Save your cash and consider bartering

Robert J. Sherry

Bartering is a business process as old as the hills'perhaps older than government itself. With the advent of electronic commerce, barter, perhaps surprisingly, is enjoying a resurgence. Could state and local governments consider barter as a means of securing needed goods and services? The answer may also surprise you.

Companies that conduct business internationally are used to bartering. I remember many years ago hearing a story of how the procurement staff at a large minicomputer manufacturer had to dispose of a load of silkworms it accepted in lieu of cash for selling computers in Asia.

Some of the practical advantages of barter in the commercial market could also apply to state and local government. Two aspects of barter, in particular, could be beneficial.

First, barter reduces strain on the government treasury by reducing cash outlays and pressure on procurement budgets. But you must have something to barter, which brings me to the other benefit.

Second, barter affords a state or local government the opportunity to trade unused assets into goods and services while reducing surplus property.

A bartering strategy is especially worth considering in the information technology realm because many governments must replace older hardware and struggle with the most cost-effective means of disposing of it. Although some states have resorted to live auction for certain items of surplus, barter sites on the Web offer a new forum for this task.

A number of state and local governments are exploring the use of barter sites already. It turns out that obsolete computers and worn-out police cars are not all they have to barter with. For example, the National Association of State Purchasing Officials reported that Tucson, Ariz., through its Transportation Department, has issued a request for proposals essentially seeking to barter traffic data collected and maintained by the city in return for renovation and operation of the city's transportation control center.

Before you run off to conduct your first transaction, though, think things through. Ask yourself if there are constitutional, statutory or regulatory prohibitions against bartering in your jurisdiction. Unless your jurisdiction has acted recently, it is unlikely that there are any explicit provisions in place that permit bartering. So the big question will be whether any existing laws or ordinances on procurement and disposition of surplus property prohibit bartering.

Once you have surmounted that hurdle, make sure you have the requisite infrastructure in place. Most likely, you will want to consider joining an established online bartering site before attempting to create one of your own.

Robert J. Sherry is a partner in the law firm of McKenna & Cuneo LLP. He heads the government contracts practice in the firm's San Francisco office, counseling information technology companies on federal, state and local issues.

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