THE BELTWAY AND BEYOND

DOD's e-commerce plan needs a good push

Stephen M. Ryan

The Defense Department is hard at work implementing electronic commerce procedures for its buying. But DOD is divided between thinking of these nascent programs as ways to take advantage of revolutionary technologies or as burdensome processes laden with historical requirements. How DOD directs this policy choice will reveal how the department will interact with industry in years to come.

Late last year, DOD brass announced their intention to create an electronic mall called DOD E-Mall. Its purpose was to foster e-commerce. In doing so, DOD was following the dictates of Defense Secretary William Cohen's Defense Reform Initiative report of November 1997. The 1999 National Defense Authorization Act, passed last year, provides legislative support for the program.

A plain request

The request for information for DOD E-Mall, unlike many others produced by the government, is a model of simple, clear language. It calls for establishment of information technology electronic stores, run by the private sector, where 'the DOD buyer can use a search engine, shopping cart or purchase list, and one checkout procedure to buy products.'

There is also an enormous side benefit for DOD from the E-Mall concept. Electronic store vendors would be required to provide online record-keeping and analysis capability. This would give DOD policy- and budget-watchers much better information about who is buying what throughout the department'data that is often not visible in the higher reaches of the department.

DOD also created a new organization, the Joint Electronic Commerce Program Office, to integrate e-commerce into how DOD does business. JECPO, part of the Defense Logistics Agency, has registered more than 162,000 vendors (see story, Page 48).

So DOD has a vision for e-commerce and an organization to carry it out.

The E-Mall concept sets up the possibility of an auction, every day, for every commodity, provided the items offered for sale were covered by a contract somewhere in the government. Because of the Competition in Contracting Act and fundamental government buying rules, it will not be possible to simply offer products that have not been listed on a buying vehicle.

What industry envisions as a result of the E-Mall project is an online IT department store where prices could be continually changed to meet the competition. Industry anticipates being able to ship products the same day they are ordered, or soon thereafter, with nearly all deliveries completed within 48 hours to places that have good delivery service.

Multiple awards to every competing vendor that qualifies for the E-Mall makes sense. Getting on with the E-Mall project's RFI makes sense. Giving multiple awardees the greatest possible freedom to constantly lower prices makes sense. This way the vendor community would be required to have warehouses or contract arrangements that get the goods shipped. If this is done, DLA will not need to risk filling its warehouses and creating expensive inventories of commodities. The General Accounting Office could skip its annual report on such problems. That would be progress.

The whole program was on a fast track but now appears to be on a bureaucratic siding. Why? DLA appears to be taking a command and control stance. For example, it would require vendors to send their data to DLA, where employees would post it, as opposed to outsourcing the E-Mall and letting vendors do most of this work.

Stumbling blocks

The purported advantages of an online mall won't materialize if vendors have to check with mother DLA or JECPO every time they change prices or bundles of products. It won't work as quickly or efficiently if vendors have to send their data to DLA so DLA can post it.

The key factor is how outsourced the private-sector role will be. DLA appears to be clinging to a vision of the E-Mall that would keep the agency more deeply involved than is necessary.

The upshot is a fast-track program supported by the secretary of Defense and slowed to nearly a stop by Congress.

Who will unsnarl this modest policy problem? The point man appears to be Marvin Langston, DOD's deputy chief information officer and deputy assistant secretary of Defense for policy and implementation. Reporting to CIO Arthur Money, Langston has a resume full of Defense IT roles. Logically, Langston should be able to settle the debate at DLA.


Stephen M. Ryan is a partner in the Washington law firm of Manatt, Phelps and Phillips. He has long experience in federal information technology issues. E-mail him at SRyan@Manatt.com.

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