Daniel J. Drake
John A. Ciucci
Prepared pursuant to Department of Defense Contract MDA903-85-C-0139.
The views expressed here are those of the Logistics Management Institute at
the time of issue but not necessarily those of the Department of Defense.
Permission to quote or reproduce any part must - except for Government
purposes - be obtained from the Logistics Management Institute.
LO;!'ThTICS MANAGEMENT INSTITUTE
64(X) Goldsboro Road
Bethesda, Maryland 20817-5886
90 05 09 1'2
ELECTRONIC DATA INTERCHANGE IN PROCUREMENT
The information technologies that have improved commercial purchasing hold
great potential for Government procurement as well. In commercial practice,
electronic linkages between buyer and seller speed order placement, improve
solicitation/offer/award processing, improve visibility of order status, support just-in-
time inventory and distribution techniques, and generally achieve savings far in
excess of start-up and operating costs. With judicious application, similar benefits
are readily attainable for Government small purchases whose simplified procedures
enable use of electronic means. Gaining these benefits for large purchases, however,
will require development and implementation of a specific, permissive policy.
Electronic interface technologies have long played an expanding role in
purchasing. The telegraph, telephone, telex, and facsimile are older communications
technologies whose advantages have gradually been recognized in Government
procurement regulations. More modern electronic interface technologies -
electronic bulletin boards, electronic mail (E-mail), and electronic data interchange
(EDI) - can provide even greater advantages and need similar acceptance.
example, unlike predecessors that merely supplemented paper contracting processes
and provided little security, EDI offers secure, authenticated contracting
transactions that can be electronically authorized, documented, transmitted,
received, and acknowledged.
Automated Government procurement systems are currently producing hard-
copy contractual documents that are mailed to contractors and entered into their
automated contract management and order processing systems. This conversion of
automated information to paper and back to automated form is not only slow and
labor-intensive, it is error-prone. Modern automated procurement systems utilizing
ED[ will substitute electronic records and transactions for paper files and documents.
doing much to streamline procurement operations and improve internal efficiency.
Government can emulate industry's experience with EDI but cannot duplicate
precisely all of its applications. Commercial buyers can require their suppliers to
have EDI capabilities; the Government cannot. Commercial buyers are under no
obligation to publicize requirements, provide solicitations to all requesters, seek
competition, consider protests, or promote use of small and minority business as
suppliers. In contrast, in Federal procurement, requirements must be publicized
widely; solicitations are publicly displayed and sent to all requesters to obtain full
and open competition; bids are formally received and opened; and small, minority,
and domestic businesses enjoy such advantages as receiving award although their
prices are higher and even having many procurements set aside for their exclusive
participation. Despite the complexities introduced by these requirements, we believe
that Government procurement can comply w.,ith statutory requirements for full and
open competition and small business opportunity while still providing offerors with
faster, broader access to solicitations than is provided by current labor-intensive,
Federal Acquisition Regulation (FAR) Part 13, Small Purchase and Other
Simplified Purchase Procedures, authorizes oral orders, oral quotations, written
telecommunicated purchase orders without signatures, and minimal file
documentation for purchases under $25,000. Electronic orders, quotations, and
records conform to FAR Part 13 requirements while offering better documentation
and safeguards through electronic audit trails and software access controls. The
Defense Logistics Agency's Paperless Ordering Placement System (POPS) and
Standard Automated Materiel Management System (SAMMS) Procurement by
Electronic Data Exchange (SPEDE) provide adequate proof of concept for small
purchases and other simplified procedures using electronic means. But many other
opportunities to streamline contracting by exchanging electronic requests for
quotations, quotations, purchase orders, delivery orders, and provisioned item orders
have yet to be realized. In particular, many opportunities remain for applying EDI to
procurements above the small purchase limitation.
Obstacles also remain. A principal one is the concerns that have been expressed
over legal requirements for signatures and written documents, standard forms, and
enforceability or negotiability of electronic documents.
concerns may have been overstated and that, in any case, they can be accommodated
We believe that these
by using trading partner agreements and by regulatory changes to recognize and
facilitate increased use of EDI in Government procurement.
To achieve the benefits of and overcome barriers to the further application of
electronic interfaces to Government contracting, we recommend the following
" Recognize that EDI is an integral part of an overall procurement process
improvement strategy and that procurement EDI is part of a larger
electronic relaionship wiLth industry including electronic payments.
" Establish pilot projects to test concepts and increase our knowledge of
network management, security, competition, and small business issues that
arise when using EDI for procurements under the FAR Part 14 sealed
bidding procedures and the FAR Part 15 negotiation procedures.
* Develop an implementation strategy, based on the results of pilot EDI
projects and procurement process improvement initiatives, that initially
emphasizes small purchases and high-volume, repetitive ordering and
gradually moves through a mixed paper/electronic transition period to
achieve ultimate application to fully competitive large purchases.
* Amend the FAR to permit use of electronic contractual documents and
procedures in appropriate circumstances when electronic signature,
message authentication, audit trail, and record retention safeguards can be
established to cover the risks posed by fraud, protests, and disputes.
* Develop security and authentication procedures for electronic transactions
and records appropriate to the particular types of risk associated with
various kinds of acquisition and with the specific procurement method used.
* Develop an EDI transaction implementation guide for common procurement
documents to encourage uniform transactions and procedures within the
defense industry and, ultimately, all Government.
" Include EDI concepts and procedures in Government procurement training
courses to prepare buyers and managers for the cultural changes that will be
required by and will result from paperless transactions and procurement
* Establish programs through the Small Business Administration-sponsored
small business development centers to inform small businesses of EDI's
concepts and potential so that they can learn how to participate in electronic
Executive Summary ....................................
List of T ables ..................................................
List of Figures ..................................................
Chapter 1. EDI: The Next Step in Procurement Automation .......
W hat EDI Does
Procurement Efficiency and Process Streamlining ..........
Procurement Automation Improvements
Commercial Purchasing Success ..........................
DoD's EDI Experience: Commercial Items and Small
Purchases . ...........................................
The EDI Challenge: Large Competitive Purchases
Assuring Integrity in the Procurement Process .............
Procurement Process Improvement
Organization of this Report ...............................
1 - 1
Chapter 2. Findings and Recommendations ......................
Recom m endations .......................................
Chapter 3. EDI Applications: Examples and New
O pportunities .......................................
Government Transportation Procurement Application
DoD EDI Procurement Application ........................
Paperless Ordering Placement System
SAMMS Procurement by Electronic Data Exchange
Commercial Purchasing Practices and Procurement
Stream lining in DoD ..................................
EDI Procurement Opportunities ..........................
Potential EDI Applications ...............................
Chapter 4. Resolving Legal, Regulatory, and Procedural
B arriers ............................................
Electronic Contract Formation and Legal Sufficiency .......
Written Contract Requirement ...........................
Electronic Signature and Authentication ..................
Electronic Recordkeeping ................................
Paperless Contracting ...................................
Small Business Contracting Opportunities .................
Restrictions on Competition ..............................
Synopsis and Solicitation Notice Requirements .............
Representations and Certifications ........................
Contractual Forms and Clauses ...........................
Defense Priorities and Allocations System .................
Standards and Implementation Guides ....................
Contractor Computer Data Retention Requirements ........
Docum ent Distribution ..................................
Internal Acceptance of Electronic Documents ..............
Protection of Competition-Sensitive or Proprietary
Inform ation ..........................................
System Failures .........................................
Procurement Personnel Changes ..........................
Availability of EDI Translation Software ..................
EDI Im plem entation .. ..................................
G lossary ......................................................
G loss. 1 - 2
Appendix A. Trading Partner Agreement to Authorize ED[ ........
A-1 - A- 7
Appendix B. Recommended Acquisition Regulatory Changes
to Recognize ED[ ..................................
B-I - B-12
ANSI X12 Transaction Sets ..............................
DoD Delivery Orders Under GSA Multiple-Award
Provisioned Item Orders Issued in FY89 ...................
EDT Software for Major Automated Procurement Systems ...
EDI Procurement Approach Summary - Low Risk .........
EDI Procurement Approach Summary - MediumiHigh
R isk .................................................
Computer-to-Computer ED[ Transmission .................
DoD Contracts - FY88 ..................................
Total Electronic Information System ......................
Simple EDI Purchasing Example .........................
Front-End Environment .................................
EDI: THE NEXT STEP IN PROCUREMENT AUTOMATION
Most Government procurement activities are using automation in some form.
Technology advances have permitted automated procurement systems to evolve from
being used solely for assisting contract document preparation to functioning as
complex, integrated total information systems. These more advanced procurement
systems share information through networks with other Government computers,
thereby improving decision making and processing. Use of new information
technologies has improved internal processing, but these technologies have had little
application as yet to external Government-contractor interfaces and processes. The
next logical step in this evolution is to integrate internal Government purchasing
systems with contractor systems through an electronic interface technology known as
electronic data interchange or EDI. As procurement automation evolves and
acquisition regulations adapt to this technology, EDI will provide DoD, and
ultimately all of Government, with great opportunities.
WHAT EDI DOES
Electronic data interchange is the computer-to-computer exchange of routine
business information. Commonplace in many private companies, it promises to
become the preferred method for conducting business in the future. With the
appropriate computer hardware, software, and communications, business and
Government together can eliminate the tedious flow of paper purchase orders,
invoices, shipping notices, and other documents and replace them with electronic
equivalents. In its simplest form, EDI links the Government's automated purchasing
computer and the contractor's order processing computer through telephone lines, as
illustrated in Figure 1-1.
Computer-to-computer interchange of information is new neither to industry
nor to DoD. Since the 1960s, large private companies and DoD activities have been
communicating business information electronically but in nonstandard and
proprietary formats. What is new is the emergence of nationally and internationally
recognized data formats, commonly referred to as standards or transa,:tion sets, that
FIG. 1-1. COMPUTER-TO-COMPUTER EDI TRANSMISSION
serve to broaden and ease the interchange of data. The American National
Standards Institute's (ANSI's) Accredited Standards Committee X12 (ASC X12) has
developed national standards for electronically interchanging business transactions
between industry members and among industries. The commercial standards
eliminate the need to create special software to receive or send user-unique data
ne software designed to generate and interpret standard formats
can be used to exchange information with all trading partners. And, interestingly,
many companies are now using these same standards to facilitate the internal
exchange of information.
The motivations for using EDI are compelling: the typical costs for processing a
paper document, such as a small purchase order, can range from tens to hundreds of
dollars, while conducting business electronically can slash costs by a third to a half.
Specific benefits are greater record accuracy, lower data entry costs, decreased
paperwork, faster answers to questions, reduced order time, and reduced inventory.
PROCUREMENT EFFICIENCY AND PROCESS STREAMLINING
Title 10, United States Code (U.S.C.) Section 2301 states:
The Congress finds that in order to ensure national defense
preparedness, conserve fiscal resources, and enhance defense production
capability, it is in the interest of the United States that property and
services be acquired for the Department of Defense in the most timely,
economic, and efficient manner.... ,'iw Lhcr, it is the policy of Conre.,., Mat
procurement policies and procedures promote responsiveness of the
procurement system to agency needs by simplifying and streamlining
But despite any desire for efficiency, procurement is anything but efficient in
actuality. Part of the reason is that the process, with its myriad rules and review
steps, is physically moving information on paper documents in a sequential s ep-by-
step procedure. Today's typical procurement system automates paper document
preparation but not information processing. Paper is merely a medium for
information; other media are available. Future automation using new technology.
when coupled with streamlined processes, will improve information processing and
result in greater procurement efficiency and effectiveness.
PROCUREMENT AUTOMATION IMPROVEMENTS
The typical automated procurement system comprises computer-based software
that helps prepare hard-copy contract solicitation and award documents and, as a
byproduct in most applications, populates databases with management information.
More advanced applications are now evolving that electronically receive and validate
purchase requirements and coordinate the procurement action through near
paperless electronic interfaces with (for example) legal, financial, small business, and
technical specialists. Despite paperless internal processing, a hard-copy contract
document is still printed, signed, copied, internally distributed, and mailed to the
contractor. When received by the contractor, most of the information in this
document is manually entered into the contractor's order processing or contract
management system. This approach -
converting automated information to paper
and back to automated form - is slow, labor-intensive, and error-prone. When a
paper document is handled and data are entered from it into an automated system,
there will be misplaced documents and erroneous data entries. There is a better way.
COMMERCIAL PURCHASING SUCCESS
Commercial purchasing has developed computer-to-computer links between
buyer and seller to speed solicitation processing and order placement, to improve the
handling of order and delivery status information, and to reduce data entry errors.
This development proceeded from the fact that many firms began to realize that their
purely internal automated systems were merely generating paper purchase orders
that were mailed to suppliers who manually entered the same information into other
automated systems. A better way enters purchase order information directly into the
supplier's system, avoiding printing, distribution, and data entry inefficiencies.
Buyers' and suppliers' computers are programmed to communicate routine,
noncomplex transactions automatically.
Use of new technologies, when coupled with a rethinking of how business is
conducted, results not only in efficiencies but in improved acquisitions. The new
processes, being flexible, are more responsive to changes in requirements, customers,
markets, and the like. Rapid order placement and availability of real-time status
information, made possible by electronic purchasing systems, are key elements of the
just-in-time inventory and distribution concepts now being applied so successfully in
modern business. Modern purchasing systems are critical tools in developing,
producing, and supporting products. EDI is being adopted in the commercial world
because of strategic competitive pressures. Although these pressures do not provide
the impetus to adopt EDI in the Government sector, the same paybacks and gains in
efficiency are equally available to that sector.
DoO's EDI EXPERIENCE: COMMERCIAL ITEMS AND SMALL PURCHASES
Some innovative DoD procurement activities have applied EDI to the problem
of communicating with suppliers. Their initiatives have primarily involved ordering
transactions for commercial items or for military items available through
commercial distribution channels.
The best examples are two Defense Logistics Agency (DLA) projects -
Paperless Ordering Placement System (POPS) and Standard Automated Materiel
Management System (SAMMS) Procurement by Electronic Data Exchange
(SPEDE) - that use ED[ to pass orders valued at less than $25,000 directly to the
contractor. POPS competitively establishes indefinite-delivery contracts providing
for electronic placement of orders. SPEDE establishes a blanket purchase agreement
(BPA) that provides for simple electronic order placement in one version and provides
for exchanging requests for quotations (RFQs), quotations, purchase orders, and
acknowledgments in a more advanced version.
These projects have adequately demonstrated the feasibility and cost
effectiveness of ED[ small purchase and delivery order applications. This success
should be replicated throughout DoD wherever electronic ordering arrangements can
be established with cooperating contractors.
THE EDI CHALLENGE: LARGE COMPETITIVE PURCHASES
Items currently acquired through electronic ordering are few in number, since
the typical DoD supply item is not a commercial item available through commercial
distribution channels. Most DoD procurement dollars are spent for items not carried
in manufacturers' stock. Instead, they are spent for items that are designed to
military specifications and that have significant production leadtimes. Aircraft,
radar, and engine components are examples. Some military items have a history of
significant, stable demand permitting long-term indefinite-delivery contracts calling
for electronic order placement to be established. However, most items have less
predictable demand and are acquired in small quantities whenever the stock reorder
level is reached.
For items valued at less than $25,000 (the small purchase
limitation), an electronic RFQ process is feasible and is already in use in certain
buyer offices. Now the challenge for procurement automation is to develop electronic
processes that can handle acquisitions above the small purchase limitation.
ASSURING INTEGRITY IN THE PROCUREMENT PROCESS
Whatever electronic approach is taken, it is essential that the integrity of the
procurement process be safeguarded. Nothing will cause rejection of electronic
purchasing methods faster than the perception that competition-sensitive
information cannot be safeguarded, or that electronically signed offers and awards
cannot be relied upon in lieu of manual signatures on paper documents.
Technology has advanced to the point where such issues should no longer be
controlling. Electronic signatures and message content can be authenticated with a
greater degree of reliability than can those on paper. Network security procedures
can protect both classified and sensitive unclassified information during
transmission and database storage. Authentication and security techniques need be
applied only when the risk of compromise justifies the implementation costs.
general rule would require authentication and security for purchases above the small
purchase limitation: purchases involving greater likelihood of fraud, protest, or
dispute, and more serious consequences should they occur.
PROCUREMENT PROCESS IMPROVEMENT
Electronic data interchange complements two other management concepts
being proposed for defense and Government procurement - increased use of
commercial practices and continuous process improvement. EDI is a technological
tool used in commercial purchasing not only to automate purchasing but to change
internal processes in general. In DoD, as procurement regulations accommodate
technology, as computing systems are modernized, and as procurement automation
improvements mature, procurement executives must search for better ways to do
business, to streamline procurement by taking maximum advantage of automation,
and to improve the effectiveness of the buying function.
ORGANIZATION OF THIS REPORT
We present specific findings and recommendations in the next chapter.
Chapter 3 discusses EDI concepts, describes benefits, and illustrates opportunities for
changing DoD's supply and procurement processes. Chapter 4 analyzes and proposes
specific solutions to legal, regulatory, and procedural impediments to the use of EDI
in Government procurement. It concludes on an optimistic note by providing a
structured implementation approach based on a risk assessment.
The appendices set forth a sample trading partner agreement and suggested
changes to the Federal Acquisition Regulation (FAR) and DoD FAR Supplement
(DFARS) to facilitate the increased use of EDI in Government and defense
FINDINGS AND RECOMMENDATIONS
Inefficient Paper Processes
Government purchases are written on paper (1) to delineate and document the
parties' contractual responsibilities and (2) to convey to the supplier line-item
descriptive, quantity, quality, price, and delivery information. In the contract
formation process, the emphasis is on terms and conditions and on selecting a source.
Once this lengthy process is completed, the essence of the bubiness arrangement is
simply what is ordered, when it is due, and where it is to be delivered.
A paper contract award or ordering process is essentially a paper production
process requiring - depending on dollar value and/or type of action - numerous
coordination, review, and approval steps before contract award. In a paper process,
information flows only as fast as the paper flows. This handicap becomes obviously
limiting in high-volume, repetitive ordering situations when all that is really needed
is to convey the "what," "when," and "where" information, which can be stripped
away from the already-agreed-to contractual framework.
Document preparation, review, approval, duplication, and distribution are
time-consuming. Paper processing is slow and increases the risk of mistakes. Most
procurement offices generate paper documents through some form of procurement
automation, only to have the contractor extract the needed information from the
document and re-enter it into its order processing or contract management system.
This operation provides an opportunity for data entry errors (e.g., omission,
transposition) and resultant mistakes in production, packaging, delivery, etc. In the
few procurement offices that still prepare handwritten purchase or delivery orders,
there are often problems in interpreting the buyer's handwriting. Again, an
opportunity exists for data input errors and delays while checking for clarification.
Another inefficiency associated with paper-based contracting is the poor quality of
photocopies of solicitation, order, and award documents that are distributed to the
contractor and contract administration and payment offices. Some photocopied
documents are so faded or blurred as to be unreadable. Finally, the incomplete or
misdirected distribution of paper documents results in discrepancies between the
files of contract administration offices, disbursing offices, and contractors. Many
times it is not apparent that a crucial piece of paper is missing until the wrong item is
delivered, or the right item is shipped to the wrong destination, or no item is
delivered at all. The comparative efficiencies of EDI are obvious.
Commercial Purchasing Efficiency
Some inefficiencies associated with contracting by means of paper documents
have been resolved by use of commercial firms' EDI integrated with requirements
and purchasing applications. When these firms have high-volume, repetitive orders,
they establish long-term paper contracts to document contractual obligations and
responsibilities, but they use electronic media to convey line-item details,
streamlining and speeding up the process. In contrast to hand processing every order
through a labor-intensive paper process, EDI purchasing automatically moves
information from buyer to seller. Buyers may put considerable initial effort into
selecting suppliers and establishing the written agreement, but subsequently they
need expend only relatively minor effort in communicating what they want
delivered, when, and where. Automated requirements bypass extensive procurement
processing and go directly to the supplier's order processing system.
The benefits are manifold. There are no data input errors, misdirected
distributions, or unreadable orders. Data are manually entered once, edited, and, if
accepted, electronically passed to other internal computer applications and through a
telecommunications network to the supplier. The process is streamlined and
accurate. Network communication summaries list transactions sent and received.
Acknowledgments verify order details received. Periodic follow-up messages indicate
production or delivery status. Finally, shipment notices, invoices, and payments are
all made automatically and electronically.
Procurement Process Improvement
Some Government procurement activities have applied electronic interface
concepts to procurement but have found that electronic transmission of documents
alone has limited benefit. Technologies such as EDI must be integrated into
automated procurement systems along with other procurement process
improvements. Information technologies are enablers. They enable the procurement
process to change. Instead of merely automating the paper process, procurement
automation can now facilitate changes in preaward information flows, review and
coordination steps, and award processing and distribution. The very structure of the
preaward process may now change with, for example, solicitations being made
available through electronic bulletin boa..,.
rotation may become obsolete. The labor-intensive procedure of telephoning for
quotations or manual preparation of solicitation packages could be eliminated. The
Electronically Assisted Solicitation Exchange (EASE) project at the Naval Supply
Center, Jacksonville, is an example of how technology stimulates procurement
process change. EASE has eliminated the practice of rotating RFQs among suppliers
and obtaining just three quotations. When an RFQ is posted on the electronic
bulletin board, it may generate many more than three quotations, thereby increasing
small business opportunities, stimulating competition, and reducing prices. The
burden of reviewing numerous quotations is minimized by automation, and overall
the process is improved.
Solicitation mailing lists and their
The potential for EDI use is huge in DoD, which made nearly 15 million prime
contract awards in FY88. As can be seen from Figure 2-1, while the vast majority of
dollars (91 percent) were spent on buys over $25,000, nearly all the contract actions
(98 percent) involved smaller procurements.
But there are DoD procurements other than small purchases that could benefit
from use of EDI arrangements. When there is a long-term relationship between
Government and contractor, and high-volume, repetitive transactions are expected,
electronic order placement can speed the passing of line-item details, reduce data
entry errors, facilitate interchange of status information, and eliminate paper
documents. For example, the ordering of supply items under indefinite-delivery,
multiple-award schedule, and spares provisioning contracts, regardless of dollar
value, offers fertile ground for the use of EDI.
All of these arrangements rely on a previously negotiated contract to establish
an ordering mechanism. Once this framework, with all the required clauses and
certifications, is in place, orders are placed with a minimum of documentation and
processing delays. An EDI ordering system would retain the written, paper contract
but include a clause authorizing placement of electronic orders. When an ED[ order
246 i 2%
37 91 4470/98%
FIG. 2-1. DoD CONTRACTS - FY88
is generated, the Government supply or procurement computer would recognize the
required item (from its stock number or part number) as being available under a
prearranged ordering agreement, translate order details into an EDI transaction,
and electronically transmit the transaction to the contractor's order processing
system. Depending on review criteria established by procurement management,
high-dollar-value orders or orders for special-interest items could be electronically
submitted to a buyer or contracting officer for review and approval prior to release
Information technologies also offer great potential for improving small business
access to Government small purchase requirements. Such information is not readily
available today except in publicly posted solicitation notices at local contracting
Technology now permits solicitation notices, and even entire solicitations, to be
displayed on electronic bulletin boards and ED networks so any small business can
access procurement opportunities anywhere in the United States via microcomputer
and telephone modem. Also, the small business can submit its quotation to the
contracting activity via the same information technologies.
We believe that expanded use of information technologies will not inhibit small
business participation. On the contrary, EDI and electronic bulletin boards will
disseminate small purchase solicitation information so efficiently and fairly that
small business participation will be stimulated. The Government's payoff will be
increased competition, which will result in lower prices and better goods and services.
Automated Procurement Systems Require Few Changes
Commercial EDI translation software will operate on most of DoD's automated
procurement systems. Base and regional purchasing offices in the Air Force, Army,
Marine Corps, and Navy are all operating minicomputer systems compatible with at
least one commercial, off-the-shelf EDI translation software package (see Table 4-1).
Most central supply purchasing mainframe and minicomputer systems are also
capable of producing EDI transactions. The EDI translation packages permit data
mapping to either internal databases or extracted flat files. However, the preferred
approach would integrate EDI directly into the procurement system's internal
Standard EDI Transactions
Current EDI standards include common purchasing documents such as
purchase orders and RFQs. Table 2-1 identifies the wide range of EDI transactions
developed by ASC X12. ASC X12 is accredited by ANSI to develop American
national standards, which are called ANSI X12 standards once approved. The
flexibility inherent in ED[ standards permits almost any purchasing document to be
translated into an EDI transaction format, as has been demonstrated by the
successful use of EDI by several Government EDI procurement and contract
administration projects to communicate purchase orders, delivery orders, RFQs,
quotations, invoices, remittance advice, and shipment notices.
If additional data need to be included in an existing transaction set, optional
segments, data elements, and reference codes can be selected and implemented by
agreement between the contracting parties. If new data elements or codes are
needed, ASC X12 coordinates changes to the ED[ transaction standard and data
dictionary. For example, an initiative is underway among major defense contractors
ANSI X12 TRANSACTION SETS
Payment order/remittance advice
Planning schedule with release capability
Price sales catalog
Response to RFQ
Purchase order acknowledgment
Purchase order change
Purchase order change acknowledgment
Product transfer and resale
Order status inquiry
Order status report
and the ASC X12 Government Subcommittee to create transaction sets and segments
for contract cost and schedule reports passed between DoD program offices, prime
contractors, and subcontractors.
EDI standards permit tailoring of transactions to application data needs. This
tailoring is accomplished through implementation guides for the documents (e.g.,
purchase orders, invoices, and shipping notices) transmitted. Implementation guides
describe all the conventions and coding details for various specific types of written
documents before the contracting parties exchange documents, permitting generic
documents to be adapted to specific industries or trading relationships without the
need for unique transaction sets.
Nearly all Government procurement, financial, shipping, and program
management documents can be adapted to the general EDI transaction, segment, and
data element framework. Efforts are also underway by organizations such as the EDI
subcommittee of the Aerospace Industries Association of America to translate the
Material Inspection and Receiving Report (DD Form 250) and the Contract Pricing
Proposal Cover Sheet (Standard Form 1411) into existing EDI transaction sets. It is
important to note in this connection that, if the Government is to succeed in applying
EDI concepts to its contracting processes, it must not create nonstandard
transactions. To do so will only ensure that few firms will participate, since ED[
participants will be reluctant to maintain two sets of software translators, each with
a separate set of transactions- one commercial, one Government.
Contractors Expect Faster Information and Payment
Procurement automation's ability to pass order information rapidly to a
contractor's automated system is impressive. However, contractors want their
ultimate benefit to be faster payment. To achieve faster payment will require
electronic submission of DD Form 250s as ANSI X12 856 ship notice transactions,
and invoices as ANSI X12 810 invoice transactions, to DoD payment centers to
improve the quality of information provided disbursing officers and speed its receipt.
Electronic submission of DD Form 250 and invoice data should greatly facilitate
payment decisions, and with electronic funds transfer (EFT) capabilities, ensure
compliance with Prompt Payment Act requirements.
prucurement implementation of DLA's SPEDE reported that introduction of EDI led
to raised expectations among their small business contractors that particularly
depend on timely payments. Electronic invoicing and payment projects in DLA are
now starting to meet those expectations.
The medical supply
Also, a primary consideration of contractors participating in EDI projects is
their opportunity to obtain not just prompt payment but early remittance advice
If procurement orders, receiving documents, and invoices are
transmitted electronically, contractors can obtain projected payment information by
invoice number and line-item number weeks before actual payment. This
information is extremely valuable to larger, sophisticated contractors that closely
manage cash transactions for opportunities to invest amounts in excess of daily cash
needs. Cash managers can project cash flows weeks in advance while also working to
resolve invoices rejected for payment.
Regulatory Exceptions to the Requirement for Written Documents
Procurement regulations are in constant change. They are influenced not only
by revisions of statute but also by changes in procurement methods. As new
technologies develop, procurement procedures and regulations accommodate them.
The telephone facilitated use of oral quotes and orders. The telegraph allowed
communication of last-minute bids and placement of orders through written
telecommunications. Facsimile permits submission of bids and proposals by means
other than the mails or hand delivery. The advent of computer-generated
procurement forms has alleviated the need to maintain inventories of prescribed
forms. As these technologies have evolved, the regulations have gradually adapted
themselves to the new information transmission methods. The same acceptance is
possible for electronic order placement under the small purchases and simplified
procedures of FAR Part 13 and the ordering methods of Part 16.
Procurement regulations recognize exceptions to the requirements that
procurements, or more precisely orders, be in writing and be signed. Specifically,
FAR 13.506 exempts written telecommunicated purchase orders from any
requirement for signature. Similarly, small purchase orders and delivery orders may
be oral and obviously unsigned and unwritten, although delivery orders are to be
later confirmed in writing. Finally, the small purchase and other simplified purchase
procedures of FAR Part 13 minimize the need for file documentation.
These less rigid rules in FAR Part 13 make possible electronic paperless orders
in lieu of oral or telecommunicated orders, especially when modern electronic
ordering systems can provide a level of documentation and authentication not
possible with older technologies. Given the permissive, relatively flexible nature of
Part 13, it is probable that EDI can today be applied to small purchases without the
need for regulatory deviation or change.
Innovative EDI concepts should be explored through small projects designed to
develop the technology, increase our understanding of electronic contracting issues
and problems, and reduce the perceived risk of using information technology in
traditionally paper environments. Although DLA's POPS and SPEDE have
successfully demonstrated EDI in central supply procurement, little is known of
EDI's application to base/operational, construction, weapon system, or research and
Pilot projects will require high-level support to overcome resistance to change.
One-time deviations from FAR and DFARS requirements may be needed to test scrne
concepts. Applying EDI to sealed bidding and competitive-proposal contracting
without restricting competition or denying opportunities to small businesses is
expected to pose many challenges.
Standard DoD implementations of ANSI X12 transactions should be developed
to facilitate acceptance of EDI in procurement and to ensure a uniform
implementation with industry. This is necessary because many of the data elements
critical to DoD's internal systems are optional in the standards. Published guidelines
would provide industry with details in which optional data elements are mandatory
when transacting business with DoD. Currently, the Services and agencies are
independently developing their own interpretations of how these transactions should
Although DoD represents almost 75 percent of Federal Government
procurement spending, it should not act in isolation. Office of Federal Procurement
Policy authorization of Government-wide implementation guides is recommended to
ensure more uniform application of EDI standards and conventions.
Any electronic ordering procedure must take into account how electronic
documents can be passed not only externally to the contractor but also internally to
other Government activities.
For example, FAR Subpart 4.2 lists the distribution
requirements for contract award documents and their modifications. We may ask,
what is the point of creating a streamlined electronic contracting system when paper
documents must still be printed and mailed to administrative contracting offices,
disbursement offices, and contract auditors lacking EDI capabilities?
What is needed are intra- and inter-agency EDI networks to distribute contract
information to the same offices listed in the FAR. The first phase of DoD's
Modernization of Defense Logistics Standard Systems (MODELS) applies ANSI X12
EDI concepts to the existing Military Standard Contract Administration Procedures
(MILSCAP) transactions. MILSCAP transactions are data abstracts and therefore do
not replicate the complete procurement document in the receiving computer system.
Also, MILSCAP transactions are transmitted only to contract administration and
disbursing activities and not to activities such as the Defense Contract Audit Agency
(DCAA) offices cited in Subpart 4.2. Future phases of MODELS must include total
contract distribution as contemplated by the FAR and DFARS.
Total Electronic Information System
Electronic data interchange is more than placing purchase orders through
electronic means. It enables procurement activities to share documents and
information with internal and external organizations through paperless processes.
As illustrated in Figure 2-2, the Government and contractor should exchange
electronic documents throughout the solicitation, award, and contract administration
phases of the procurement's life cycle.
Electronic data interchange RFQs, quotations, purchase orders, purchase order
acknowledgments, and purchase order changes contain all the information required
to perform the procurement function. EDI invoices, shipping notices, and remittance
advice support EFT, although the actual transfer of funds is not an ED[ transaction.
When paper invoices and DD Form 250s are converted to EDI transactions,
information can be entered directly into disbursement systems, thereby minimizing
one of the major contributors to payment delays. Now that payment requests and
receiving reports are automated, sophisticated disbursing systems can provide - as a
byproduct of their automated voucher examination process - an electronic list of
accepted or rejected vouchers and the amount to be remitted by line item and in total.
ainitera y EDI trnacin
FIG. 2-2. TOTAL ELECTRONIC INFORMATION SYSTEM
Internally, EDI transactions permit automated procurement systems to pass
award, obligation, and delivery schedule information to other local or command
systems. For example, when issuing a purchase order, the procurement system no
longer needs to print a hard-copy due-in report for the supply department's receiving
dock. Since an EDI purchase order is automatically created cy the procurement
system, the award software - when transmitting the ED[ transaction - can pass
line- item-descri ptive and delivery schedule details directly and simultaneously to the
receiving system. The same is true of obligation information passed to accounting for
recording purposes and of award information passed to command systems for
management information purposes. By creating internal electronic transactions as a
byproduct of ED[ purchase order generation, electronic datafeeds can eliminate paper
record storage, manual data entry, data errors, and follow-up phone calls to the
We recommend maximum use of electronic sharing of required information
when the information already exists in digital form. EDI enabics information
sharing and overall process improvement.
To ensure the integrity of the Government's procurement function, adequate
security must be provided for competition-sensitive and proprietary information
when the risk of compromise warrants the expense. Such security is not warranted
for low-dollar procurements, given the lower risk of fraud, which may not justify
incurrence of security software and hardware costs. We recommend providing
security for EDI transactions only in large competitive purchases where the risk of
compromise may jeopardize the integrity of the competitive process.
Finally, we recommend that DoD include the EDI procurement concept in
managerial and executive level training courses such as the DoD Procurement
Executive Seminars. Once ED[ prototype projects have matured and project
managers have refined their implementation strategies, implementation experiences
and recommended approaches should be included in DoD procurement training
courses. If EDI procurement applications develop sufficiently, a dedicated EDI
procurement course may be warranted in the early-to-mid- 1990s.
ED[ APPLICATIONS: EXAMPLES AND NEW OPPORTUNITIES
Electronic data interchange is not a new concept. It originated during the 1960s
in the transportation industry when paper documentation became so voluminous
that shipments were misplaced and deliveries were delayed. At that same time, the
industry discovered that shipment documents could be translated into digital data,
transmitted to interested parties, and retranslated into usable information. Today,
all the major transportation firms rely on EDI, integrated with their other automated
systems, to convey information to shippers, freight forwarders, and others.
GOVERNMENT TRANSPORTATION PROCUREMENT APPLICATION
The Government's transportation function, like its commercial counterpart, has
led the way in applying modern EDI concepts in the Federal Government. The
General Services Administration (GSA), which oversees procurement of and payment
for transportation services, amended the Federal Property Management Regulations
(FPMR), effective 20 April 1989, to permit Federal agencies to electronically
transmit carrier billings and backup documentation for freight and passenger
transportation services as an alternative to issuing hard-copy standard forms. Of
special interest to the Government procurement community is the authorization for
ED[ procurement of transportation services. The new section on EDI policy, added to
the FPMR [Title 41 of the Code of Federal Regulations (CFR)I at 41 CFR 101-41.007.
When mutually agreeable to the procuring agency and the
participating carrier, authorization is granted to use EDi
procurement of transportation services, provided that there are sufficient
procedures to safeguard the integrity of the billing and payment process.
An authenticating signature will be used in each transaction as the
equivalent of a signature to certify receipt, delivery of goods, and that the
bill accurately reflects the services provided and that the carrier charged
the lowest charges available for the service. Each carrier must also provide
a sec. 10721 quotation or present a unilateral ordering agreement to GSA or
other agency of the Government that is establishing an EDI program,
binding the carrier to ail the requirements of Part I01-41 with the exception
Of the Forms being used. ED( standards are prescribed in § 101-41 104
The Government is now actively using EDI to procure and bill transportation
services. This EDI procurement application is the first formally recognized by
DoD EDI PROCUREMENT APPLICATION
In a simple EDI purchasing example, illustrated by Figure 3-1, the sending
computer takes information that would normally be on the paper purchase order and
translates it into an agreed-upon transaction format that can be read by *he receiving
computer. In return, the receiving computer can transmit either a purchase order
acknowledgment or, if shipment is made, an invoice. The parties in this arrangement
have previously executed a written trading partner agreement covering the
generation and acceptance of electronic orders in lieu of paper orders. Paper has been
eliminated as a means of conveying information.
SANSI X 12850
ANSI X12 855
FIG. 3-1. SIMPLE EDI PURCHASING EXAMPLE
For some users, ED[ is merely an electronic means of passing information
extracted from paper documents. Paper purchase orders are manually prepared,
entered into the sending computer, and passed to the receiving computer, only to be
printed out as a paper document for action. Using EDI in such a manner provides
little benefit besides eliminating mail time and reducing data entry errors.
Electronic data interchange links computers, not people in offices. EDI can be
used to integrate automated, streamlined requisition, requirement, and procurement
processes with automated, streamlined order processing and distribution processes.
Electronic data interchange will, if properly applied, permit the Government
supply or procurement computer to communicate directly with the contractor's order
processing system. The following steps describe such an EDI procurement
* Analyze the requisition using the Government's supply computer.
* Determine whether an electronic contracting arrangement has been
previously established for the requested stock number or part number at an
agreed-to price for the specified quantity.
* Translate the requirement information into a standard EDI purchase order
* Transmit the EDI order directly to the contractor's order processing
* Notify internal systems of award, obligation, and delivery data.
But the process does not end there. The real power of EDI is not data
communication but the way in which it facilitates other processes. Order information
is automatically sent to the contractor's order processing computer, where software
* Analyze the order information
* Direct the regional warehouse to ship or deliver the item to the requiring
* Generate shipment notices and invoices and transmit them back to the
This entire process from requisition through delivery can be accomplished within as
little as 24 hours. Considerable cost savings are realized from reduced inventory,
warehousing, packaging, and shipping costs.
PAPERLESS ORDERING PLACEMENT SYSTEM
An ED[ system similar to the one described above is in operation today at the
Defense General Supply Center (DGSC) as POPS. DGSC initially used POPS to
acquire supply items with storage/handling problems and/or limited shelf life (e.g.,
photographic film) but now has expanded POPS to include many other items that can
be supplied directly from a contractor's distribution channels. DGSC has applied EDI
concepts to indefinite-delivery contracts to obtain rapid delivery via the contractor's
commercial distribution system. The benefits go beyond faster service to the
requiring unit. They include inventory cost savings, since DGSC does not have to
warehouse items if the contractor will stock the items in its commercial distribution
system. Also, the Government no longer has to write off overage inventory repackage
items or pay for second-destination transportation.
POPS contracts are normally competitively placed indefinite-delivery contracts
with major suppliers. The criteria for selecting an item for POPS are
* Significant demand history
* Availability of commercial distribution channels
* Opportunities to reduce inventory, warehousing, and transportation costs
* Existence of suppliers willing to respond to electronic orders.
During the last fiscal year at DGSC, POPS processed over 60,000 orders with
approximately 30 contractors. Most importantly, the DoD Inspector General's Report
on Audit of Electronic Contract Ordering (Audit Report No. 87-188), of 10 July 1987,
documented POPS compliance with the FAR. DGSC estimates that POPS has saved
nearly $30 million since going into operation in 1983. POPS has been exported to
other DLA hardware centers. The concept can also be applied to military procure-
ment activities using indefinite-delivery contracts to order supplies or services.
SAMMS PROCUREMENT BY ELECTRONIC DATA EXCHANGE
POPS is not DLA's only EDI success.
procurement subsystem of DLA's SAMMS.
There is also SPEDE. an ED[
SPEDE has applied modern EDI technology to several predecessor automated
ordering methods. One was SASPS (SAMMS Automated Small Purchase System).
which exchanged computer-generated shipping instruction sheets and computer
punch cards with vendors. Another was PET (Procurement by Electronic
Transmission), which relied on direct Government-to-contractor telecommunications
in a proprietary format. Although both of these prior projects worked, neither had
the advantage of providing modern EDI's vendor acceptability, through use of
national standards; document flexibility, through availability of variable-length
transactions and formats; or ability to integrate electronic ordering at buyer
workstations with order processing at vendor workstations.
SPEDE permits DLA supply centers to issue orders under a BPA and receive
vendor responses electronically. Each vendor has entered into a standard BPA,
installed Government-furnished SPEDE software on its IBM personal computer (PC)-
compatible microcomputers, and agreed to certain telecommunications procedures.
There are three versions of SPEDE. Two replace the SASPS functions. SASPS I
issued calls under BPAs. SPEDE orders items simply by sending an ANSI X12 850
purchase order transaction to the supplier's microcomputer. If the price stated in the
order is acceptable, the supplier replies with an ANSI X12 855 purchase order
acknowledgment, eliminating any doubt as to whether the supplier will accept the
order. SASPS II issued RFQs to suppliers that responded with a quotation, but there
was not necessarily a BPA in place. For SASPS II, SPEDE issues an ANSI X12 840
RFQ transaction to as many as 12 suppliers, and they respond with ANSI X12 843
response to RFQ transaction. SPEDE evaluates the quotations and issues an
ANSI X12 850 purchase order. Both SASPS versions of SPEDE also provide
suppliers with electronic invoicing.
Another version is a hybrid between calls and RFQs under a BPA. At Defense
Personnel Support Center's (DPSC's) medical supplies procurement activity, this
version, SPEDE-Medical, provides a small purchase (less than $25,000)
RFQ/quotation/order system involving approximately 40 small business medical
supply distributors. The SPEDE-Medical competitive small purchase module is the
most advanced and promising EDI procurement application we have found. It has
fully complied with ANSI X12 standards and has demonstrated procurement
efficiency while stimulating competition, lowering prices, and providing small
businesses with automated order/quotation tools. It is more than an order processing
Every business night, SAMMS downloads to SPEDE between 800 and
1,200 purchase requests. SPEDE determines which suppliers have transactions.
calls up their microcomputers, and transmits that day's purchase orders, RFQs, and
award information. The vendor checks the SPEDE software each morning and
processes orders, RFQs, and quotations on the microcomputer. When a supplier
decides to provide a quotation, the DLA purchasing office eventually provides, back
through SPEDE, either an order or a notice of which vendor received the award and
at what price. Consequently, SPEDE's Government-furnished software provides
small vendors with more than just order processing.
management decisions, automated business records on the number of quotations,
orders, and prices.
It also provides, for
Defense Personnel Support Center's medical supply procurement activity has
noted how, under SPEDE, competition is stimulated by the ease with which RFQs,
quotations, and orders are handled and documented. Since, with EDI, buyers no
longer rely on poorly documented telephone RFQs, vendors like the new system.
Telephonic RFQs lend themselves to potential abuse by buyers who may have
favorite suppliers or who may be in a hurry to make an award. SPEDE permits
everyone to receive and document these small purchase transactions. In fact, SPEDE
has been so well received by medical suppliers that DPSC has been approached by
firms that had previously been reluctant to do business with the Government but
changed their attitudes when they heard of SPEDE's ease of use.
SPEDE is currently being integrated with the DLA Pre-Award Contracting
System (DPACS) to run on the Gould NP-I minicomputer in each purchasing office.
This integration of SPEDE and DPACS offers greater efficiency and less buyer
interaction. The integrated system can now process many routine actions with little
buyer involvement. Of course, if certain thresholds are exceeded or the offeror inserts
remarks or conditions in its quotation, the buyer will be automatically informed.
SPEDE has been expanded to all DLA hardware centers. Its concepts and
possibly its UNIX-based software can be transferred to other supply/purchasing
activities in DoD. We highly recommend this ED[ procurement system to the other
Services and agencies.
COMMERCIAL PURCHASING PRACTICES AND PROCUREMENT STREAMLINING
The President's Blue Ribbon Commission on Defense Management, popularly
known as the Packard Commission, and the Secretary of Defense's Defense
Management Review (DMR) emphasized greater reliance on commercial products
and increased use of commercial purchasing practices. POPS and SPEDE have been
putting those initiatives into practice for several years.
The application of EDI to defense procurement will, to a certain extent, also
bring together these same DMR initiatives. EDI is a commercial purchasing
practice. The items best suited for EDI ordering are items already in commercial
stock (off-the-shelf commercial items). And, lastly, EDI's greatest contribution is not
just rapid interchange of business data but a rethinking cf how items can be supplied
more efficiently and economically.
This rethinking process that EDI fosters is what one defense procurement
executive called "separating the simple parts from the complex parts of the
procurement proc-ss." The objective is to establish a written contractual vehicle to
enable electronic order placement. The complex part of the process is negotiating the
written contractual document and establishing a supporting file. The document
contains the agreed-to general and special provisions, while the file contains the
representations and certifications required of the contractor. Establishing the
contract may take from 6 to 9 months. The simple part of the process is conveying the
order, with its line-item details of quantity, price, schedule, and shipment
instructions. A great deal of effort and time are inevitably expended in establishing
the contract, regardless of whether a paper-oriented system or EDI is used. But, with
EDI, relatively little time is spent getting repetitive information to the contractor.
This approach of establishing an umbrella contract under which orders are
issued is described in FAR Subpart 16.5, Indefinite-Delivery Contracts. When
combined with EDI technology, the indefinite-delivery contract is a powerful tool for
streamlining DoD procurement.
EDI PROCUREMENT OPPORTUNITIES
Many business relationships between the Government and its contractors could
benefit from the application of EDI concepts. Wherever repetitive transactions
concerning line-item details are involved, an EDI link is possible. Several candidates
for electronic ordering are
* Orders/calls under BPAs prescribed in FAR Subpart 13.2
* Delivery orders under indefinite-delivery contracts prescribed in FAR
* Orders under basic ordering agreements (BOAs) prescribed in FAR
* Orders under GSA multiple-award schedule contracts prescribed in FAR
* Spare parts and support equipment orders using the provisioning procedures
for weapon system contracts prescribed in DFARS Subpart 217.74.
POTENTIAL EDI APPLICATIONS
The availability of automated procurement systems throughout DoD provides
an opportunity to establish EDI procurement networks with cooperating contractors
expeditiously. The following applications illustrate how procurement can be
improved when EDI is integrated with other automated systems.
Matching Requirements with Ordering Opportunities
Contracting activities often prefer to order from indefinite-delivery or GSA
Federal Supply Schedule contracts instead of entering the synopsis/solicitation/
award cycle. The problem is identifying the appropriate ordering contracts. But,
once they are identified, it may be possible to order and receive an item in days
instead of months. If DoD were to provide supply or procurement systems with
information helping to match required items with available indefinite-delivery
contracts, EDI orders could be passed directly to the contractor, thereby eliminating
There are two approaches - one using electronic bulletin boards to display the
current line-item and ordering details of the indefinite-delivery contract and the
other using ANSI X12 832 price sales catalog transactions to distribute details to
supply and purchasing systems. GSA is currently using an electronic bulletin board
for its automatic data processing (ADP) schedules. The next step should be the
distribution of those details to automated systems so orders can be rapidly and
accurately generated and transmitted.
As shown in Table 3-1, DoD placed nearly 700,000 orders under GSA multiple-
award schedules in FY88. Those orders were for commercial items such as copiers
[Federal Supply Group (FSG) 36], mobile radios (FSG 58). electronic test equipment
(FSG 66), office supplies (FSG 75), office furniture (FSG 71), and computer equipment
(FSG 70) not stocked in the Government supply system but readily available from
DoD DELIVERY ORDERS UNDER GSA MULTIPLE-AWARD SCHEDULES
Greater than or equal to $25K
Source: Federal Procurement Data System and Defense Logistics Supoort Office.
Such a volume of business would justify making electronic ordering
arrangements with at least major suppliers. if the top suppliers in each supply group
participated, most orders could be handled electronically. In an analysis of FY88
Federal Procurement Data System (FPDS) data, it was noted that some major GSA
multiple-award schedule contractors were also major providers under DoD indefinite-
delivery contracts for the same supply classes. For example, in FSG 66, Hewlett-
Packard and Texas Instruments are both major suppliers on both GSA multiple-
award schedules and DoD indefinite-delivery contracts. If major DoD test equipment
ordering activities could access their major suppliers electronically through EDI
networks, there would inevitably be considerable order processing and distribution
efficiencies and cost benefits.
Weapon System Change Proposals, Change Orders, and Modifications
Major weapon system program offices are burdened with numerous paper
documents used to staff engineering change proposals, change orders, and eventual
contract rr )difications. Weapon system contracts generate hundreds if not thousands
of contractual documents during the weapon system's production phase.
Electronic data interchange could permit a more efficient exchange of
documents required to propose, authorize, and definitize engineering and contract
changes. Not only could proposal and contract documents be exchanged, but
inquiries and acknowledgments could improve configuration and contract
management status when integrated with existing automated systems in the weapon
system program office.
Weapon System Provisioning
Provisioned item orders (PIOs) consist primarily of statements of line item, part
number, quantity, required delivery dates, and ship-to points. Most PIOs are
generated by Government automated systems and entered into contractors'
automated systems. Therefore they lend themselves to handling by EDI techniques.
The high volume of PIOs generated by weapon system programs, and the large
number of modifications due to design change notices (DCNs), create considerable
difficulties in maintaining information on contract status. EDI would do much to
s- ve problems with the accuracy and completeness of contractor data records.
Table 3-2 indicates the FY89 volume of PIOs (and of the line items involved) issued
by Air Force Air Logistics Centers for two major weapon system programs. The Air
Force F-16 fighter program, which has been in its production phase since 1973, still
averages 70 PIs
per month. The B-lB bomber is now out of production, but the
program still averages over 60 PIs per month. Newer aircraft such as the B-2, C-17,
and Advanced Tactical Fighter (ATF) will initially have more PIs, while aircraft
squadrons are being activated.
PROVISIONED ITEM ORDERS ISSUED IN FY89
Source: Air Force Systems Command's Acquisition Management
Maintenance Job Order Contracting
Electronic data interchange might be applied to task orders under service or
construction contracts if price and task specifications have been previously
established. A possible application would be job order contracts established for real
property maintenance services. These contracts are firm-fixed-price indefinite-
quantity contracts for specified maintenance tasks to be performed at competitively
determined unit prices. Job orders are used widely for building-maintenance tasks
on military installations. Given the establishment of an "umbrella" contract with
predetermined prices and work packages, EDI could easily link the installation-level
automated civil engineering system to an automated procurement system for
processing EDI purchase order transactions against job order contracts.
automated procurement system could be located at either installation or regional
Weapon System Replenishment Spares
Many weapon system supply centers establish BOAs as a means of rapidly
placing replenishment spare parts orders with sole-source manufacturers. Since
demand for some items can be unpredictable and leadtimes lengthy, a prepositioned
BOA is an excellent ordering vehicle to expedite the process when demand occurs. If
sole-source items could be prescreened for breakout potential and then coded sole-
source, requirements for them could be rapidly processed directly into the
manufacturer's order processing and production scheduling systems. A few days or
weeks of reduced procurement administrative leadtime (PALT) translates into
reduced safety stock and increased readiness.
Currently, several DoD supply procurement centers are using electronic means
in parallel with paper orders to buy spare parts from sole-source contractors. The Air
Force's San Antonio Air Logistics Center and the Army's Aviation Systems
Command both transmit MILSCAP transactions to the General Electric (GE)
Aircraft Engine Group. These electronic ordering mechanisms could be modernized
by replacing their proprietary formats with ANSI X12 transactions, relying on
electronic transactions in lieu of paper, and formalizing the relationship with a
trading partner agreement similar to the sample set forth in Appendix A.
A unique opportunity for electronic ordering of spare parts exists with
commercial versions of aircraft and jet engines in military inventory. For example,
the Air Force has re-engined many of its KC-135 tanker aircraft with CFM-56
commercial engines (military designation F-108). The airline industry orders parts
from the CFM-56 manufacturer, CFM International, through the Air Transport
Association's electronic ordering system. CFM International maintains inventory on
the basis of airline demand forecasts. The Air Force could use EDI transactions to
order parts from the manufacturer in a similar manner, thereby reducing expensive
inventory while gaining almost immediate parts availability.
RESOLVING LEGAL, REGULATORY, AND PROCEDURAL BARRIERS
As new information technologies have been developed, Government procedures
and regulations have been revised to accommodate new business practices - made
possible by those technologies - that speed or improve the contracting process.
Acquisition regulations gradually authorized telegraphic bids, telephone quotations,
facsimile proposals, and computer-generated contract forms. EDI's acceptance will
be no different, except that EDI will not just communicate information more rapidly,
it will replace paper as a means of executing and documenting some contractual
actions. EDI capability to supplant paper contracting has generated a number of
legal, regulatory, and procedural issues. Most of these issues are being resolved by
experience with the EDI contracting prototypes in operation at GSA and DLA. We
are confident that these, and future prototypes, will demonstrate EDI's capability to
provide better execution, documentation, security, and authentication safeguards
than do paper systems.
ELECTRONIC CONTRACT FORMATION AND LEGAL SUFFICIENCY
The fundamental issue regarding EDI in relation to procurement is whether an
electronic transaction forms an agreement that is legally sufficient to bind the
In commercial practice, EDI participants agree to be bound by electronic
transactions in accordance with a trading partner agreement. This affirms the
enforceability of electronic communications and provides guidance as to the rights
and responsibilities of the parties regarding interchange conventions, transaction
standards, message timing, errors, omissions, and system failures.
A written trading partner agreement needs to be provided for in Federal
procurement regulations to recognize EDI relationships and to bind the contracting
parties when certain electronic transaction conventions are met. In the case of
indefinite-delivery contracts that authorize delivery orders and weapon system
contracts that authorize provisioning orders, a means of incorporating the agreement
in the contract will be required. Appendix A is a sample EDI trading partner
agreement. Appendix B contains recommended FAR and DFARS changes to
WRITTEN CONTRACT REQUIREMENT
Courts and boards, in an attempt to do justice, will enforce a contract whether
written or oral. Many times they will find a contract on the basis of the conduct of the
parties or find that a contract is implied in law. Obviously, in these instances, there
is no written contract. However, certain contracts in the private sector are required
to be in writing. This insistence that some kinds of contracts must be in writing goes
back to 1677, when the English Parliament passed legislation requiring that certain
classes of contracts be in writing and be "signed by the party to be charged" before an
action could be brought to enforce the contract. This legislation was part of a broad
statute called "'An Act for Prevention of Frauds and Perjuries," which was actually
designed to prevent fraud and perjury in proving various transactions. Most
jurisdictions have today enacted similar statutes, known as statutes of frauds,
requiring certain contracts to be in writing. The most common is the Uniform
Commercial Code (UCC), Section 2-201, which states that a
contract for the sale of goods for the price of $500 or more is not
enforceable by way of action or defense unless there is some writing
sufficient to indicate that a contract for sale has been made between the
and signed by the party against whom enforcement is sought or
by his authorized agent or broker.
The UCC defines "written" or "writing" as including printing, typewriting, or
any other intentional reduction to tangible form [UCC §1-201(46)]. Further, it
defines "signed" as including any symbol executed or adopted by a party with present
intention to authenticate a writing [UCC § 1-201.(39)l.
Just which contracts must comply with the Statute of Frauds varies among the
jurisdictions (a contract to sell real estate commonly is required to so comply, but
otherwise there is wide variation). If there is no statute in the jurisdiction requiring
the contract to be in writing, it remains true today that an oral contract will be
enforced.! In the current literature and journals, legal scholars invariably point to
the Statute of Frauds as being of significant concern if not an outright impediment to
EDI contracting. Many are calling for an amendment to the UCC to remove all
'As a matte, of fact. there are today so many exceptions to the Statute ot" Frauds that it is quite
unusual to see it raised as a defense in contractual actions, although this occasionally happens
doubt. Such an amendment would be an ideal solution; it is also true, however, that
laws change slowly, and oftentimes after a practice becomes customary in the
With that background, it needs to be said that the UCC has not been enacted
into Federal contract law. The basic legal framework in Federal contract law is
composed of the U.S. statutes and regulations and the decisions of the U.S. courts and
boards. Judges do, on occasion when facing a novel issue, turn to the UCC and adopt
a principle now and then, but they are not bound to do so. They feel strongly about
the ability to be free to develop further Federal contract common law.
A Federal statute enacted primarily in the matter of controlling financial
obligations operates in the nature of a Statute of Frauds.
31 U.S.C. 1501(a)
As stated in
An amount shall be recorded as an obligation of the United States
Government only when supported by documentary evidence of -
a binding agreement between an agency and another person
(including an agency) that is -
(A) in writing, in a way and form, and for a purpose authorized
by law: and
(B) executed before the end of the period of availability for
obligation of the appropriation or fund used for specific
goods to be delivered, real property to be bought or leased, or
work or service to be provided:
a loan agreement showing the amount and terms of repayment-
an order required by law to be placed with an agency;
an order issued under a law authorizing purchases without
when necessary because of a public exigency,
(B) for perishable subsistence supp!ies, or
within specific monetary limits,
a grant or subsidy payable -
from appropriations made tor payment ot. or contributions
to, amounts required to be paid in specitic amounts fixed by
law or under formulas prescribed by law:
(B) under an agreement authorized by law: or
under plans approved consistent with and authorized by
a liability that may result from pending litigation.
17) employment or services of persons or expenses of travel under
services provided by public utilities: ,)r
other legal liability of the Government against an available
appropriation or fund.
This statute's requirement for "a binding agreement between agencies and
other parties that is in writing" appears to impose a significant written
documentation requirement severely restricting EDI's application to Government
procurement. It is our interpretation that an "in writing" requirement is directed at
providing sufficient documentary evidence to
" Establish a financial obligation by the Government for recording purposes
" Act as a Federal Statute of Frauds to prevent agencies circumventing
spending restrictions by asserting oral contracts.
The issue turns on the question of what "in writing" means. Obviously, it
means handwritten or typewritten and, given modern information technology, the
terrr can be extended to devices that write and read information onto or from
electronic media such as magnetic or optical disks. Properly designed electronic
record systems can provide g-eater assurances of data accuracy than paper methods
that are subject to forgery. Magnetic or optical disk media can receive, store, and
retrieve information with sufficient reliability and security to provide acceptable
documentation of a contractual agreement for purposes of financial recording and
Statute of Frauds requirements. The terminology used with these electronic record
devices is "read and write." For example, a capability folind in some optical disk
systems is called "write once, read many" or WORM.
Electronic transactions can be written to magnetic or optical (i.e., laser) media
from which they can be read electronically and displayed visually. The question of"a
writing," when viewed against 31 U.S.C. 1501, is ambiguous with respect to EDI. We
believe that the desire of courts and boards to uphold the intent of the parties will
prevail. Of course, what the intent of the parties is will be decided by the rules of
evidence. Surely, if the intent of the parties is to form a binding agreement, and if the
court finds the computer equipment and techniques to be reliable, the agreement will
The written paper requirement is further limited when FAR 2.101 defines a
a mutually binding legal relationship ohbigyating the seller to
furnish the supplies or services (including construction) and the buyer to
pay for them. It includes all types of commitments that obligate the
Government to an expenditure of appropriated funds and that, except as
otherwise authorized, are in writing.
There are several authorized exceptions. FAR Part 13 authorizes oral orders for calls
against BPAs at 13.201. At DFARS 208.405-2 (S-70), oral orders not in excess of the
small purchase limitation are authorized for orders from multiple-award schedules.
Oral orders issued against indefinite-delivery contracts must be confirmed in writing
[FAR 16.506(b)], although this confirmation may not necessarily require a
contractual document but simply a letter. Having made the point that in some
circumstances the FAR permits unwritten contracts, we must still note that the FAR
may need to recognize specifically that a properly designed electronic records system
can meet the "in writing" requirement.
ELECTRONIC SIGNATURE AND AUTHENTICATION
Government acquisition regulations require contracts to be signed. FAR 1.601
states ". . Contracts may be entered into and signed on behalf of the Government
only by contracting officers ......
FAR 4.101, Contracting officer's signature, states
(a) Only contracting officers shall sign contracts on behalf of the
United States. The contracting officer's name and official title shall be
typed, stamped, or printed on the contract. The contracting officer normally
signs after it has been signed by the contractor. The contracting officer
shall ensure that the signer(s) have authority to bind the contractor....
If necessary, EDI transactions can include an electronic message authentication
code to ensure that the transaction is released by someone in authority. If EDI is to
be applied widely, the FAR needs to be revised to recognize electronic signatures or
authentication codes as an acceptable form of the contracting officer's and
contractor's signatures, where the risk of fraud requires authentication. It should be
noted that the small purchase procedures of FAR Part 13 authorize awards without
signature at 13.506, where written telecommunicated purchase orders are
The requirement for electronic contracting transactions to be validated or
authenticated by message authentication means should be limited to those
transactions that are not exchanged under the auspices of a prior written EDI trading
partner agreement. If the parties have already agreed to exchange standard
electronic transactions through certain conventions, networks, passwords, etc.. the
use of message/signature authentication may be superfluous.
And it may be
unneeded as a deterrent to fraud if electronic audit trails, system access controls, and
separation-of-duties techniques are used.
Federal Acquisition Regulation 4.803(a) lists all items to be included in the
contract file. One of these is the "original of the signed contract or award, all contract
modifications, and documents supporting modifications executed by the contracting
office." FAR 4.803(b) lists all items to be included in the contract administration
office file. These include a "copy of the contract and all modifications, together with
supporting documents executed by the contract administration office" and "orders
issued under the contract." These FAR citations imply inclusion of only hard-copy
But note the statutory recordkeeping requirements specified at 44 U.S.C. 3101:
The head of each Federal agency shall make and preserve records
containing adequate and proper documentation of the organization,
functions, policies, decisions, procedures, and essential transactions of the
agency and designed to furnish the information necessary to protect the
legal and financial rights of the Government and of persons directly affected
by the agency's activities.
Also note the statutory definition of a record at 44 U.S.C. 3301:
As used in this chapter (44 USC 3301 et seq.), "records" includes all
books, papers, maps, photographs, machine readable materials, or other
documentary materials, regardless of physical form or characteristics, made
or received by an agency of the United States Government under Federal
law or in connection with the transaction of public business ....
There is no statutory prohibition against using electronic or "machine readable
materials" to document the "essential transactions of the agency" and "to furnish the
information necessary to protect the legal and financial rights of the Government."
To remove any doubt and to give comfort to the contracting parties, the FAR should
be revised to recognize electronic documents explicitly. Additionally, the
requirements of FAR Subpart 4.8, Contract Files, are optional for small purchase and
other simplified procedures covered by Part 13.
designed with proper controls over system access and record updates would have
storage and retrieval advantages over a system using paper documents.
An ED[ procurement system
The Federal Government established guidelines for electronic records in
Federal Information Resources Management Regulation (FIRMR) Bulletin 23, dated
18 June 1985, which expired 1 October 1986. The National Archives and Records
Administration (NARA) and GSA are attempting to establish an electronic
recordkeeping regulation. The Federal Register of 5 December 1988 published their
draft electronic recordkeeping regulation. Although it has yet to be finalized, some
guidelines are available in NARA handbooks and instructional guides.
These guidelines delineate record creation, format standards, indexing,
retention periods, storage media, and destruction considerations for electronic record
system designers. They also point out that electronic record systems, if properly
designed and maintained, present no greater legal problems than do paper records.
Under the Federal Rules of Evidence [Rule 803 (8)], if the only official record
established is electronic, it may be admitted as evidence as follows:
compilations, in any form, of public offices or agencies, setting forth (A) the
activities of the office or agency, or (B) matters observed pursuant to duty
imposed by law as to which matters there was a duty to report, excluding,
however, in criminal cases matters observed by police officers and other law
enforcement personnel, or (C) in civil actions and proceedings and against
the Government in criminal cases, factual findings resulting from an
investigation made pursuant to authority granted by law, unless the
sources of information or other circumstances indicate lack of
Public records and reports.-Records, reports, statements, or data
Automated system designers will therefore need to establish trustworthiness by
" Record establishment dates and times are precisely defined
* All record modifications or alterations are automatically recorded by the
system in an electronic audit trail
* The document was authorized to be issued ("signed") by an appropriate
Some procurement personnel are greatly concerned by the thought that the
integration of buyer workstations, local area networks, optical disk systems, and ED[
will create a paperless contracting environment. It is possible in some purchase
environments that most work will be done at automated buyer workstations. The
Naval Supply Systems Command's (NAVSUP's) Procurement Early Development
(PED) prototype small purchase system approaches being paperless. DPACS, when
integrated with SPEDE, will also provide a near-paperless environment.
However, much of this concern is ill-founded. As can be seen from the following
excerpt from the congressional Office of Technology Assessment 1988 study
Informing the Nation: Federal Information Dissemination in an Electronic Age, paper
still has some advantages over electronic display:
A note of caution with respect to the role of paper is in order. Despite
the dramatic increase in computer technology and electronic information,
paper documents are expected to have a continuing, major role for several
reasons. First and foremost, for documents of significant length, research
has found that reading from a computer screen is much more difficult than
reading from paper, despite improvements in the design and resolution of
screens and terminals. Even extensive practice at electronic reading does
not appear to make a significant difference. Second, paper continues to be a
more convenient and portable medium for many purposes, and
accommodates a wide range of reading styles and locations. Third, for many
documents, paper is still a bargain, although this is changing with the
advent of optical disk technology ....
for lengthy reports and books) permits the reader to browse through
material and use a variety of conscious or subconscious search patterns that
may be difficult if not impossible to replicate even with today's computer-
based search and retrieval software. Reading paper formats can lead to
Fourth, the paper format (especially
Therefore, when reviewers must read and comprehend textual material (as
when legal and procurement committees review files and buyers analyze proposals),
it is unlikely that we will see a paperless contracting office. Although entire
contracts may be stored on optical disk systems in the near future, there will still be a
need for printed copies of the document and the file. There may simply be human
engineering limitations on how far "paperless" contracting can go. This does not
mean that when processing, reviewing, or approving repetitive transactions such as
calls under BPAs or delivery orders under indefinite-delivery contracts, these
operations could not be entirely automated without any paper documentation.
However, the BPA or indefinite-delivery contract and supporting file themselves will
most likely be in paper form.
SMALL BUSINESS CONTRACTING OPPORTUNITIES
Public law and Federal acquisition policy clearly provide that small businesses
shall be given every opportunity to participate in the procurement process.
As stated in 10 U.S.C. 2301: "Further, it is the policy of Congress that a fair
proportion of the purchases and contracts entered into under this chapter be placed
with small business concerns."
FAR 19.201 states: "It is the policy of the
Government to place a fair proportion of its acquisitions, including contracts and
subcontracts for subsystems, assemblies, components, and related services for major
systems, with small business concerns and small disadvantaged business concerns."
FAR 19.202-3 states: "The contracting officer shall, to the extent practicable,
encourage maximum participation by small business concerns, small disadvantaged
business concerns, and women-owned small business concerns in acquisitions."
Obviously, any changes in how the Government conducts procurements must
comply with small business procurement policy. Nothing can be allowed to be seen as
denying small businesses the opportunity to compete, or as erecting barriers to small
The primary small business issue regarding EDI is the ability of small
businesses to acquire the necessary expertise, hardware, and software to access the
Government's telecommunications networks. It is feared that a significant number
of small businesses will find this level of technology too burdensome and therefore
that its use will restrict competition.
The question is not simply one of whether the small business will own a
microcomputer; it is one of whether the small business will understand EDI concepts
and technology. This is an educational and maturation process that may take some
time; but, just as the public previously adapted to and accepted telephones, facsimile
machines, automated teller machines, direct deposit of funds, and PCs, ED[ will
become a way of doing business. Electronic bulletin boards that are currently being
accessed by more and more small businesses may be an intermediate step toward a
level of sophistication that accepts ANSI X12 ED[ transactions.
Therefore, the question is not when, but how small business contractors can be
initiated into EDI contracting. Congress has stated that it is Government policy to
aid, counsel, and assist small businesses in obtaining Government contracts
[15 U.S.C. 631(a)]. The Small Business Administration (SBA) and DoD small
business programs may need to aid this process jointly. One possible educational
program that could be used as a vehicle is the small business development centers
funded by the SBA at local colleges and universities under Public Law 96-302.
Until EDI concepts are generally accepted, the Government will have to provide
small business offerors access to solicitation information in paper form. This
situation has been encountered before when Government procurement offices have
introduced the use of new technologies. Comptroller General Decision B-224070,
United Electric of Brevard, describes a situation in which a Government agency
provided, as part of the bid package, photographically reduced copies of engineering
drawings. A bidder had to possess the appropriate microform reader to view these
reduced drawings. However, to provide all potential bidders access to information in
the package, the agency also made paper copies of the engineering drawings
available at the contracting office. The Comptroller General found that this
arrangement did not restrict competition.
Similar arrangements need to be made when posting solicitation notices in
electronic bulletin boards or placing electronic RFQs in telecommunications network
mailboxes - a paper document will have to be provided for the least technologically
capable small business. Eventually, probably in the mid-to-late-1990s, a small
business without electronic means of receiving solicitations and awards will not be
considered a viable business and this practice can be discontinued.
Also, we can look at commercial experience in implementing EDI purchasing
systems with small businesses. Public utility companies, because of their highly
regulated status, are required to meet State-mandated small and minority business
goals as well as the Federal requirements of Public Law 95-507. Some of these
utilities report increased business opportunities for small businesses as a result of
utilizing EDI. For example, a hardware store or builder supply firm doing business
with the local power generation plant is now able to receive solicitations from the
utility's plants throughout the State. Access to the ED[ network now broadens
business opportunities beyond just the local public utility company.
sophisticated small businesses that have made the move to ED[ now market their
ED[ capabilities to prospective customers.
Information technologies such as EDI and electronic bulletin boards can provide
small businesses wide-access information. Small businesses may find these
technologies t- h an equalizer, not a competition inhibitor.
RESTRICTIONS ON COMPETITION
A requirement for an offeror to be able to receive solicitations or submit
quotations or offers electronically would appear to be restrictive of competition.
However, if the Government agency provides a paper alternative, or provides other
means of obtaining electronic information, the Comptroller General has found in
favor of technology. We predict that such a parallel system would disappear in a
relatively short period of time.
In Comptroller General Decision B-234490, 26 May 1989, W. B. Jolley protested
that an Army Corps of Engineers solicitation provision requiring that cost proposals
be submitted on a computer disk restricted competition. The Comptroller General
decided that such a requirement is not unduly restrictive of competition, because
experience has shown that (1) submitting information on computer disks reduces
time and errors in evaluating cost proposals involving numerous line items and
(2) complying with the requirement involves relatively little expense or effort.
Specifically, the Army furnished preformatted and programmed computer disks to
the offerors and requested that they submit their offers for each of the approximately
500 line items on the provided disk. For those offerors lacking direct access to
computers, the Army advised that most commercial typists or computer program-
ming companies provide this service for a fee as low as $25.
SYNOPSIS AND SOLICITATION NOTICE REQUIREMENTS
Currently, several electronic bulletin board projects are underway within DoD
that publicize contracting opportunities to potential contractors in narrow markets
(e.g., telecommunications) or local trading areas (base installation support). The use
of electronic bulletin boards or electronic bid boards to publicize procurement
opportunities may be restricted for small purchases by current statutory language.
41 U.S.C. 416(a)(1)(B) states that
an executive agency intending to solicit bids or proposals for a contract for
propcrty or strvices shall post, for a period of not less than ten days, in a
public place at the contracting office issuing the solicitation a notice of
solicitation described in subsection (f) -
(i) in the case of an executive agency other than the Department of
Defense, if the contract is for a price expected to exceed $10,000, but
not to exceed $25,000; and
(ii) in the case of the Department of Defense, if the contract is for a
price expected to exceed $5,000, but not to exceed $25,000.
The issue is whether the requirement "shall post, for a period of not less than ten
days, in a public place at the contracting office" can be met by modern
telecommunications media. Until electronic bulletin boards are generally accepted
by the public, Government agencies will have to maintain both hard-copy solicitation
notices and electronic bulletin boards. A statutory revision may be necessary to
recognize electronic bulletin boards as a means of posting solicitation notices.
One impact of electronic solicitation bulletin boards will be a reduced need for
manufacturers' representatives to visit contracting offices to search out procurement
opportunities. Even the more sophisticated firms that acquire requirements
information from supply centers and contracting activities via the Freedom of
Information Act and sell the information to defense contractors of all sizes may be
displaced by these electronic solicitation bulletin boards.
REPRESENTATIONS AND CERTIFICATIONS
One issue concerning the use of EDI to solicit and receive offers has been the
requirement for each offeror to complete and sign the representations and
certifications included in Section K of the solicitation. The concern is that the
submission and signature requirements would make any EDI offer nonresponsive.
Also, the electronic submission of representations and certifications may seem
impractical, given the legal uncertainties regarding electronic signatures.
A recent change to the procurement regulations to provide simplified contract
formats has resulted in agencies' having the authority to use annual representations
and certifications in lieu of individual-contract representations and certifications.
Federal Acquisition Circular (FAC) 84-53, Item III, provides at FAR 14.213 and
15.407(i) for annual submission of representations and certifications. However, the
offeror must still certify in individual offers that the annual representations and
certifications remain current, accurate, and complete as of the date of the offer, or
must provide updated representations and certifications. Although this FAR change
doe auL authorize EDI ofT-er wiLliouL repLieiitatious and certifications, it is a move
away from the concept that each contracting action requires its own complete, formal
documentation. It is certainly possible that an EDI transaction could be devised to
indicate the current status of the annual representations and certifications and the
contractor's reaffirmation of them.
CONTRACTUAL FORMS AND CLAUSES
Acquisition regulations prescribe contractual forms for certain contract actions.
For placing orders, DoD generally uses DD Form 1155, Order for Supplies or
Services. Additionally, certain clauses applicable to purchase orders are
incorporated by reference in each order.
However, use of a prescribed form or any form is not always mandatory. In
several places within FAR Part 13, for instance, provision is made for oral orders or
written telecommunications orders. Therefore, if an EDI purchase order conveys the
same information as an oral or telex order, while providing better controls and
safeguards, why should it not be used?
ANSI X12 840 RFQ and 850 purchase order transactions currently provide
clause reference transmission capability. EDI software is able to identify the
appropriate regulation (e.g., FAR), the numerical reference (e.g., 52.203-5), and the
clause title (e.g., Covenant Against Contingent Fees) and include this information
within the N9 Reference Number data segment in the 840 or 850 transaction. As a
practical matter, the standard clause requirements would be established in the
trading partner agreement, and the need to identify clauses electronically would be
limited to new or revised clauses. If a clause must be stated in full text, the MSG
message data segment may be included in the 840 or 850 transaction.
Another approach is to use master solicitations to obtain a prospective
contractor's written acceptance of clauses and provisions prior to the use of ED[
transactions. To signify continued acceptance of clauses, the offeror could include a
designated code in each bid.