Agencies should shift to online auctions, scholar says

Sellers ranging from large corporations to an ex-husband with a used wedding dress have made fortunes on eBay - but the federal government has been less successful with online auction tools.

While the government has long sold unwanted goods - such as property seized from criminals - at physical auctions, it has been slow to get into the more lucrative online market. With the exception of those run by the Defense Department, agencies' online auctions have suffered from low sales and participation rates, according to a new report from the IBM Center for the Business of Government.

The report comes on the heels of President Bush's Federal Asset Sales initiative, which aims to help agencies sell their unwanted assets. The Office of Management and Budget has announced that it will create a Web site, FedAssetSales.gov, that will offer potential buyers a single place to buy government property.

Federal agencies currently provide information on asset sales through 163 Web sites, according to OMB. In 2003, the government sold $115 million worth of surplus assets over the Internet.

The IBM report urges agencies to sell more assets over online auctions and to run them more efficiently. Successful auctions depend on providing buyers as much information as possible and attracting as many buyers as possible, said David Wyld, author of the report and professor of management at Southeastern Louisiana University.

Wyld pointed out that while the government sells $16 billion worth of surplus property each year, the General Services Administration, which is responsible for most civilian assets, sells products for only 2 percent of their original cost. GSA's main auction site, gsaauctions.gov, has not been successful, partly because it charges high fees.

The Defense Department, on the other hand, through a partnership with Liquidity Services, Inc., sells about 400,000 items annually on its main online auction, govliquidation.com. Users can search for items like desert boots and X-ray machines. They can also schedule appointments to inspect the merchandise in person. Military equipment like airplane parts are "demilitarized" before sale, meaning they are stripped of any insignia or electronics.

The chief benefit of online auctions, said Wyld, comes from their ability to attract more potential buyers. "Any time you increase participation, you're going to drive up the price," he said.

Online auctions don't work for every kind of sales, however. While govliquidation.com requires buyers to register and Defense maintains a "banned buyers" list, the government retains little control over who buys what and sometimes that matters.

Take government land, for example. "You want a little bit more control over who is going to buy it and what their potential use is going to be. Some of the land assets are going to be around military bases. You want to know who is going to be moving in next door," said Geoffrey Segal, director of government reform for The Reason Foundation, a Los Angeles-based nonprofit.

In his report, Wyld recommends that government executives find out how much they are currently spending on storing surplus assets, the amount they are recovering through physical auctions and their costs, and if there is any regulation preventing them from using online auctions. He also suggests they check to see if their agencies are allowed to keep auction revenues, or if proceeds must go to the Treasury Department.

Most civilian agencies have little incentive to increase their sale revenues because the money goes directly to the Treasury. Wyld said ideally that would change and money from online sales would stay with individual agencies, motivating agency heads to organize more lucrative auctions.