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The E-Commerce Quandary

As the agency that buys equipment and supplies for some 350 school districts in Nebraska, the purchasing cooperative for the Nebraska Educational Service Units has the unenviable task of sifting through mountains of orders from schools and compiling information on bids submitted by vendors.

But starting last year, the co-op revamped its large annual bid event. Instead of a paper-based bid process, the districts and educational service units submitted their requests, and vendors made their bids, online over the Internet. The tedious effort of entering the bid information into databases and ranking the offers was time-consuming and labor-intensive. Now, the computer spits out the information with the click of a mouse.

“It used to take three-and-a-half days,” says Lynn W. Thorpe, chief executive officer of the co-op. “Now it takes three-and-a-half hours.”

Many administrators and technology advocates had expected that by 2002 that kind of success story would be common. The promise of online purchasing was compelling — schools and universities that took advantage of the Internet to solicit bids and acquire goods would be able to connect with more sellers, find more competitive prices, process their purchases more efficiently, and receive supplies and equipment more quickly. Venture capitalists opened their purse strings to technology-company startups with visions of capturing a slice of the billions of dollars education institutions spend each year on supplies and equipment.

But that was in the salad days of the so-called dot-com boom — way back in 2000. In a downturn that seemed to happen overnight, the economy faltered, the stock market lost confidence in technology companies, and the dot-com bubble burst. Funding dried up, companies folded or retrenched and education administrators, already cautious about getting involved with an untested venture such as online procurement, had more reason to shy away from the practice.

The enthusiasm about jumping immediately into online purchasing may have waned among education administrators, but many of the institutions that have moved some of their procurement systems online have found that the change has delivered what was promised: less bureaucracy, more efficiency and better prices. Most officials interviewed believe that although it might take awhile, most schools will eventually conduct most of their purchasing online.

“It's coming,” says Brian Talbott, executive director of the American Association of Educational Service Agencies. “It's just not going to be the overnight whiz-bang thing that people thought it was.”

The promise

Schools spend upwards of $80 billion on supplies and equipment each year, according to industry estimates. But the process for buying those goods often is protracted and mired in bureaucracy. A prospective order might bounce through a district's interoffice mail from teacher to secretary to principal to purchasing department before it gets to the person authorized to approve and complete a purchase order. Maintaining a district's purchasing bureaucracy is costly. Processing one purchase order — regardless of the size of the purchase — has been estimated at anywhere from $75 to $150.

Streamlining that laborious procedure could save schools time, money and aggravation. The influx of computers and connectivity into districts during the late 1990s made an online solution feasible for most schools. Numerous companies sprung to life offering schools software packages that would allow them to use the World Wide Web to solicit and accept bids and purchase supplies, equipment and services.

“The whole procurement operation is more efficient,” says Bill Parkinson, assistant treasurer for Mentor, Ohio, schools, which uses an online system for most of its purchases.

Besides reducing red tape, online purchasing removes barriers of geography for schools. In a traditional bid arrangement, it might not be practical for firms from outside the region to submit a bid. But with an online system, a district might find more competitive prices outside its geographical area. Online procurement companies often sought out relationships with vendors and suppliers to provide schools with a greater variety of purchasing options.

The reality

But the best-laid plans of companies offering online purchasing solutions ran aground as the economy took the wind out of the sails of fledgling companies and schools were slow to embrace such a radical overhaul of their traditional operations.

“The market's really changing so much,” says David Ritchey, a spokesman for the Association of School Business Officials International (ASBO). “A lot of dot-coms haven't been able to succeed.”

The dot-com collapse reinforced the already cautious nature of many school administrators.

“Part of what you had happening was that schools were not sure they wanted to get involved because of the fall of a number of companies,” says Talbott. “They wondered ‘are they going to be around?’”

Even schools that recognized the potential benefits of online procurement have been reluctant to commit to a system until they see more evidence of success.

“From talking to people, they're concerned that it's not quite ready yet,” says Ritchey. “It may be at some point, but not yet. I think districts would be glad to change if they saw there was a real benefit.”

Mentor's Parkinson has encountered that reluctance as he talks about online purchasing to colleagues in other districts.

“A lot of people have wanted to do it, but they haven't,” he says. “I guess for some districts it's a matter of waiting for someone to do it first. There is an apprehension about converting over to a new system. People have been in their jobs for years and years. It's a completely new way of thinking. The public sector is slower to accept change.”

In Utah's Alpine School District, officials used a company's online procurement system for awhile, “but we're not pursuing that anymore at this point,” says Marlin McKinney, director of purchasing. The system allowed Alpine to save time and cut costs for postage and paperwork, but it did not improve the district's purchasing system as much as officials had hoped.

“The biggest problem we had was converting information from our computer system to their bid system,” says McKinney.

If the procurement software package is not compatible with a school system's financial-management system, schools often must re-enter purchase information into the financial system, preventing districts from achieving much of the greater efficiency promised.

Software companies are overcoming those obstacles. The e-procurement system that the Mentor, Ohio, district is using is fully integrated with the district's financial software.

In some jurisdictions, rules and regulations regarding school purchases and bids have made it impractical for schools to see the full benefits of online procurement. Some states required bids to be sealed or be received through the U.S. mail. Many of those restrictions were put into place before anyone conceived of the feasibility of online commerce.

“As those laws are amended and adjusted, that will open up things for more districts,” says Talbott.

Early adopters

Just as it was in the first days of computers in classrooms, some school officials look at online purchasing and embrace the possibilities that technology offers, while others wait for the flaws to be worked out before they agree to adopt a new system.

In Mentor, Parkinson says the district can order more quickly, find suppliers more easily and track purchases more efficiently by using an online system.

“At any point, you can tell exactly whose desk an order is on and where it is in the process,” says Parkinson. “You can create templates — click a button, and last year's order automatically becomes a requisition. All you have to do is go in and change the quantities and pricing if you need to. The building secretary doesn't have to memorize account codes — they're all included in the system.”

The system is on the Internet, so Mentor didn't have to upgrade its computer system to use it.

“You don't need any more software or hardware,” says Parkinson. “You just need to make sure you have an up-to-date web browser.”

For the educational purchasing cooperative in Nebraska, conducting its annual bid online allowed the co-op to save thousands of dollars it would have spent printing and mailing catalogs and bid documents. Skipping the printing step enabled the co-op to make the catalog information available to schools two weeks earlier than normal.

To organize and review all the bids in the old, paper-based system, Thorpe had to bring in eight to 10 workers to keypunch the information into the co-op's computer system.

“Now we just hit a button, and it's done automatically,” he says.

A critical step in getting staff members to accept the move to online procurement is providing adequate training.

“We had people in our district who were apprehensive,” says Parkinson. “We spent a lot of one-on-one time to overcome their fears. We ran training classes and showed them step-by-step how it works. We used an actual requisition, so they could see with their own eyes how they did it before and how it is done now.

“It's a matter of holding their hands and walking them through the process. They realized how much easier it is this way. They're gaining experience and becoming more comfortable.”

Thorpe says that in some cases, schools are ready to use online purchasing, but vendors aren't ready.

“The worst learning curve is with some of the vendors,” says Thorpe. “Many of them are not comfortable doing Internet bidding.”

In other cases, vendors have set up systems to encourage online buying. The Alpine, Utah, district is one of many that buys supplies online from Office Depot “Each school can place orders and have them delivered directly to the school,” says McKinney.

Although the Alpine district backed away from using an online purchasing package provided by a software company, McKinney says he still is convinced that online procurement ultimately will become standard practice for school districts. Right now, he would like a system that better matches the needs of his district.

“We're trying to write a program in-house,” says McKinney.

Despite the bumps in the road as companies struggle to survive an economic downturn and work to provide products that meet the specific needs of schools, early adopters like Parkinson believe that the benefits of online procurement eventually will win over most school administrators.

“It's something that school districts should get into,” says Parkinson. “There are a lot of little efficiencies that add up to big savings for the district. As a concept, how can it fail? The taxpayers get more bang for their dollar.”

Kennedy, staff writer, can be reached at [email protected].

SIDEBAR: Electronic scavenging

Schools can use the Internet not only to buy the goods and services they need, but also to sell the things they no longer can use.

Marlin McKinney, director of purchasing in the Alpine, Utah, school district, says he has been disposing of the school system's surplus property — textbooks, musical instruments, cars used in driver's education, buses, kitchen equipment — by putting it up for auction online.

“It's surprising what people will buy,” says McKinney.

Before discovering eSurplus Auctions (, which offers surplus property from schools and other governmental agencies for auction, the Alpine district would get rid of its surplus property by either throwing it away or going through the time and expense of a live auction.

Now, the district uploads descriptions and sometimes photographs of the items that have outlived their usefulness, and those scavenging for bargains on the Internet can submit bids to buy it. The district doesn't have to pay to stage an auction, and it makes a little money on things that otherwise would have ended up in the dumpster.

“We don't ship anything,” says McKinney. “It's up to the buyer to come and get it or arrange for shipping.”

In most cases, that limits interested buyers to the region close to the district selling an item. But McKinney says in some cases, those buying Alpine's offerings have come from as far as California and Oregon.

“It has worked out very well for us,” he says.

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