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AGIMO archive > Publications (NOIE) > 2002 > November > Doing Business Online with Government > Introduction - Why trade electronically with the Commonwealth Government?

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Doing Business Online with Government

1. Introduction - Why trade electronically with the Commonwealth Government?

1.1 What is e-commerce?

E-commerce is the use of the Internet to buy and sell goods and services. E-commerce is changing the way in which organisations do business. It can be used to improve purchasing and sales processes and lower the cost of transacting business for both large and small companies.

Business-to-business (B2B) e-commerce - trading between businesses - is the fastest growing area of e-commerce. B2B transactions over the Internet can save businesses time and effort by streamlining the traditional paper-based processes of requisitioning, obtaining approvals, and receiving and reconciling payments.

For suppliers, e-commerce offers:

For buyers, e-commerce offers:

Practical benefits for business

The benefits of e-commerce to small and medium sized enterprises (SMEs) have been demonstrated in a series of case studies released by NOIE in late 2001 1. The study involved interviews with 34 SMEs from different industry groups, chosen from all areas of Australia including rural and regional areas.

Most of the businesses surveyed did not need to make a large investment in e-commerce to make gains. They found that savings came from corresponding via email, using their websites as a marketing tool, and conducting financial transactions online. A combination of these efficiencies allowed some businesses to grow and to engage staff in more satisfying and profitable activities.

Other significant results were:

1.2 What Government is doing about e-commerce

The Commonwealth Government is implementing electronic procurement (e-procurement) using e-commerce to purchase goods and services, for the same reason businesses are - to improve the way it does business. The Commonwealth Government is also committed to being a leading user of online services and demonstrating the benefits of electronic trading to the community.

The Government's Commonwealth Electronic Procurement - Implementation Strategy (April 2000) set two goals for Commonwealth agencies:

Suppliers to Commonwealth agencies are encouraged to implement e-commerce arrangements that meet their needs, within the open standards framework.

Commonwealth agencies have made considerable progress in implementing electronic payment, with two-thirds of agencies paying the bulk of their suppliers electronically. Most agencies have a basic e-procurement capability. These include some online purchasing, generally from a few major suppliers such as stationers.

With regard to complex procurement, the Commonwealth Electronic Tender System (CETS) at www.tenders.gov.au, piloted successfully in 2001, will allow agencies to conduct tendering and quotation processes online. NOIE has committed to the redevelopment of CETS software to provide enhanced functionality, capacity and robustness. This will bring the system up to full production standard in preparation for implementation across Commonwealth agencies from the second quarter of 2003, with more tenders appearing progressively on the site.

Some agencies are pursuing advanced approaches to e-procurement, such as:

Cheque is in the mail

Accelerating e-commerce between businesses and Commonwealth agencies

The most recent Australian Bureau of Statistics (ABS) figures show that in June 2001, 69 per cent of Australian businesses had Internet access, but only nine percent were selling goods or services via the Internet 3. The lack of suppliers able to trade electronically is nominated as a major impediment to increased uptake of e-procurement by Commonwealth agencies.

In September 2001, the Government announced funding of A$6.5 million to accelerate the uptake of e-commerce by small business. This funding will encourage more small businesses to go online and to deepen their engagement in e-commerce through a series of specific guides, supported by case studies. The funding will also assist small businesses and Commonwealth agencies to implement electronic trading. It will be used to provide Government suppliers with information tailored to their specific requirements - such as this guide - and to help some small business suppliers take part in 'proof-of-concept' e-procurement demonstrations with agencies.

The funding will also be used to assist Commonwealth agencies - particularly smaller agencies - by working with vendors to provide low-cost e-procurement systems for transactions with suppliers. This will involve assessing e-procurement systems against Government requirements, facilitating enhancements, and providing practical assistance to early adopters.

If you are considering implementing e-commerce, you should approach your major agency customers to find out what their plans are for e-procurement. This will help you to ensure that any arrangements you put in place allow you to trade with them electronically. Agencies have the flexibility to implement e-procurement arrangements that best meet their needs within the overall Commonwealth Government framework.

What about State and Territory governments?

State and Territory governments are pursuing a range of approaches to e-procurement. Some have selected a single service provider (for example, South Australia, Western Australia), while others have established a panel of providers (Victoria). Some (for example, Western Australia, Victoria, New South Wales) have established (or intend to establish) a whole-of-government e-marketplace for hosting suppliers' catalogues.

More information about the e-procurement activities of each State and Territory is available at:

Promoting an open trading environment

The Commonwealth Government is working with State and Territory governments through the Australian Procurement and Construction Council (APCC), a peak council of departments responsible for procurement and construction policy, to promote a national approach to e-procurement. The objective is to ensure that suppliers and governments are able to trade in an open environment, and get full value from their investments in e-commerce. The APCC Government Framework for National Cooperation on Electronic Procurement 4 endorses an open standards-based approach (see section 2 for more information about standards).

The global electronic trading environment

Governments around the world recognise the benefits of e-procurement, and are moving their purchasing and payments online. Information about e-procurement in selected countries is available at:

1.3 Pathways to e-commerce

Moving to e-commerce can be an evolutionary process - there may be a number of steps involved. For instance, you may wish to obtain Internet access and an email account initially. The next step might be to establish a website to market your business and its products. If you sell commodity goods, you might then decide to establish a simple online catalogue with product details and prices, but without the capability to place orders. You may then decide to include transaction capabilities to allow buyers to place orders through the catalogue. An alternative option is to join an e-marketplace - these offer a range of services, including catalogue development and transaction capabilities. As previously stated, while there may be a number of steps involved, it is important to make a start in order to capitalise on the opportunities afforded by e-commerce, such as accessing new market opportunities, increasing efficiency and competitiveness.

This guide focuses on trading electronically with Commonwealth Government agencies. Some of the information provided relates to particular systems the Commonwealth Government has implemented. Where relevant, links are provided to information about e-procurement initiatives of State and Territory or international governments. Some parts of this guide are more general and are relevant to trading electronically with business partners more widely. Of course, Commonwealth agencies typically form only one segment of a business's customer base. Ideally, your e-business strategy will take account of the full range of your customers' needs and capabilities.

The flow diagram below illustrates, at a high-level, different stages involved in the trading process, from a supplier's point of view. It excludes stages, which do not generally involve electronic trading, such as delivery of goods and services 5.

The fork in the diagram illustrates the different processes involved in 'simple' procurement (purchasing commodities from catalogues) and 'complex' procurement (tendering for strategic and non-commodity items).

In practice, acquiring particular products may involve both kinds of procurement. Complex procurement for example, includes situations where an agency might select a stationery provider through a tender process. While simple procurement includes situations where a contract has been established - purchasing officers might then place orders through the stationer's catalogue.

The next section shows how you can trade electronically with Commonwealth Government agencies in various stages of the procurement cycle.

The procurement cycle

Useful references

More information about e-commerce options is available on the NOIE website 6. The website includes guidance for small businesses and A Ready Reckoner spreadsheet to assist firms undertake their own cost/benefit analysis for the adoption of e-commerce. More information will be available in a second series of small business e-commerce case studies and an e-commerce guide for SMEs. These are scheduled for publication later this year and will be available on the NOIE website (www.noie.gov.au).

Cartoon: Trade cycle

Footnotes

1 The full report, Advancing with e-commerce (NOIE, 2001), is available.

2 'Simple procurement' is buying goods and services that are commodities or otherwise easily described, through simple purchase processes. 'Complex procurement' is the acquisition of goods and services that are not commodities, and usually involves a tendering process, which may consist of several stages. The open standards are described in Section 2 of this Guide. The strategy is available here.

3 Business Use of Information Technology, Australia (Australian Bureau of Statistics, 2002). Summary information is available at http://www.abs.gov.au/ausstats/abs@.nsf/5f1e01afb32859f9ca25697500217f48/ 86d9fbd4a5bac37fca256b810080827b!OpenDocument.

4 An updated version of the Framework was released in June 2002 and is available on the APCC website at http://www.apcc.gov.au/apcc/docs/APCCFRAMEWORK2002.pdf

5 Of course, where the goods or service are in digital form (for example, online publications), they may be delivered electronically too.

6 at www.noie.gov.au/ebusiness 

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