eCOMMERCE & ePROCUREMENT
e-commerce is the online transaction of business, featuring linked computer systems of the vendor, host, and buyer. Electronic transactions involve the transfer of ownership or rights to use a good or service. Most people are familiar with business-to-consumer electronic business (B2C). Common illustrations include Amazon.com, llbean.com, CompUSA.com, travelocity.com, and hotels.com.
E-commerce can be divided into:
E-procurement [a subset of the B2B component of eCommerce] is the business-to-business purchase and sale of supplies and services over the Internet. An important part of many B2B sites, e-procurement is also sometimes referred to by other terms, such as supplier exchange. Typically, e-procurement Web sites allow qualified and registered users to look for buyers or sellers of goods and services. Depending on the approach, buyers or sellers may specify prices or invite bids. Transactions can be initiated and completed. Ongoing purchases may qualify customers for volume discounts or special offers. E-procurement software may make it possible to automate some buying and selling. Companies participating expect to be able to control parts inventories more effectively, reduce purchasing agent overhead, and improve manufacturing cycles.
E-procurement is often integrated within a firm’s overall computerized supply chain management process. This allows for forward buying arrangements to be put into place with vendors who have access to production/buying schedules, thereby allowing them to autonomously ship products as needed on a just in time basis.
http://www.epiqtech.com/Electronic-Procurement.htm
In addition to eProcurement, other components of the broader eCommerce can include “eTailing”, retail selling over the Internet, which we are probably all familiar with; electronic auctions (and reverse auctions) whereby goods are auctioned off to the highest bidder (or purchased from the lowest offer).
Systems within eCommerce can be either “open” or “closed”.
Open systems are those we are familiar with such as Amazon or eBay. These use open standards available to all users of the Internet, thereby maximizing access to potential customers.
Closed systems tend to be used within the confines of a particular enterprise or group of related enterprises. These may require membership, implementation of specific standards for electronic data interchange, and perhaps participation through a designated Value Added Network (VAN), a kind of service provider that facilitates interaction between buyers and sellers. VANs traditionally transmit data formatted as Electronic Data Interchange but increasingly they also transmit data formatted as XML or in more specific "binary" or open formats. VANs usually service a given vertical market or industry and provide "Value Added Network Services" ("VAN Services" or VANSs) such as data transformation between formats (EDI-to-XML, EDI-to-EDI, etc.).
At one extreme, a VAN hosts only horizontal Business-to-business application integration services, hosting general-purpose integration services for any process or industry. At the other extreme a VAN also hosts process-specific or industry-specific integration, for example supply chain ordering or data synchronization services.
A VAN not only transports (receives, stores and forwards) messages but also adds audit information to them and modifies the data in the process of automatic error detection and correction or conversion between communications protocols). (See article about Extranets, below.)
Three broad categories within the context of the electronic marketplace include:
Another way to view eCommerce is by market focus. For example:
Business models for eCommerce may include:
Types of E-Commerce Web Sites:
Transactional Site: People who shop online are most familiar with this type of website. A transactional site may be an electronic storefront for a brick-and-mortar retailer or a catalog business, (e.g., Lands’ End ), or a manufacturer showroom for those wishing to sell directly to the public (e.g., Dell Computer ). Transactional sites conduct full “end-to-end” transactions via the website, allowing customers to search for, order, and pay for products online as well as allowing them to contact the company for after-sales service. The most sophisticated sites create efficiencies by integrating the transaction process with back-office systems such as accounting, inventory, sales and others (e.g., Amazon).
Information Delivery Site: This site generates sales by promoting corporate awareness rather than facilitating online transactions. Its function is similar to a brochure, providing information about the product or service and contact information on how to proceed with a purchase. Because this site is often static and doesn’t require the software systems necessary for online transactions, it is less expensive to design and maintain than the transactional site. An information delivery site is ideal for companies that market products and services that cannot be provided online or goods that cannot be sold online (e.g. Ford, Toll Brothers, and Caterpillar).
A modified version of this site permits the buyer to shop online for the best price from competing vendors providing the identical product, e.g., authorized dealers of Honda America. Information on options available for a particular model allows the buyer to “visualize” the configuration and obtain an estimated price for the vehicle.
E-marketplaces: These sites are market-makers: they bring buyers and sellers together to facilitate transactions. Participation in a brokerage often provides an efficient way of finding a customer without the expense of building a proprietary transactional website. Types of brokerages include auctions (e.g. eBay), virtual malls (www.virtualmall.com) and matching services (Fedbizops, www.fbo.gov).
Advantages of eCommerce include:
Disadvantages of eCommerce include:
How Companies Use Extranets
The goal of an extranet is to streamline communications between your business and external clients, customers or partners. Beyond these general goals, however, different industries may use extranets in very different ways. Consider some of the following examples:
Manufacturing.
From airlines to automobiles, the manufacturing industry uses extranets to provide access to product manuals and technical specifications. Extranets make it easy to share and transfer this type of information, which can run to thousands of pages in print format. Also, those with access can update information, flag problems and issue warnings — all instantly, in a self-serve format.
Financial services. Banks, brokerages and other institutions use extranets to perform a variety of transactions, covering everything from consumer banking to check-clearing services. Even the Internal Revenue Service has developed an extranet that allows tax-processing companies to submit forms over the Internet.
Online catalogs. Suppliers, especially wholesalers, use extranets to make online catalogs available to vendors. Extranets also allow suppliers to offer discounts to favored clients and to discount items that are overstocked, being phased out or proving hard to move. The extranet’s ability to display up-to-date inventory data streamlines the purchasing process for both buyers and sellers.
Web design and development. Web-design firms use extranets to give their clients easy access to ongoing design and development projects. Used correctly, this type of extranet can make the development process more efficient, keep the client informed and involved, and keep the project on time and on budget
Publications. Extranets provide an easy way for publishers to distribute editorial calendars and accept work from authors. Publishers can also combine an extranet with existing content management and workflow applications, allowing them to integrate remote bureaus, freelance authors and contractors, and other offsite team members.
Public relations. Like publishers, public-relations firms often use extranets to manage their content workflow. Extranets are also useful for publishing late-breaking news and updates, making them instantly available to reporters, investors and analysts.
Customer service. Many firms now allow customers to log in and view customized account information, track orders, and communicate with sales and service staff. As a growing number of firms adopt online customer-service tools, more customers expect to find these tools when they deal with a company.
Training and education. Extranets allow online training firms to provide course materials and other resources to their clients. Many schools and universities now conduct at least some of their courses over extranets, allowing students to earn credits regardless of their location or their ability to attend classes on a regular schedule.
Project management. For businesses that employ contractors, an extranet-based project-management system provides an easy-to-use solution for keeping all the players on track. Such systems also allow in-house teams to monitor external vendors who can use the extranet to report their progress.
Supply chain. From automatic ordering to inventory analysis, extranets can be critical in supply-chain management — regardless of a company's size. This is especially true as "just in time" management practices require firms to keep inventory data as current and accurate as possible.
Virtual sales. In some cases, sales teams can initiate and close deals more effectively when they are able to give hands-on demonstrations via an extranet. Extranets allow sales representatives to deliver interactive presentations regardless of a customer's location, and they reduce a company's sensitivity to traditional sales challenges such as industry trade-show schedules and tight travel budgets.
Electronic Procurement in Government Contracting
By Richard White (http://www.fedmarket.com/articles)
The last four installments were devoted to the related subjects of women-owned, minority-owned, HUBZone and small business contracting. We're shifting now into electronic procurement -- or e-procurement -- a topic that seems to grow increasingly important by the day. Over these next few weeks, we'll break down the general topic of e-procurement into the following sub-topics:
We begin with electronic signatures because it's an e-procurement cornerstone. The country's various electronic signature laws have helped make e-procurement possible. Any vendor involved in e-procurement will be operating under the blessing of one or more electronic signature laws.
Government e-Procurement Push
To compete for government business, vendors are finding themselves involved in e-procurement. More and more, they're finding that at least some sales activities must be conducted online. Examples of online activity include responding to RFPs, displaying catalogs, and even executing contracts.
At the federal level, the primary source behind this e-procurement push is Section 30 of the Office of Federal Procurement Policy (OFPP) Act, which requires that a federal procurement organization "establish, maintain, and use, to the maximum extent that is practicable and cost- effective, procedures and processes that employ electronic commerce in the conduct and administration of its procurement system."
In line with this law, traditional Federal Acquisition Regulation (FAR) definitions have been expanded to include the use of e-commerce and electronic signatures. For example, "contract" includes "all types of commitments that obligate the Government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing." The FAR also makes it clear that "in writing," "writing" and "written" refer to "any worded or numbered expression that can be read, reproduced, and later communicated, and includes electronically transmitted and stored information." Furthermore, the FAR states that electronic commerce "may be used to issue RFPs and to receive proposals, modifications, and revisions," and that an "electronic signature may be used in the production of purchase orders by automated methods."
Under the authority of these legislative and regulatory changes, agencies are moving their procurement activities online, forcing vendors to follow.
"Electronic" vs. "Digital" Signatures
To encourage the use of e-commerce the federal government wanted to make it clear that e-signatures are valid in executing contracts. What do we mean by e-signatures? Let's consider two important definitions:
"Electronic signature" is a general term that refers to signatures created using a variety of possible cryptographic methods. Signatures often are accomplished through the use of username and passwords, or PIN numbers. "Electronic" signatures are less secure than "digital" in terms of user authentication.
"Digital signature" is a more specific term (and a subset of "electronic signature") that refers to signatures created with public key cryptosystems. Signatures are accomplished through Public Key Infrastructure (PKI). With digital signatures there is true authentication that the person signing is who he says he is.
The primary federal and state laws in this area, ESIGN and UETA, are based on the looser "electronic signature" requirement.
Electronic Signature Laws
Federal law: Electronic Signatures in Global and National Commerce Act (ESIGN)
The Electronic Signatures in Global and National Commerce Act (ESIGN) expressly authorizes the use of electronic signatures, notarizations, acknowledgments and verifications, and electronic records. Under the act, no contract, signature or record can be denied legal effect solely because it's in electronic form.
The law is rather general, saying essentially that electronic signatures may be used to establish binding contracts. ESIGN also states that a person cannot be required to agree to use or accept electronic records or electronic signatures.
Federal agencies, however, are the glaring exception to this rule. Section 101(b) (2) states that the act does not obligate any person "other than a governmental agency with respect to a record other than a contract to which it is a party."
There are two competing interpretations of this important provision. The Office of Management and Budget's position on section 101(b) (2) is that it applies broadly to an entire transaction involving a government contract, including all records relating to the contract. Under OMB's interpretation, federal contracting officers can disallow all electronic responses.1
A second interpretation holds that section 101(b)(2) does not apply to documents in the procurement process that come before the actual contract (e.g., contractor requests for clarification, statements of interest, and proposals).2 Federal contracting officers under this interpretation could not, for example, exclude an offeror from consideration solely on the grounds that it submitted its proposal electronically.
This second interpretation seems more logical in light of the plain language of the statute. The issue, however, has yet to be decided by a federal court. In practice, many federal agencies still insist on receiving paper responses to solicitations, and, until a court says otherwise, contracting officers can point to OMB's position for support.
But under this interpretation, wouldn't it be asking too much of federal agencies to force them to accept electronic signatures? What about competing standards? What about an offeror who wants to use second-rate or even ineffective e-signature software in submitting its proposal? ESIGN has built-in protections designed to address such problems. The act provides that an electronic record may be denied validity if it does not remain accurate and accessible to all persons entitled to the record.3 It also allows agencies to impose performance standards to ensure record integrity, accuracy and accessibility.4
As a vendor, when would it make sense for you to insist on an electronic response when the solicitation calls for paper? When your interest in statutory interpretation outweighs your interest in winning government business. In other words, probably never.
State laws: two approaches
The states have adopted two general approaches in authorizing the use of electronic signatures: (1) only digital signatures satisfy signature requirements (Utah approach); and (2) electronic signatures satisfy legal signature requirements (UETA approach).
1) Utah approach
States following the first approach authorize the use of only digital signatures, ignoring the more general category of electronic signatures. Utah was the first state to adopt such legislation, sometimes referred to as "long statutes." Long statutes recognize digital signatures as legally binding but go beyond that by giving digital records evidentiary weight, adopting a specific technology (usually asymmetric cryptosystem), allocating liability, and providing a state's Secretary of State (or other public entity) extensive regulatory powers.
2) Uniform Electronic Transactions Act (UETA) approach
The second approach is more in line with traditional contract law, under which a variety of methods can qualify as a signature. (Examples of valid signatures over the years include names on telegrams, typed names, names on letterhead, and faxed signatures.)
States following this approach separate the issue of signature from the issues of security, proof and evidence. These states have adopted, in whole or in part, the Uniform Electronic Transactions Act (UETA), which is similar to the federal act, ESIGN. As of July 18, 2001, 37 states had passed various versions of the UETA.
Practical Effect
When joining government-backed e-procurement systems, you may find yourself operating under one or both of these approaches.
Systems operating under the Utah approach will be more secure. On the other hand, such systems may require that you install and learn to use PKI software.
While systems operating under the UETA approach will be less secure, the benefit is that you won't have to hassle with PKI software. Basically, you'll just have to register with the system (acknowledging, among other things, that you have agent authority to represent your company), choose a username and password, and then enter your username and password each time you use the system.
Let's take a look at systems operating under these two approaches:
1) NASA Electronic Procurement Pilot (EPRO)--digital signature approach
The NASA Electronic Procurement Pilot, known as EPRO, relies on two digital software programs. Vendors responding to solicitations build documents and bundle them together within one program. They then sign cover sheets with a digital signature using another program.
The problem is that it takes time to deploy these tools and explain how to use them.
Officials are debating a possible move toward a more liberal electronic signature approach, one that has been coined "Reverse EPS." (EPS refers to Electronic Posting System, which is the backbone of the federal government's primary contracting opportunity site, FedBizOpps.gov.)
Reverse EPS would help get around the deployment problem. Offerors would log onto a secure NASA server then upload all files associated with the procurement action, such as proposal response or contract execution. The signature event would be a combination of logging in and submitting the documents while logged in. There'd be no extra software to use.
The main concern with this approach is lack of authentication. (Misused usernames/passwords; is the signatory the person he says he is? etc.) Although such a system likely would be on solid legal footing (i.e., ESIGN), agency officials could, in the end, decide they're not comfortable with one that lacks PKI security.
2) eMaryland Marketplace--electronic signature approach
The state of Maryland launched eMaryland Marketplace on March 8, 2000, just before adopting the UETA. Currently 1,800 vendors participate.
Using eMaryland, vendors register and sign an authorization agreement. Users "sign" documents by logging in and submitting them to the system. There are no PKI software installation requirements.
It seems that eMaryland officials want to move virtually all state procurement activity through the system. Plans for the near future include moving major construction projects (those over $100,000) online (including bonding management and submission of costing sheets).
The state's adoption of the UETA, and its resulting reliance on electronic (as opposed to digital) signatures, makes rapid deployment possible.
The Better Approach
Between EPRO and eMaryland, which approach is better?
We come down on the side of eMaryland. We believe that, in general, the lower costs and rapid deployment associated with electronic signatures outweigh the security benefits of digital signatures.
Electronic signatures do not radically alter the legal landscape. Signature requirements aren't exactly stringent under traditional contract law. Over the years, courts have deemed a variety of methods valid in establishing signatures: names on telegrams, typed names, names on letterhead, and faxed signatures, for example. Under the Uniform Commercial Code "any symbol executed or adopted by a party with present intention to authenticate a writing" is a valid signature.
Courts have always had to deal with such issues as forgery. They can handle more modern authentication problems such as misused passwords.
Conclusion
We hope that this installment has helped you sort through some of the legal underpinnings of the e-procurement systems you've joined or will be joining soon. (In Installment 32, we'll take a close look at some of the major systems.)
Beyond that we wanted to let you know that you may be required to install, learn to use, and, in some cases, pay licensing fees for PKI software. It appears that the trend is in the opposite direction, however, with the widespread adoption of the UETA at the state level, and the development of electronic signature-based systems such as eMaryland Marketplace.
That is our hope, anyway.
Resources
eMaryland Marketplace
http://www.emarylandmarketplace.com
"The Fundamental Legal Issues Raised by e-Commerce"
http://profs.lp.findlaw.com/signatures/signature_1.html
"Comparison of E-Sign and Pure UETA"
http://www.state.ma.us/itd/legal/esign-ueta-compare.htm
Federal Digital Signature Standard (DSS), FIPS PUB 186-2
http://csrc.nist.gov/publications/fips/fips186-2/fips186-2.pdf
End notes:
1 OMB Memorandum for the Heads of Departments and Agencies, Jacob J. Lew, Director, September 25, 2000.
2 Samelson and Bedwell-Cole, “Will ESIGN Affect Government Contracting Practices?” Contract Management, November 2000.
3 15 U.S.C. § 7001(d).
4 15 U.S.C. § 7004.
Finding Vendors on the Internet
By Richard White (http://www.fedmarket.com/articles)
With the emphasis these days on procuring commercial products in lieu of government specified-products -- and the accompanying emphasis on market research -- many government buyers find themselves spending a good portion of their day looking for vendor information.
This installment presents a few thoughts on finding vendors on the Internet.
Define Product/Service Requirements
Get together all the relevant information you can about the product/service before you start. Examples of helpful questions to ask are:
Background Research
Go to Google.com and use appropriate keywords to get a better understanding of the item. At this stage you should be thinking about helpful keywords that describe the product, both the obvious ones and those not so obvious.
Searching using the obvious keywords can lead you to Web pages mentioning the more obscure words and phrases (e.g., "Plastic Fabrications" instead of "Polyvinyl bags") that you might find useful later at sites such as Thomas Regional and Thomas Register.
Google alone may lead you to one or more companies that can supply the item. If you believe you've found a good company at this point -- after reading product descriptions, etc., at a company Web site -- look that company up in one of the company listing sites mentioned below. Cross-reference using product categories to find competitors. All things equal, zero in on companies that are located within your geographic area.
Consider using the FirstGov search engine, http://www.firstgov.gov, to find relevant information at federal Web pages. (E.g., you might find information written by government buyers about products they've used successfully or not so successfully in the past.)
If you’re wading through a lot of irrelevant information, consider using very specific keywords such as agency specification numbers, if available. For example, if you had a specification such as "Forest Service Interim Specification 5100-318A" you might type "5100-318A" into FirstGov or Google just to see what happens. Perhaps you'll bring up an old FedBizOpps or CBD notice that provides critical background information on the item. Search http://www.fedbizopps.gov for federal procurement and award notices. To search CBD archives, go to http://www.fbodaily.com/cbd/archive/ or http://cbdnet.access.gpo.gov. (FedBizopps replaced the CBD as the official source in early 2002.)
Company Listing Sites
The following company listing sites are free but you will have to register to obtain username/passwords.
Other sources:
If still no luck, try associations for the product line you are looking for (e.g., in the case of plastic-based products, you might try the American Plastics Council). Such associations often have member directories, although they tend to be spotty. They may also contain valuable links to other sources for vendors.
Oh, and don’t forget to try that old standby the Yellow Pages, both online (e.g., http://www.superpages.com) and offline.