Spend Matters welcomes our new guest contributor, David C. Wyld, the C.E. Laborde Professor of Management at Southeastern Louisiana University and founder of the Reverse Auction Research Center.
In both the private and public sector, reverse auctions have come to be recognized as a proven best practice for purchasing goods and services. Study after study on reverse auctioning have proven that the power of competitive bidding has made it possible for procurement organizations to save a great deal of money. At the same time, they are creating a level playing field for rival suppliers of all sizes to compete for selling opportunities that are advantageous for them.
As someone who has spent over a decade helping advance the concept of the public sector using reverse auctions to make sure taxpayers get the biggest “bang for their buck” in governmental acquisitions, I was pleased to see that the largest procurement-focused agency in the federal government has now fully embraced the notion of competitive bidding. This article is the first in a series for Spend Matters on this important development in the public sector’s use of reverse auctioning.
On July 1st, the General Services Administration (GSA) launched GSA Reverse Auctions, a reverse auction site developed by the Federal Acquisition Service (FAS)’s National Information Technology Commodity Program. This new competitive bidding platform is focused on procurements of commonly purchased information technology products, office supplies, and simple services. Participating suppliers must already be on approved contractor lists (known as Multiple Award Schedules and Blanket Purchase Agreements in the federal world). Thus, GSA Reverse Auctions operates as a second order of competition, as the auctions are a way of further reducing the prices paid by federal agencies under these agreements.
As aforementioned, this is far from a new public sector procurement practice. The federal government’s utilization of reverse auctioning has been on the upswing for a number of years. Propelled by both the pressure of significant budget cutbacks and the availability of new, web-based reverse auction marketplaces, a variety of federal agencies have successfully employed and currently implement competitive bidding. Now, with its new reverse auction site, GSA is hoping that the availability of a platform free to use by both government acquisition shops and vendors will further promote the use of competitive bidding. GSA Reverse Auctions provides government buyers with a customizable reverse auction functionality, enabling them to:
- Structure their auction with customizable price and duration parameters
- View past auction results to gain both market intelligence and to use as a model for their own events
- Consolidate similar buys to take advantage of federal purchasing power
- Have greater transparency in acquisitions and ensure compliance with all applicable federal procurement regulations
For vendors, the GSA reverse auctioning platform provides competing suppliers with real-time awareness of where they stand in competition with rival firms and access to contracting opportunities from across the federal government. GSA is also offering public and private sector buyers and vendors with online training and dedicated help desk support.
In announcing the new service, FAS Commissioner Thomas A. Sharpe, Jr. said, “Using a government-run reverse auctions tool is a fantastic innovation for GSA’s customers, and we expect that it will drive even more savings and speed into the acquisition process.... Reverse auctions can drive down prices paid, reduce the total cost of acquisitions, and save time and precious acquisition resources for both government and industry.”
The significant investment behind the development and launch of GSA Reverse Auctions must be viewed as nothing less than a validation of the simple fact that reverse auctioning works. Numerous federal agencies already procure well over a billion dollars annually by buying through competitive bidding processes offered through private sector partners. While it is too early to assess the success of GSA’s offering, it is quite possible that, given GSA’s central role in federal acquisition, this new platform could spur further utilization of competitive bidding across the federal government—ultimately producing greater cumulative savings for the American taxpayer. This is indeed good news for us all.
Look out next week for deeper analysis on specific questions raised by GSA’s new reverse auction offering, including:
- How important is the absence of a market maker in the GSA model?
- What is the true cost of “free” reverse auctions from the GSA?
- Is there a problem with the government competing with private sector reverse auction services?