A recent study conducted by the Reverse Auction Research Center revealed that the federal government could save over $4 billion annually by running more commodity and simple service purchases through the reverse auction model. Reverse auctions is already used in some federal government agencies, but not all – and it has not even touched its full potential as a government purchasing best practice.
The Reverse Auction Research Center’s study identified 17 key government sectors in which reverse auction could yield the most savings, with the Department of Defense, Department of Veteran Affairs, and the Executive Branch coming in as the top three.
This quote from David Wyld sums it all up: “There are a lot of tough choices to be made in cutting federal spending, but one solution is a no-brainer: use more reverse auctions for simple buys.”
In light of the current financial difficulties our country is having, reverse auction implementation and expansion would provide much needed savings to our Nation’s bottom-line. eBridge believes that the implementation of reverse auction would provide valuable savings to any government sector willing to take leadership and utilize the technology. We hope to see this practice adopted increasingly in the near future as U.S. citizens and government officials realize its potential for incredible savings.
To see the article from Business Wire, click here
In a recent article from governing.com, author Jessica Mulholland describes the remarkable savings achieved by government agencies and private companies utilizing reverse auction technology. The prime example from the article, Maricopa County, Arizona, discovered reverse auction when they became tired of paying a premium price for a commodity that was being sold to them at far above market value. Once they learned about reverse auction and the savings it creates, they began running any purchase through it that they could. As a result, they uncovered dozens of purchases on which their margins were greatly decreased for their bottom line – saving millions of dollars on everyday items such as flour and peanut butter, but even more specific items as well.
Mulholland also points out that in reverse auction quality is still factored in, as the buyer is not restricted to awarding to the lowest bid – they have the option of awarding to 2nd, 3rd, even 4th placed suppliers if they feel that bid is the highest in value or quality to their company.
eBridge offers the same incredible results discussed in this article – all at no direct price to our clients. There is truly no substitute for a professional team like ours at eBridge that runs and fully-manages large purchasing transactions through reverse auction from A to Z.
Everyone familiar with reverse auction knows that there is a large amount of opposition out there facing those who believe in this process. Everyone in the purchasing industry – whether they have been directly involved with reverse auction or not – has formed a positive or negative opinion through the years based on their particular experience with reverse auctions, as well as their relative perceptions of the industry as a whole. This article from Supply Excellence does a great job of addressing many of the key objections to the reverse auction model.
At eBridge, we believe that all of the myths/objections to reverse auction listed in this article can be addressed professionally and appropriately, creating an end result that is beneficial to both the buyer and suppliers in a purchasing transaction.
We understand that many people have either had a poor experience with reverse auction, or are opposed to it because of what it can be. However, we believe that the reverse auction purchasing model can actually be beneficial to almost any business model when applied through our professional and respected team of experts. We do our part to run purchases with integrity, and with respect towards both the buyer and suppliers – maintaining key relationships that every company desires, and creating value not solely through pricing.
A Kentucky city public works department ran a fully-managed purchasing event for the procurement of chemicals through eBridge Monday to achieve a savings margin of 16% against their budgeted amount. 7 total suppliers participated in this event During the event, there were 141 total bids placed, 19 first place turnovers, and 16 bid extensions. True market value was achieved through a 1st – 2nd place spread of less than 2%. This event truly models the potential of the eBridge team to deliver remarkable results to our clients. With initial bids of over $100,000 this event finished with the lowest bid coming in at $38,700.
eBridge assisted with this event from start to finish, leading throughout the entire process. We added value by sourcing additional suppliers, writing and developing specs, and training the buyer and suppliers. eBridge has extensive experience running a variety of auctions for municipals, as well as Fortune 1000 companies, medical centers, and Universities. We have run over 1300 fully-managed purchasing events such as this one, and can help any company achieve remarkable results.
eBridge recently completed a direct purchase bid for a Fortune 500 manufacturing company. The bid was for a component part and involved suppliers bidding from three continents. There were 62 bids placed, with bids coming in significantly lower than the company’s budget. eBridge conducted individualized training for the vendors and hosted the entire event through its secure website. The buyer didn’t have to invest in any additional software or staffing to run the event. In the end, the purchasing company estimates that it saved over $1 million by using this process and is currently looking at future bids on which it can partner with eBridge.
Last week a west coast hospital system purchased 220 LCD televisions. The specifications required the televisions to be hospital grade, ensuring they were appropriate to outfit hospital rooms and medical facilities. Specifications also included a request for installation cost. The online bid environment listed two line items for suppliers to bid on selected elements.
During the live reverse auction event, the five suppliers placed 61 total bids. In a paper bid process, the hospital would have only received five total bids, giving suppliers only one opportunity to submit pricing and compete for business. First place changed hands 15 times. At the conclusion of the reverse auction event, first and second place were separated by a mere 0.12% indicating true market value was achieved. Final pricing yielded a 6% savings versus budget.
An east coast university partnered with eBridge to establish a print contract for new materials for the 2011-2012 school year. The university engaged the use of eBridge’s reverse auction technology, but also the team of purchasing professionals to help create specifications and identify the right purchases for the process. This bid was comprised of two line items.
eBridge’s team worked with the purchasing team to establish neutral specifications and would allow multiple suppliers to bid on this project. One specific requirement was that suppliers be within a 300 mile radius of the university to ensure timely delivery.
During the live bidding event, the four suppliers placed 14 total bids. First place changed hands 10 times. First and second place were separated by a mere $500. The final low bid was 15% below the university’s budgeted amount.
A recent article from BroadbandBreakfast.com discusses the recent Federal Communications Commission (FCC) final workshop in a series devoted to the Universal Service Fund (USF). The goal of the fund is to help extend broadband service to uncovered areas across the United States. Workshop discussions included how and to whom funding will be appropriated. The FCC has proposed using reverse auctions to award financial assistance to broadband service-providing telco companies.
The reverse auction proposal would limit government funding to a single entity that would provide service to the entire service area. Providers would enter into an auction wherein the company that could provide the service with the lowest level of government funding would win.
What do you think? Should the FCC use reverse auction technology to award the contracts? Is this an appropriate item for the process?
A recent article from Connected Planet Online outlines the Federal Communications Commission’s current exploration of potential methods to extend broadband internet access to the entire continental US, with a specific focus on under-served rural areas. The FCC plans to accomplish this broadband expansion by financially assisting selected private telecommunications companies in their endeavors to extend their services to rural areas that are not currently receiving broadband internet service.
The question is: which private telco companies will the FCC select?
Among the FCC’s most viable options in selecting telecommunications suppliers is the utilization of reverse auction to award contracts. The FCC could implement reverse auction services to create competitive pricing between companies and thus incentivize suppliers to extend their services at the lowest price possible by selecting to award the lowest bidding supplier with financial assistance.
There are, however, some significant obstacles to the reverse auction process’ successful implementation here. First, satellite-based internet suppliers would have a significant leg-up in the bidding process as their services require considerably less installation overhead than cable-based services. Should they still be allowed to compete in the bidding process? Second, AT&T and Verizon already have a significant amount of market-share and are most likely the favored suppliers going in, which leads us to the question of: will this bidding process further oust business from smaller, local telecommunications providers?
eBridge recommends that the FCC explore the viability of this purchase through reverse auction. While reverse auction can be an incredible tool, it may not be the perfect fit in this particular application. If some suppliers are more capable than others in fulfilling bid specifications, perhaps the FCC should table their use of reverse auction to a different project. eBridge takes leadership not only in the execution of the reverse auction process , but also in preliminary analysis to determine the viability of reverse auction in specific applications. Half the battle is finding the right fit for reverse auction to be successful.
Today eBridge ran an event for a university hospital to purchase LCD TV’s. The televisions will outfit patient rooms in the new medical facility at the university. Prior to the bidding event, the buyer received a sample of the televisions each vendor was bidding on to make sure the electrical adaptors fit the wiring of the rooms.
The buyer approved 11 suppliers to participate in the event. During the bidding event the suppliers placed 196 bids total. First place changed hands 55 times, with first and second place being separated by a mere 0.15%, indicating true market value was found. At the conclusion of the one-hour fifteen-minute bid, the final low bid was 30% lower than the university’s estimated budget.