Pennsylvania will conduct an online auction for electricity services in the commonwealth

San Diego -- Pennsylvania on Tuesday will conduct an online auction for electricity services in the commonwealth, the eighth such auction performed there since March.

The previous seven auctions have resulted in savings of nearly $6 million to taxpayers, said Stan Richart, the state official in charge of procurements valued at more than $100,000.

Speaking at last week's National Electronic Commerce Coordinating Council conference, Richart said Pennsylvania began to conduct online auctions to purchase government goods and services earlier this year when it received bids for aluminum coil that the state planned to use in manufacturing the commonwealth's license plates (see civic.com, Sept. 9). Richart is the buying supervisor at Pennsylvania's Department of General Services.

The state is using the software and services of Pittsburgh-based FreeMarkets Inc., which runs the auctions and provides the necessary software that vendors need to participate. The bidding is not done on the Internet. Vendors bid by using FreeMarkets' BidWare solution.

Greg Cooper, senior market manager at FreeMarkets (www.freemarkets.com), said not all bids generate savings for the host, but more than 90 percent of the bids generate savings. "So we can't guarantee savings," he said. "But we do guarantee that will you get what the market will bear" on that day.

The auctions also have reduced the time needed to complete the bid process from 60 days to no more than 45 days, Richart said. Pennsylvania pays FreeMarkets on a monthly basis for the service and "the cost of the bidding has never been more than the savings," he said.

Only once has a vendor underbid the competition, been awarded a contract and then not been able to produce. "We did a sugar bid, and a vendor came in with a very, very low bid and just couldn't do it. But our legal team let them off," Richart said, adding that such leniency might not be granted in the future.

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