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2/27/2003
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States Will Be Slow To Take Advantage Of Federal IT Buying Muscle

A report from market-intelligence firm Input says state and local governments aren't expected to use the buying provisions under the E-Government Act in the near future.

Though the recently enacted E-Government Act will let states piggyback on a federal procurement schedule to purchase IT wares at cheaper bulk rates, most states aren't expected to take advantage of the program anytime soon, according to a report issued Thursday by the government market-intelligence firm Input. "Similar to the trend we've seen with federal agencies, we anticipate state and local government adoption of the Schedule 70 vehicle to be slow initially, but steadily rise as current legal and accounting barriers are overcome," says Marcus Fedeli, Input's assistant manager of state and local market development services.

The General Services Administration plans to finalize rules allowing states and local governments to participate in the IT procurement schedule by April 17, meaning purchasing could begin shortly thereafter.

Another market-intelligence firm, Federal Sources, estimates that the federal government spent $13 billion in hardware, software, and services from Schedule 70 contracts in fiscal year 2002.

"Once the cooperative agreement matures," a Federal Sources reports, "states and localities could appreciably increase sales through the schedule annually. However, one major hurdle to pursuing this purchasing agreement is the need for a government body to resolve state and local government disputes with schedule contractors."

That won't necessarily be easy. "The administrative workload of approving a Schedule 70 purchase in New York would dissuade any state agency from working with GSA until the system is modified," Fedeli says.

As Schedule 70 becomes a factor in state and local governments, procurement officers will transform their contracting practices to compete and compare with federal schedules, Fedeli says. Considering that states and local governments spend some $40 billion a year in IT goods and services, IT producers will watch closely on how these governments will react. "To maintain an advantage," he says, "vendors will have to adjust their pricing based on the markets where they choose to compete."

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