Input: Few reversals for IT

About 8 percent to 10 percent of money spent by state governments through reverse auctions went to information technology purchases in fiscal 2004, according to analysts at market researcher Input last week.

State officials use reverse auctions, which lower purchase prices in a buyer's auction, to reduce costs, but such auctions have limited effects on IT procurements, said Marcus Fedeli, Input's manager of state and local opportunity products. Reverse auctions are good for items whose criteria are set in stone, but IT requirements "can creep," he said.

"They can't essentially see the same savings because the variables of the projects are always changing."

Also, with the vendor solutions, certain line items may not be included. "It becomes labor intensive for the government. ... The competitive process of the [request for proposal] process is a lot more lucrative," cost efficient and time efficient, Fedeli said.

In a reverse auction, agency officials describe a product or service they want to buy, and vendors bid on supplying that product or service. The auction takes place online, and vendors compete for the contract by lowering their prices as they see other offers posted. Of the approximately $151 million spent by states through reverse auctions in fiscal 2004, about $12 million to $15 million went to IT, according to Input reports.

Successful IT auctions have saved money for government agencies. For instance, Minnesota agency officials work through the state's Department of Administration's Materials Management Division saved $710,010 on Cisco Systems IP telephones, $321,903 on digital microwave radio equipment, $50,000 on Global Positioning System equipment and $92,646 on data recorders and accessories, Input's data shows.