Savings drive reverse auctions

When Manny DeVera talked to federal procurement officers a year ago aboutconducting online reverse auctions, many questioned whether such transactionswould even be legal. "They said you can't do it," DeVera recalled.

But today, after watching about 60 such auctions generate substantialsavings on items ranging from computers to aircraft parts, procurement officersfrom across the federal government are sold, said DeVera, who is deputyassistant commissioner for service development at the Federal TechnologyService.

"Every auction we've done has shown cost savings," DeVera told a gatheringof corporate sales executives and government procurement officials Thursday.

For example, the Defense Finance and Accounting Service saved 21 percent— $2.2 million — when it bought several thousand computers and printersthrough an online reverse auction last fall.

The Air Combat Command saved between 8 percent and 38 percent on batchesof computers. And in November, the Coast Guard saved $1.4 million on aircraftparts. Online bidders for the Coast Guard contract included companies overseas.

During reverse auctions, companies bid to sell goods to the government.During bidding, the price declines as bidders strive to undercut one anotherto win a contract. Conducting reverse auctions online enables companiesanywhere to compete. Eight companies, called "enablers," conduct onlineauctions for federal agencies.

A year's worth of experience has demonstrated that online auctions area way to stimulate competition, DeVera said.

Buying through reverse auctions has been dominated by the military.The Air Force has conducted about 15 auctions, the Navy about eight. Butthe civilian agencies are ready to join in, DeVera said. The Energy Departmenthas done some auction buying. "A year from now, almost every agency willhave done auctions," DeVera predicted.

And by then, agencies will probably be buying services as well as goodsthrough reverse auctions, he said, adding that by 2003, online reverse auctionscould account for 20 percent of the $220 billion in government purchasesof goods and services.