Feds buy in to reverse auctions
- By Colleen O'Hara
- Aug 14, 2000
The Office of Federal Procurement Policy and other agencies have thrown
their weight behind online reverse auctions as a way to purchase goods and
services in government, and save some money in the process.
"I think it's wonderful you're trying [reverse auctions]," said Ken
Oscar, acting director of OFPP, speaking earlier this month at a conference
sponsored by the General Services Administration's Federal Technology Service.
Reverse auctions, which allow sellers to bid down the price of a product
or service, provide agencies with another tool in their purchasing toolbox,
Vendors that have participated in a reverse auction "think that it's
good" and "fair," Oscar said, adding that even the losing vendors he has
talked with felt that the process was inclusive.
The Navy, the Army, the Air Force and the U.S. Postal Service are among
the agencies that have already tried online reverse auctions. The Navy conducted
its first online reverse auction May 5 and found that it was a useful "price-
leverage tool," said Rear Adm. Bill Jenkins Jr., deputy for acquisition
business management at the Navy.
The Navy has learned firsthand that online auctions can save a significant
amount of money. For example, when the Naval Supply Systems Command held
an auction for ejector seats, it saved about $1 million, said Capt. Kurt
Huff, director of contracts, Navy Inventory Control Point, Philadelphia.
Another auction held at the end of June for ship-related services saved
the service almost $3 million.
Online auctions may help reduce the cost of buying specific products,
but they do not reduce the time it takes to put a procurement together,
Jenkins said. "It is not a purchase lead-time reducer," he said, adding
that they only make sense where there is "healthy competition" in the market.
FTS organized this month's event to garner support for its own auction
plans, which include a six-month pilot with nine vendors to test the reverse
Manny DeVera, director of GSA's FTS IT Solutions Regional Services Center,
said he is close to signing agencies to participate in the pilot. One agency
had signed on, but later backed out.
DeVera has been the force behind GSA's Buyers.gov site, which will initially
offer three approaches to selling computer hardware and software to agencies:
a private buyer auction, a reverse auction and an online shop for a specific
information technology commodity.
Although reverse auctions may not be for everybody and for every situation,
they do have a place, said Sandra Bates, FTS commissioner. Agencies should
"dare to be great," she said. "I think we owe it to our customers to think
outside the box."
Still, there is some disagreement about what products are appropriate
for a reverse auction.
GSA's Buyers.gov site focuses on IT commodities, but Steve Kelman, Weather-head
Professor of Public Management at Harvard University's Kennedy School of
Government, said he is "not convinced that buying laptops and PCs are the
first targets of opportunity," particularly because agencies are successfully
using blanket purchase agreements to buy those types of products.
Agencies should look at spot market buys instead, Kelman said.
Still, online reverse auctions fit well into procurement reform, he
said. "It's one more example of buying smart."