Increased competition and the demand for efficiency in the government contracting and purchasing arena has created a movement towards innovative use of technology in state government procurement practices. In particular, the increased use of the Internet is a phenomena that promises to reshape how government buys goods and services in the new millennium. In 1999, state and local governments spent over $322 billion dollars on the procurement of goods and services. McGraw-Hill predicts that by the year 2007, state and local procurement will exceed $450 billion dollars. It is evident that state governments spend a large amount of tax dollars on the procurement of goods and services. The problem lies in the inefficient and outdated laws, processes, and technologies that currently govern state purchasing practices. This report examines the efforts and challenges to streamline and modernize state contracting and solicitation processes using Internet technology. The report begins by providing a baseline assessment of the various procurement practices of state governments, especially the contracting and bid solicitation process for the state of Texas. The report also provides an overview of the procurement challenges facing vendors and state government today. It then examines current initiatives and efforts by state governments to address the inefficiencies of the current system. The third chapter examines these efforts and addresses whether or not these initiatives are effective. Chapter Three also explores the policy and economic impacts of implementing Internet technology. Chapter Four provides alternative options for improving the procurement process and the advantages and disadvantages of each alternative. The report concludes by identifying policy issues related to the trend towards e-procurement and provides recommendations based on best practices and innovative use of Internet technology for state governments to implement in their procurement process.