Procurement execs consider reverse auctions

Procurement officials from across the federal government gathered in Washington Wednesday to learn more about one of the newest tools at their disposal: reverse auctioning over the Internet.

Agencies are old hands at auctioning surplus equipment to private companies, individuals and even foreign nations. But reverse auctions are very different. In the new approach, companies bid against each other in real time to win government contracts.

"I think they're great," said Kenneth Oscar, acting deputy administrator of the Office of Federal Procurement Policy at the Office of Management and Budget. "Competition is critical. Reverse auctions and supply lists are a marriage made in heaven. Reverse auctions bring competition to these lists."

Oscar and procurement lawyer Carl Peckinpaugh, chief counsel for DynCorp, told government contracting officials that reverse auctions are not prohibited under the Federal Acquisition Regulation.

Agencies that have experimented with the tool have met with considerable savings. When the Naval Inventory Control Point (NAVICP) conducted the federal government's first reverse auction over the Internet in May, it saved nearly $1 million on a purchase of ejection seats. NAVICP's next reverse auction, on shipboard berthing, saved $2.8 million.

"I was a skeptic when we first discussed reverse auctioning," said Capt. Kurt Huff, NAVICP's contracting directorate head. "But now I believe that it is an appropriate pricing tool."

The Navy will conduct at least two more reverse auctions before the end of August in order to test how well the tool works on different types of contracts.

"If you look at the reverse auction technique as a pricing tool you can obtain the information required to make a best-value determination," Huff said. "Our sense is that the Navy will start using this much more in the coming months."

The General Services Administration is developing its own site for reverse auctions and other cutting-edge procurement techniques that have developed as a result of the Internet. The site, Buyers.Gov, will be up and running by the end of the month, said Manny DeVera, director of the Federal Technology Service's IT Solutions Regional Services Center.

"Reverse auctions simplify the procurement process," DeVera said. He also urged agencies to band together and "aggregate demand" to increase their purchasing power. "They have to learn to work together," DeVera said.

With demand aggregation over the Web, "you have lots of different agencies doing purchases on the spot," said Jim Rose, co-founder and CEO of MobShop Inc., based in San Francisco. "Our site collects orders for products and puts them all together."

The conference, "Reverse Auctions and Volume Buying: Continuing Procurement Reform" was presented by the Potomac Forum Ltd. and sponsored by the General Services Administration with support from the Air Force and the Navy.