Small firms missing out on federal e-commerce efforts

Electronic commerce may be revolutionizing federal procurement, but early indicators suggest it is hurting small businesses, Small Business Administration officials told a House committee Tuesday. E-commerce has enabled online posting of federal contract opportunities, electronic transmittal of invoices, and the use of credit cards for contract payments. Small businesses often lack the technology to participate in the new environment, officials from SBA's Office of Advocacy told the House Small Business Committee.

According to an Office of Advocacy study, only 1.4 percent of small businesses use the Internet to buying and selling goods and services. Most do not have e-commerce capabilities because the up-front costs are prohibitive, and because the investment is unlikely to yield a return.

SBA has begun studying the impact of federal procurement reforms of the early 1990s. The data suggests that contract bundling, in which individual requests for proposals are combined into a single bid, leads to declines in purchases from small businesses. It also reveals that two-thirds of the total prime federal contract dollars are controlled by the federal procurement centers that spend the least amount of money on small businesses.

"The data tells us that something is wrong; it does not, however, tell us how to fix the problems," Jere Glover, chief counsel in SBA's Office of Advocacy, said in a written statement submitted to the committee.

The General Services Administration launched a small business procurement Web site earlier this month. The site, www.smallbizmall.gov, allows agencies to shop for information technology products and services from small and disadvantaged businesses.

Private firms are also addressing the small business dilemma. Tony Bansal, CEO of Digital Commerce Corporation, said his company's product,FedCenter.com, allows small businesses to set up their own Web sites and put product catalogs online.

SBA says the government whould develop special procurement vehicles that only small businesses can bid on and offer monetary awards to contracting officers who make awards to small businesses.

"Without managerial systems in place, or accountability measures that provide incentives for agencies to do business with small business, the benefits of e-commerce as used by the federal procurement system will not redound to small business," Glover testified.