Austin, Texas
                    FISCAL NOTE, 77th Regular Session
                              April 8, 2001
          TO:  Honorable Steven Wolens, Chair, House Committee on State
        FROM:  John Keel, Director, Legislative Budget Board
       IN RE:  HB2528  by Junell (Relating to development and management
               of an electronic procurement system for state and local
               government.), As Introduced
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  HB2528, As Introduced:  negative impact of $(5,842,500) through       *
*  the biennium ending August 31, 2003.                                  *
*                                                                        *
*  The bill would make no appropriation but could provide the legal      *
*  basis for an appropriation of funds to implement the provisions of    *
*  the bill.                                                             *
General Revenue-Related Funds, Five-Year Net Impact:
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       2002                         $(4,272,500)  *
          *       2003                          (1,570,000)  *
          *       2004                             (70,000)  *
          *       2005                           28,507,500  *
          *       2006                           28,510,000  *
All Funds, Five-Year Impact:
*Fiscal      Probable        Probable        Probable       Change in     *
* Year    Savings/(Cost)  Savings/(Cost)  Savings/(Cost) Number of State  *
*          from General    from Federal      from All     Employees from  *
*          Revenue Fund  Funds - Federal General Revenue     FY 2001      *
*              0001            0555         Dedicated                     *
*                                            Accounts                     *
*  2002      $(4,272,500)              $0              $0             1.0 *
*  2003       (1,570,000)               0               0             1.0 *
*  2004          (70,000)               0               0             1.0 *
*  2005        28,507,500      37,130,000      42,600,000             1.0 *
*  2006        28,510,000      37,130,000      42,600,000             1.0 *
Technology Impact
This bill would require $2.7 million for the electronic procurement
system to purchase critical hardware and software including the
interfacing of financial and accounting systems to the electronic
procurement system.  In addition, the Department of Information
Resources estimates it would need a computer ($2,500) for the additional
staff member and that the computer would need to be updated in fiscal
year 2005 ($2,500)
Fiscal Analysis
This bill would authorize the Department of Information Resources to
build and manage the electronic procurement marketplace and the
electronic commerce network.  The General Services Commission would
manage and administer the content of both systems.  The bill would allow
local governments to participate in the state's electronic procurement
system and in the contracts supporting those procurements.
According to the Comptroller of Public Accounts (CPA) and the Department
of Information Resources (DIR), the cost for implementing electronic
procurement would be $5.7 million in general revenue.  In fiscal year
2002, $1.7 million would be used to purchase critical hardware and
software for the electronic procurement system and $1 million for
interfacing financial and accounting systems of the 20 largest state
agencies.  In addition, the estimate assumes a need to contract for
professional services at a cost of $1.5 million for fiscal year 2002 and
again for fiscal year 2003, to implement the electronic procurement
system for the rest of the state and outreach to venders and local
governments (professional services based on 15 contractors:  programmers,
requirement analysts, system designers, etc. at $100,000 each).  There
would also be the need for one project manager at $70,000 per year
including benefits.

According to the CPA and DIR, electronic procurement implementation would
result in savings by fiscal year 2005 as participation in the system
increased and purchases became more frequent.  It is estimated that
savings would be expected to accrue at a rate of 2 percent of actual 1999
purchases by all state agencies.  According to the CPA, the 2 percent
estimate is conservative compared to private industry standards of 3 to 5
percent (Gartner Group and other industry experts).

Based on this methodology, the State would generate savings of $28.58
million each fiscal year in general revenue based on the purchase of
$1.429 billion;  $37.13 million would be saved each fiscal year in
federal funds based on purchases of $1.86 billion; and $42.6 million
would be saved each fiscal year in dedicated accounts funds based on
purchases of $2.13 billion.
Local Government Impact
No significant fiscal implication to units of local government is
Source Agencies:   313   Department of Information Resources, 116
                   Sunset Advisory Commission, 304   Comptroller of
                   Public Accounts, 303   General Services Commission
LBB Staff:         JK, RB, GS, DW, SK