Government contracting is done electronically, through two types of electronic means; e-commerce websites and EDI, which stands for Electronic Data Interchange.
The concept of electronic procurement for a small business not yet comfortable with new technology can be overwhelming. E-procurement takes many forms and has become a requirement for doing business with the government. But the electronic procurement requirements that we describe here are not unique to the government. They are the same as a large private-sector business requires of its suppliers. Therefore, it is essential that any business at least consider these issues, whether it does business with the government or not.
Electronic procurement with the government typically takes two forms: e-commerce websites and/or Electronic Data Interchange (EDI).
As a consumer, you've most likely purchased a product or service such as an airline ticket or an item of clothing on one of the many e-commerce web sites. When you complete your order by entering the required information and electronically submit your order via a website instead of calling or mailing in your order or visiting a store location, you are participating in electronic procurement. The information that you provided is electronically connected into the merchant's internal systems. The benefit to you as the consumer is saving time; the benefit to the merchant is saving the costs associated with processing a paper order, paying phone order takers, printing a catalog, and maintaining a store location.
When it comes to government-sponsored, e-commerce web sites, the set-up is similar to the one described above, except that in this situation, the government agency is the consumer, you are the merchant, and it is the government that provides the website for performing various procurement transactions, such as displaying requests for proposals, submitting bids, delivering invoices, etc. This is a great benefit if you have a limited number of order transactions because the only technology it requires of you is a computer, Internet connectivity, and a web browser. A contractor will need to speak with the buyers of each agency to determine if an e-commerce website is available, where it is located (the web address), and what procurement functions can be performed. Also, you may need to obtain a username and password from the agency to access the site.
Government agencies that do not offer an e-commerce web site will most often require a contractor to communicate order transactions via EDI, the second form of electronic procurement with the government. EDI is a set of standards that defines how data/information is presented in an electronic form, thereby allowing the electronic equivalents of common business documents, such as invoices, forms, bids, requests for quotes, purchase orders, etc., to be transmitted electronically between the computers of what are called "trading partners." A trading partner can be the federal government, a prime contractor, or another commercial business.
Why are EDI standards necessary? For purposes of illustration, let's say that the government has contracted with you for certain supplies and wants to receive your invoice electronically. You go ahead and oblige by sending your invoice file in a format that is unique to your system. Since the way that data is presented in the government's system is also unique, in order to import your file into its system, it must first convert the data into the format that matches the format required by its system's database. Now imagine how difficult it would be for the government to manage this process if each of the thousands of government contractors were each to send electronic invoices in a format unique to their system.
So, instead, the government asks its contractors to convert their files into a standardized format (EDI) prior to sending into a standardized format. Using EDI as the standard, the government receives only one standardized format for all invoices and only has to manage converting files into one file format for each document type (invoice, purchase order, shipping notification, etc.).
Who sets EDI standards? There are nonprofit committees that define EDI standards for the country. The set of standards most often used is called ANSIIx12 4010. Within that set of standards, there are many documents, referred to by versions and numbers (e.g., 810 is the standard invoice document, 850 is the standard purchase order document, and 997 is the standard functional acknowledgement that confirms the receipt of the files by each party).
An explanation of these standards and the specifications for each version can be found at the Department of Defense and Defense Information Systems Agency.
Converting data into EDI. There are three basic options for getting your data into EDI format. It's best to check out all options as prices and functionality vary greatly.
Which is the best option for you? In order to define a return on investment for any of the options, you should take the following factors into account:
A recent development in data exchange is the use of XML (extensible markup language), a new high-powered web language developed for e-business. Unlike HTML, which displays text and images on web pages, XML enables the exchange of structured data over the web. This new technology will allow greater integration of e-partners, so they can track material/parts/supplies through the supply chain.
What EDI can do for you. Here are just some of the advantages of being EDI-capable:
Exchanging EDI files. To manage various security and tracking issues associated with exchanging the high volume of files the government exchanges, it uses what is called a Value Added Network (VAN). In simplest terms, a VAN is a for-profit private-sector business that provides and manages a collection of secure mailboxes that are used to deliver and receive order files.
If you are doing business with the government, via EDI, you will need to acquire a mailbox from a VAN from which you will pick up and deliver files from and to the government via a dial-up connection. The VAN of your choice will offer you technical assistance in this area.
It is not a requirement that your mailbox be located on the same VAN as the government's. Most VANs have agreements with one another that enable them to exchange files. However, there is a cost for this, referred to as an Interconnect Fee. If you're doing business with only one government agency, you may decide to obtain a mailbox on that agency's VAN to avoid Interconnect Fees.
There are many other fees for optional ancillary services VANs offer. The main fee incurred is the "per kilo character" charge (per 1000 characters). VANs are becoming more competitive these days, so be sure to compare prices. As an ancillary service, most VANs also offer third-party translation services.
In closing, our advice is to use the information we have provided to perform a methodical appraisal of all the solutions available to you, and then choose the best one for your company.
It always amazes us how most people willingly and unhesitatingly give out their credit card number, Social Security number, address, and almost anything else that is asked for when placing an order by phone. Yet, when it comes to ordering over the web, people will hesitate to give out any information, thinking that anyone "out there" could access and misuse it. However, the truth is that most e-commerce sites are completely secure and safe. Just know the site you are dealing with.
All branches of federal government are required by law to migrate their business practices to a paperless operation. In implementing the new e-procurement way of contracting, it is clear that there is a need to ensure the confidentiality, security, and authentication of information exchanged between government and its contractors in the electronic environment. This need has been addressed by the adoption of a mandatory electronic system.
The Department of Defense (DoD), the buying giant of the federal government, has addressed the need for security in the e-government environment by adopting a mandatory system, referred to as "public key infrastructure" (PKI). PKI allows DoD to electronically communicate with industry by enabling paperless, secure, private electronic business contracting. In addition to adoption by DoD, PKI use is expanding at all levels, including federal, state, and local levels of government as well as in the private sector.
What is PKI? It works much like a realtor's lockbox. Under this arrangement, the seller has agreed to "trust" the realtor to gain access, via a key or combination to a lockbox, and show the home to prospective buyers when the seller is away.
PKI uses a process similar to the realtor's lockbox, although in this case the lockbox is digital and is stored on computers. For government contracting purposes, a unique PKI digital identity certificate file is issued to a contractor's authorized officer or agent. In essence, this PKI digital certificate file verifies that the contractor is in fact authorized to conduct business electronically with the government contracting office. In this way, PKI helps the contracting parties to establish a "trust relationship" while doing business via computers in a virtual world, and digitally protects the information assets of both parties in much the same way a lockbox protects the seller from allowing just anyone to enter the home while still providing access to the "trusted" parties and potential buyers.
In addition to ensuring the security of the electronic information at all times during transit through shared networks and storage on network servers and desktop hard drives, it ensures that the document being signed and sent online is from the company or person authorized to provide the information within the electronic document, that the document is legally signed in accordance with current federal and state laws, that the document has not been altered since being completed and electronically signed, and that the electronic document is time-stamped and requires an electronic return receipt.
What PKI means to you. At this point, you may be wondering how all of this could affect you. Here are answers to the questions businesses most often ask about PKI:
The following websites can give you more detailed information on the various PKI programs for GSA and DoD:
Security is, and will continue to be, an issue in many aspects of our lives, including e-business. Although digital authorization is not currently a requirement, it certainly may be one day. It's a good idea to keep yourself informed about changes and developments. In the next several years, you will start to see more adoption of digital identities through the government implementation of Homeland Security policies.
With the surge in identity theft, you'll see an increase in PKI. If you are going to do any type of business on the Internet, you'll need to protect yourself and your company. It will cost you little-to-nothing to get there. It only takes a little time and effort.