Winning bid can be determined in one minute with automated reverse auction

Winning bid can be determined in one minute with automated reverse auction

By Mark A. Kellner

Special to GCN


Reverse auctions'once prohibited under federal procurement regulations'are helping the Defense Supply Center in Columbus, Ohio, save time and money on small dollar procurements, officials said.

An automated auction system, developed by programmers in the Defense Logistics Agency unit, screens and processes the bids, in contrast to outsourced systems used for other auctions with higher dollar values.

Ford Motor Co. and other private-sector manufacturers use similar reverse auctions.

'Ninety-nine percent of DSCC's transactions are below $100,000; we're buying in repetitive, small dollar acquisitions,' said Kate Minor, project leader.

'Where we're going in DLA is trying to get things on long-term agreements with contractors,' she said. 'But in the meantime, we have all these purchase requests from military.

'Our goal is to get as many things as we can on long-term contracts,' Minor said. 'So we had to free the work force to work on complicated acquisition, and this meant automating those small requests.'

Lower prices

The first auctions, conducted over a DSCC Web site, closed in August. The auctions covered 64 procurements, each valued at $25,000 or less for vehicle spare parts and semiconductors. Some 56 percent of the August sales yielded awards at prices lower than the last price paid for the same items. That percentage dropped to 36 percent with last month's sales, but the unit still considers the procedure a rousing success, Minor said.

'This all happens in a 14-day time period. That's incredibly fast. If it goes out [for bid] normally, it takes up to 87 days,' she said.

'When a purchase request comes in, our system creates an automated request for quotations. It's posted to the Web site, where the presence of a gavel icon tells vendors it's an auction candidate,' Minor said.

'When they go to bid, they are required to quote electronically on an Internet quote form. That form is dynamic and contains many validations tailored to the individual solicitation. If they click on the icon, they will get abstracts of all the quotes that have been received, in real time, that are in accordance with the government's requirements,' Minor said.

When the auction closes at 5 p.m. on the solicitation return date, DSCC's computer system removes the quote button from the screen, and an automated awards program takes all the bids and applies a sophisticated price-reasonableness algorithm to evaluate the bids. If the offers pass various tests involving contractor reliability and price reasonableness, the winning bid is posted in one minute, Minor said, with the winner receiving e-mail notification as well.

Contracts'created as Adobe Acrobat PDF files'are then sent to the winner via e-mail for processing, she said.

The DSCC intends to extend coverage from four Federal Supply Classes (including semiconductors and automotive parts) to all of the FSCs that the unit handles, Minor said.

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