Minnesota tests reverse auctions
- By Nicholas Morehead
- Jul 18, 2001
The Minnesota Department of Administration has launched a reverse auction
pilot in hopes of saving money on purchases of goods.
Minnesota is one of the first states to use reverse auctions, in which
vendors compete against each other online in real time for state contracts.
The lowest bidder wins the contract, and that saves the state money because
companies will lower their usual prices in hopes of winning the deal.
The Materials Management Division of the state's Department of Administration
(www.mmd.admin.state.mn.us), the agency
responsible for buying goods and services for several agencies, is handling
Brenda Willard, MMD's acquisitions manager, said the state legislature
was happy to support the program as long as it dealt with goods and did
not interfere with existing state contracts for services or construction.
"Which was just fine with us," Willard said. "Goods are very cut and dry.
This is what you want, this is when you want it. It's much more conducive
to reverse auctions."
The inaugural auction on June 21 was for the state Department of Corrections.
The department bought 500,000 pounds of aluminum for license plates, saving
about $35,000. Minnesota used MaterialNet (www.materialnet.com) to handle the auction. They also plan to use Procuri
Inc. (www.procuri.com) to handle at least one other
auction, likely involving office paper or road salt.
Willard said MMD officials want to see both vendors handle an auction
before deciding by the end of the year on one for a long-term contract.
Florida and Pennsylvania also have reverse auction systems in place.