Business practice improvement
Buying goods and services can take time to issue requests for proposals, review bids and then award a contract. But, a new “reverse auction” process used in two recent purchases is proving that there is a better way to do business and save the Laboratory money and time.
“It’s another procurement tool we use to get the best deal for the Laboratory and the government,” said Nick Perry of Purchasing (ASM-PUR).
The reverse auction, also known as eAuction, has been used by one of the parent companies now managing the Laboratory, said Perry, and has saved the company almost 20 percent on procurement costs.
It is called reverse auction because unlike a traditional auction where the highest bidder gets the item, the company that submits the lowest bid is awarded a contract, explained Perry. Lowest cost isn’t always the deciding factor: quality and the ability of the winning bidder to service their product and be responsive to the Lab’s needs also are factors, he added.
At a recent reverse auction, the Laboratory bought 5,000 pagers. Two companies submitted bids. The initial bids from the companies were $43 and $51 per pager. When the bidding closed, the successful bidder lowered its price to $38 per pager, while the second company’s closing bid was $39 per pager.
Perry said the Lab saved about $45,000, explaining that the last time the Laboratory purchased pagers it paid $47 per pager. He added that the reverse auction process also narrows the price difference between companies bidding on a product or service.
On another occasion, the Lab purchased software maintenance services and saved about 6 percent, said Perry.
At a reverse auction, Lab buyers view a computer monitor or screen that displays the bids from competing companies. The companies also see a computer screen displaying their rank in the bid process, but not competitors’ actual bid prices. “We do not sacrifice the integrity of the bidders’ prices,” said Perry. Reverse auctions, he said, give companies the incentive to adjust their bid. “From the bidders’ perspective, it gives them multiple chances to lower their prices to remain competitive,” he said.
Perry said when the reverse auction ends, the successful company is notified and asked to send written confirmation on their bid, and all companies who bid are notified by letter on the winning company. The Lab has formally awarded the contract for the pagers to ATI Wireless.
Henry Flemming of Telecommunications (CTN-4) said of the recent reverse auction on the pagers: "In an era of reduced budgets, I am pleased the Laboratory has adopted a process that allows us to receive products at the best price."
Reverse auctions aren’t feasible for all procurements, but Perry said the Lab intends to use this new tool in future procurements whenever possible.
