Government depts forced to use GoProcure system

11.00am - By ADAM GIFFORD

The Government intends to force all its departments to use the centralised GoProcure electronic purchasing system, despite a lack of enthusiasm from departments so far.

State Services Minister Trevor Mallard said yesterday that the Government would go ahead with GoProcure, which will be built and run by consulting firm Cap Gemini Ernst & Young, using technology from United States company Oracle.

He said he was disappointed at the lukewarm response of departments to the pilot phase, but "one of the differences here is thinking what is good value for the whole of government and New Zealand rather than what is simplest for each agency to do".

GoProcure is an online "transaction hub" which holds supplier catalogues and passes transactions electronically between government agencies and suppliers.

The Government expects different levels of use _ while staff in smaller agencies may just go to the website to look at catalogues and send orders, some agencies may link parts of GoProcure into their internal requisitioning processes.

In April the Government said the system would cost $7.5 million over five years. However, the State Services Commission's e-government unit has tried to negotiate a lower figure after departments refused to commit themselves to using it.

The contract cost is supposed to cover the cost of configuring the system to meet agency needs, enabling agencies and suppliers to use the system, hosting supplier catalogues, supplying the interfaces to allow transactions to be transferred to agencies' internal systems, and operating the system for five years.

What it will not cover is many of the real costs of running an efficient purchasing system, which experts say is more about changing business processes than wrapping a technology layer around the outside.

It is also unclear whether the State Services Minister has the power to mandate use of a system.

Mallard said GoProcure would save government agencies at least $6.5 million a year.

"I expect part of the savings will be because suppliers' costs will be lower," he said.

"Other savings will be through transparency. People will be able to easily see their internal costs, which is not easy now.

"The third way we will save is through demand aggregation."

What is not clear is the real cost of the system. The minister's office refused to say which five departments and Crown entities would be involved in the first phase of GoProcure, which will run from February to October next year.

"From November 2003 GoProcure will be progressively rolled out to all other departments and large Crown entities," the official press release said.

A spokeswoman said this should be read as confirming departments will be required to use the system.

Mallard said the Government would advance money to the State Services Commission to buy the system. The money would be repaid over five years from subscription fees from participating agencies.

The commission expects about $250 million a year in spending will be put through the system.

"We did learn some lessons by watching some other systems at work," Mallard said.

He said the School Trustees Association STAbuy marketplace, which clipped the ticket on every transaction schools put through it, "eventually failed because suppliers went round the back door, they developed relationships through it, then then said to schools we can cut the School Trustees Association out of the deal.

"That is a lesson not to go for a commission approach. Agencies will be paying a levy and that will be an incentive to use the system."Mallard said GoProcure would make it easier and cheaper for suppliers to deal with the Government.

"Only one catalogue needs to be maintained, and only one interface established, to sell electronically to all government agencies. That compares to the alternative approach of suppliers building links to many government agencies individually. This will reduce costs for many small and medium-sized businesses," he said.

One problem for the Government is that much of the taxpayer spend goes through agencies which are not under the direct control of a minister, such as schools and hospitals.

Some big spending departments like Police and Defence have already invested in electronic purchasing technology, and will get little benefit from GoProcure.

Many other departments have supply contracts with GSB Supplycorp, a company born out of the privatised Government Stores board, which has invested in its own electronic marketplace using Commerce One software.

Chief operating officer Carl Mitchell-Turner said GSB Supplycorp is committed to working in with GoProcure, for the benefit of its customers, which include 350 publicly owned and 800 publicly-funded entities.