program

15 Electronic Government: Challenges Must Be Addressed With Effective
Leadership and Management (GAO- 01- 959T, July 11, 2001). 16 E- Government
Strategic Planning: A White Paper (National Electronic Commerce Coordinating
Council, December 13, 2000).

Appendix II: Reported Small Business Obstacles to Conducting Federal
Procurements Electronically

Page 32 GAO- 02- 1 Electronic Commerce

official, when businesses look closely at their government customers?
electronic commerce capabilities, they find a ?very mixed bag.? In addition,
officials in four of the six ECRC offices we contacted noted that the
government has pursued many different electronic commerce solutions and has
not adopted a uniform ?single face? approach to the vendor community. ECRC
officials cited the government?s Federal Acquisition Computer Network-
better known as FACNET- and electronic data interchange initiatives as
examples of electronic commerce initiatives that were not fully implemented
or were changed before investment returns were realized. For example, in our
1997 report on FACNET implementation, we discussed the limited use of FACNET
by government agencies and the need for a coherent strategy and
implementation approach for carrying out the agencies? acquisition
requirements using various electronic commerce technologies and purchasing
methods. 17

17 Acquisition Reform: Obstacles to Implementing the Federal Acquisition
Computer Network, (GAO/ NSIAD- 97- 26, January 3, 1997).

Appendix III: Comments From the Defense Logistics Agency

Page 33 GAO- 02- 1 Electronic Commerce

Appendix III: Comments From the Defense Logistics Agency

Appendix IV: Comments From the U. S. Small Business Administration

Page 34 GAO- 02- 1 Electronic Commerce

Appendix IV: Comments From the U. S. Small Business Administration

Appendix IV: Comments From the U. S. Small Business Administration

Page 35 GAO- 02- 1 Electronic Commerce

Appendix IV: Comments From the U. S. Small Business Administration

Page 36 GAO- 02- 1 Electronic Commerce

Appendix V: Comments From the Secretary of Commerce

Page 37 GAO- 02- 1 Electronic Commerce

Appendix V: Comments From the Secretary of Commerce

Appendix V: Comments From the Secretary of Commerce

Page 38 GAO- 02- 1 Electronic Commerce

Appendix VI: GAO Contacts and Staff Acknowledgments

Page 39 GAO- 02- 1 Electronic Commerce

David L. McClure, (202) 512- 6357 David E. Cooper, (202) 512- 4587 Linda J.
Lambert, (202) 512- 9556 Hilary C. Sullivan, (214) 777- 5652

Barbara Johnson, Rosa Johnson, Beverly Ross, Patricia Slocum, and Glenn
Spiegel made key contributions to this report. Appendix VI: GAO Contacts and
Staff

Acknowledgments GAO Contacts Acknowledgments

(310404)

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