- The Washington Times - Thursday, July 13, 2000

The federal government is trolling the Internet for its toilet paper.

Regulatory agencies are increasingly dealing with Internet companies, creating an entire new sector of dot-coms that sell strictly to regulatory agencies business-to-government companies.

"If you look at the whole business-to-business space, it's about businesses trying to figure out how to do business with each other," said Frank Adams, founder of Grotech Capitol Group, a venture-capital fund in Timonium, Md. "The government now is beginning to get into that, but someone has to do the work for them, because they don't have the talent or the resources to make them compliant with the Internet.

"So what we are going to see is a cadre of companies who will do all the upfront work for the government in exchange for a fee," he added.

The government's transition from paper to electronic transactions started seven years ago, when Congress and the Clinton administration began mandating that federal agencies move from a paper-laden procurement system to an electronic one.

Business plans for dot-coms catering to the government began landing on Mr. Adams' desk in the mid-1990s. That number has jumped over the past year.

Still, Grotech has backed only one business-to-government company: Birmingham, Ala.-based www.NationsTax.com, which created a Web site that allows companies to file state sales taxes on line.

This type of business dot-coms that facilitate the dealings of businesses and the public with the government is where Mr. Adams sees great potential.

In the Washington area, the government deals with dot-coms mostly for electronic commerce. In other areas of the nation, governments mainly hire Web sites like NationsTax.com. So while the State Department may buy its pens on line, Boston residents can pay property taxes and library fines over the Internet.

"There is probably more money spent this way, because there is much … greater need for citizens who need to do work with the government," Mr. Adams said.

Another attractive aspect of dealing with the government is that it is a huge spender. It spent $65 billion in the Washington area in 1998, accounting for one-third of the region's economy, said Stephen Fuller, an economist with George Mason University.

"Agencies are buying more and more over the Internet," said Mary Mitchell, deputy associate administrator for the Office of Electronic Commerce in the General Services Administration, the government's purchasing and leasing arm. "A lot of the purchasing is information-technology related, like hardware, software."

But purchases of pens and toilet paper are not unusual either, she said.

As more business-to-government companies start up, Mr. Adams estimates that the sector will become the next big wave in business-to-business development in the next five years.

FedCenter.com, a site run by Herndon, Va.-based Digital Commerce Corp., is an example of the development of a business-to-government company. The site provides an on-line marketplace where government entities can find vendors, compare prices, negotiate transaction terms, and execute and track purchases.

For example, government agencies are required to use recycled paper. So FedCenter, through an alliance with Xerox Corp., offers recycled paper over the Internet.

Digital Commerce has filed a registration statement with the Securities and Exchange Commission for an initial public offering. The 5-year-old company plans to trade on the Nasdaq Stock Market.

"FedCenter, our flagship site, was started for government purchasers so they could purchase anything they need," said Kasha Laiks, spokesman for Digital Commerce. "As that grew, our [chief executive officer] saw the need for a Web site to meet the needs of the military and government employees."

So www.MyGovClub.com was born. The site caters to government and military employees and their families, and it offers everything from computer products to moving information about communities and schools.

Now Digital Commerce is starting yet another site. StateGovCenter.com is more specialized, offering on-line project-management tools for state government buyers.

Another business-to-government company started as a catalog business 15 years ago. Then Steve Baldwin bought Intellisys Technology Corp. (ITC) two years ago and turned it into www.PlanetGov.com.

ITC sold computer technology, integration and other services customized for government professionals. PlanetGov does the same, but on line.

"We have reinvented ITC, and put the PlanetGov.com site with community aspects so that they can have other resources to come for besides just purchasing," said Piper Gioia, spokeswoman for the Fairfax, Va.-based company.

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