On the part of many buyers, there is still concern over the legality of reverse auctions in public purchasing, in spite of the fact that BidBridge has run successful reverse auctions in 29 states across the U.S. BidBridge shares your concern of legality, but believes that reverse auction is a tool that should be a part of every public purchasing process as a way to ensure transparency and competition in bids that fit the process.
At the federal level, the Federal Acquisition Regulations (FAR) provide for the acceptance of formal bids and quotes online, including via reverse auction as issued in March of 2005, in Subpart 4.5 of FAR. In February 2007, the Integrated Acquisition Environment quarterly included an article entitled “Spotlight on Reverse Auctions.” The following excerpt details the legality of reverse auctions in public purchasing:
“The concept of a ‘reverse auction’ has been around for some time. However, until the Federal Acquisition Regulation (FAR) was changed in 1997 to allow their use and web-based software applications were developed to facilitate their utility, reverse auctions were unavailable to the federal buyer.
Within the framework of federal procurement a reverse auction is a pricing tool, the main goal of which is to drive purchase prices downward. It’s the type of auction which the role of the buyer and seller are reversed. In a traditional auction, contractors compete for the award of a contract. Today, reverse auctions offer the ability to conduct real-time price competitions within hours. The process allows the government to reveal each offeror the prices offered by all other offerors (anonymously). Offerors then have the chance to continually revise their prices as each revision is revealed to all of the other offerors. The process is repeated until all offerors stop “bidding” or until the auction closes.”
Here is a link to the complete FAR document
“Spotlight on reverse auctions” (IAE)
Just as competition is the “cornerstone” of the public acquisition system, as outlined in the Office of Management and Budget’s memorandum to all Departments and Agencies, so too is competition the cornerstone of the reverse auction tool. BidBridge reverse auctions place a group of strategically sourced, qualified suppliers in a dynamic, competitive bidding environment in which they can work to earn the business of a buyer.
Please email us blog@bidbridge.com if you have any questions about the legality of reverse auctions in your home state.
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