One of the nation’s first statewide electronic procurement services for school systems suffered a major setback at the end of January, eSchool News has learned.

The BuyBoard, a secured web site designed “to centralize the purchasing activity and increase purchasing power” for schools and other government entities in Texas, is losing its corporate partner. Austin-based Ambac–the parent company of the servicing contractor that has provided the BuyBoard with its system, servers, and software–has announced plans to end its involvement with the purchasing cooperative.

Ambac’s decision came after it posted an after-tax operating loss of $4.5 million for fiscal 1998, according to The Bond Buyer.

The statewide purchasing cooperative is administered by the Texas Association of School Boards (TASB) and endorsed by the Texas Municipal League and the Texas Association of Counties.

The BuyBoard’s simple format was designed to allow purchasing agents point-and-click access to detailed product descriptions, commodity codes, part numbers, and images.

The online service “allows members to make confident buying decisions and streamline the purchasing process,” a description on the TASB web site says. “Buyers simply select products that best fit their needs.”

Ambac’s decision means TASB is scrambling to find ways to continue offering the online ordering service to the 376 Texas school districts TASB says are participating. The association is considering hiring some of the 47 Ambac employees who were laid off, said Gerald Brashears, chief financial officer for TASB.

Ambac Connect Inc. provided software that allows Texas schools to use the internet to obtain everything from calculators to grounds maintenance supplies. School buyers can browse an online catalog of items to purchase via Ambac’s automated system.

The system allows easy soliciting, collecting, and tabulating of bids from vendors competing to provide services and products, TASB said. As a result, TASB could help schools save on large purchases by getting low bids for consolidated purchases, it said.

According to Brashears, “several large school districts” relied on the service, which allowed them to place orders without having to call vendors individually.

Very slow transition

But, according to insiders, a big part of the reason for the pull-out is that not enough schools were using the system. This reportedly caused Ambac to doubt that its investment would pay off.

Brashears acknowledged the service could take two or three years to catch on with school buyers. But that’s too long for companies to wait, said Sabra Brinkmann, a financial analyst for Advest Inc.

Ambac’s decision exemplifies the “very slow transition to online procurement,” Brinkmann said. The company couldn’t justify the $20 million to $30 million investment that would be necessary to develop the online bidding process, she said.

“I think what it means is that the municipal market is not yet ready for internet commerce,” Brinkmann told The Bond Buyer. Many schools have long-standing relationships with vendors they buy from, she said, and they fear losing good deals by participating in a group bid.

The urge to go it alone might be especially strong for big districts that enjoy plenty of buying power. Lester Mays, executive director of purchasing for Dallas City Schools said he has never used the TASB online service because he can do better by contracting with vendors on his own. He can find a vendor to beat the TASB price “nine out of 10 times,” he said.

For smaller school districts that lack the staffing and clout of Dallas, online purchasing might make sense, Mays said. The cooperative can get a small district in West Texas the same low price for instructional supplies that bigger buyers can demand.

Brashears said the online purchasing cooperative is “a great service and we will do whatever we can to maintain it.”

Ambac

http://www.ambac.com

Texas Association of School Boards

http://www.tasb.org