E-procurement site losing users

An electronic marketplace designed by the Navy hasn't lived up to expectations despite a promising start, according to a new study.

SeaPort, created by the Naval Sea Systems Command (NAVSEA), was the federal government's first electronic procurement portal. NAVSEA modeled the portal after Amazon.com, envisioning it as a site where service contractors and government procurement officers could complete quick, efficient and cost-effective transactions. In an October 2000 business plan, NAVSEA stated that the site could save the Defense Department as much as $250 million.

The site has already helped NAVSEA generate considerable savings, according to an IBM Endowment for the Business of Government study. Within 10 weeks of SeaPort's April 2001 launch, the government had recovered the upfront costs of designing the site.

Over the first 18 months following SeaPort's debut, NAVSEA saved a total of $55 million in services acquisition, the IBM report said. Statistics are not available on the portion of these savings directly attributable to SeaPort, according to Claire Grady, the site's program manager. The majority of NAVSEA's services acquisition savings came in the first six months after the site debuted. Savings from April 2001 to the end of that fiscal year totaled $34.3 million, while savings over the entire 2002 fiscal year reached only $20.3 million, according to the IBM study.

Likewise, the number of site users looked promising at first, but fell off in fiscal 2002, the study showed. By the end of fiscal 2002, SeaPort attracted 326 government users and 224 industry users. The site also processed 101 orders over the same period, more than expected, according to the IBM study. The average value of these orders increased from $1.5 million in fiscal 2001 to $18 million in fiscal 2002, Grady said.

But site usage peaked in August 2001 and fell off markedly in fiscal 2002, according to the IBM report. In September 2002, SeaPort only processed a quarter of the procurement requests processed during September of the previous year.

This downturn could mean that NAVSEA procurement officers, who are not required to use SeaPort, lost interest in the Web portal after an initial rush to check it out, said David Wyld, a professor at Southeastern Louisiana University and the author of the IBM study. Partly because of "inertia," some NAVSEA managers have reverted to procuring services through the General Services Administration, the traditional venue for such work, Wyld explained.

"If this trend continues, certainly the potential benefits of [SeaPort] will be limited, and indeed, the success of the entire venture could come into question," Wyld wrote. Without high usage, the Web portal will not generate the savings expected, he added.

SeaPort has also fallen short of its promise to reduce the processing time for orders to less than five days, the study found. The Web site has significantly reduced processing time, from about a year to roughly six weeks. But NAVSEA is spending triple the time planned on evaluating proposals, causing the overall processing time to exceed the original target by weeks, according to the study.