Manawatu District Council is shaping up as the guinea pig for local government online procurement.
The council is the only local body actively considering using LGOL.Procure, a version of e-commerce provider EDIS’s e-procurement system given the okay by Local Government Online.
LGOL was set up in 1997 by the Society of Local Government Managers and Association of Local Government Information Management to internet-enable the strategies of local government bodies.
Manawatu council information services manager Laurence Bevan says a scoping exercise done on its behalf by PricewaterhouseCoopers was favourable towards LGOL.Procure. The next step is to ascertain how many of the council’s suppliers are interested in using the system.
As well as a setup cost, participants pay the price of integration and transaction fees, which range from $0.80 cents to $1.40 depending on the volume of transactions per year.
Bevan says the top 20 suppliers, including Boise and Mitre 10 who are responsible for about 50% of transactions, are willing to go ahead. The next hurdle is to find out whether smaller suppliers, numbering around two thousand and which account for the other half of total transactions, are willing to trade online. Smaller companies are generally not as advanced on e-commerce as larger organisations, says Bevan.
“They’re the ones whose transactions cost us the most to process and that’s where we can get the most significant cost benefits.”
Bevan says a completely manual transaction from a small, infrequent supplier can cost up to $25 to process.
“If we could get 100% of suppliers on board, and obviously that probably won’t happen, we could save hundreds of thousands of dollars.”
PricewaterhouseCoopers is in the process of finding out how many suppliers and what percentage of transactions are necessary to make using LGOL.Procure beneficial to the council. It is also coming up with a strategy for approaching smaller companies.
“Another issue is how can make it worth their [smaller suppliers] while to use the system because there is a cost involved. We’re trying to work out a way to make it easier for them.”
An investigation into what needs to be done to integrate LGOL.Pro-cure with the council’s main system, ACS Local Authority, by Christchurch-based Election.com (formerly Accent Computers), has turned out positively. Bevan says the costs are acceptable and it would probably involve three months of development work. LGOL.Procure uses XML-based web services to translate documents.
Auckland City Council, meanwhile, which was also looking at using LGOL.Procure, has decided not to go ahead with that or any other e-procurement system.
Auckland City Council CIO Ian Rae says an investigation led to the conclusion that the council is not in the market for an e-procurement offering at this time.
Bevan says he believes other councils are waiting to see what Manawatu District Council does before making any similar moves. Its procurement business model and automation with suppliers was deemed sufficient.