The Foreign & Commonwealth Office (FCO) is spending £1.5m on an online procurement system which it claims will streamline purchasing in its 220 embassies worldwide.

Software from Biomni will replace a traditional paper- and fax-based system that the FCO uses to purchase more than £70m worth of goods and services annually, including stationery, furniture and computer supplies.

The FCO expects to see a return on its initial investment within three years, but said that the biggest savings will be made through buyers having the ability to negotiate better prices with suppliers.

"We expect savings of three to five per cent, and 60 per cent of the value of the system will be covered by that," said Michael Carr, head of the FCO's support group.

He added that the FCO chose Biomni software because it is the most cost-effective system to meet requirements, and because it integrated with the existing IT infrastructure.

Automating the purchasing system is the first ebusiness project undertaken by the FCO, although it has been planning to try e-procurement for about 18 months. The rollout will be finished in September, and the system goes live on 17 November.

Carr explained that the FCO started with e-procurement because it is a low-risk way of taking advantage of developments in technology to fix an area of the organisation that isn't working efficiently.

The project also ensures compliance with government requirements stating that all departments need to be web-enabled and doing at least 25 per cent of business electronically by 2006.

Once the system is installed, embassy staff will have instant access to vendor catalogues; supply levels will be updated in real time; and buyers will be provided with price quotes immediately. Invoices will still be generated and mailed out, however.

FCO's key suppliers are already web-enabled, and Carr said that most of the smaller companies will be prepared to accept electronic orders by the time the system goes live.

Biomni project managers and FCO staff are working together on the rollout of the software, which will be centrally administered in Hounslow.

The system is multi-currency and multi-lingual, and Carr said that training won't be necessary because the system has a simple interface which allows buyers to access suppliers directly.

Extra funding for the project was raised from HM Treasury Capital Modernisation Fund.