Postal Service makes bid for Internet auctions

Joke about "snail mail" all you want, but the U.S. Postal Service has just

pulled ahead of other government agencies in the e-commerce race. The mail

service has decided to start buying some goods and services through Internet

auctions.

In an alliance with a company that specializes in conducting reverse auctions

over the Internet, the Postal Service expects to go online in May to buy

preprinted, prestamped envelopes, to lease trailers to haul mail, and to buy fuel.

Postal Service auctions will be "hosted" in Pittsburgh at the headquarters

of auction company FreeMarkets Inc. Companies interested in selling envelopes

or leasing trailers to the Postal Service will submit bids over the Internet

from computers at their home offices. The bids will come in to Pittsburgh.

Postal Service chiefs, who will be "passive participants," will probably

watch the action on computer screens at the Postal Service headquarters

in Washington, D.C.

Unlike the standard procurement process, where companies send agencies sealed

bids and contracts are awarded on the basis of a single offer per bidder,

online auctions are "dynamic." Companies typically submit several bids over

the course of an hour or two, driving the price steadily lower as they jockey

to win the contract.

Such competition usually cuts costs from 2 percent to 25 percent in auctions

conducted for businesses and state government agencies, said David McCormick,

head of FreeMarkets' public sector division.