DHS moves forward with reverse auctions

FedBid has won a five-year contract to provide online reverse auction services for the Homeland Security Department’s Office of Procurement Operations (OPO), primarily for purchases of technology and other equipment.

FedBid had been providing similar services for DHS in a limited testing role, but company executives said they now have a firm deal.

“We consider this the major contract,” said Luther Tupponce, FedBid’s vice president and general counsel. “The OPO is the most focused group in the DHS as far as buying these types of commodities is concerned.”

The contract is for one base year, through Sept. 29, 2007, with four option years.

In reverse auctions, potential sellers compete with one another to meet a buyer’s requirements. In this case, OPO officials would list their requirements on FedBid’s Web site and sellers would make bids, with the lowest price usually getting the sale.

However, DHS would be under no obligation to buy, Tupponce said. OPO officials would list the requirements buyers would have to meet, which could include factors other than price. If officials concluded that their requirements had not been met, they could cancel the auction.

“FedBid only makes money if we provide results that [DHS] likes,” Tupponce said. “No one will be out of pocket on this.”

Despite some criticism of reverse auctions, agencies have been reporting success with them. The State Department recently said it had conducted 4,700 reverse auctions worth $169 million, with a savings of close to $18 million on what it had expected to pay for the items.

At the beginning of the year, FedBid announced a contract with the General Services Administration for a similar five-year award to provide reverse auction services to that agency and others eligible to use GSA contracts.