Give reverse auctions a chance

Stephen Candelmo

The federal marketplace has been inundated this year with Internet procurement tools that let federal employees buy almost anything'from pens to notebook PCs or tanks.

Most purchasing systems can provide a faster, more streamlined procurement process and deliver lower prices because of increased competition among vendors.

Many procurement sites use reverse-auction processes to help buyers select the best bid. Unfortunately, some market observers are too focused on the nomenclature and mistakenly assume that reverse auctions are strictly price shoot-outs that put best value and past performance on the back burner. In fact, exactly the opposite is true.

The real issue that must be examined in the dynamic pricing models now available to the federal government via online procurement is whether these models provide a broad range of benefits. Low prices should be only one piece of the pie.

Many companies, including my own' of Germantown, Md.'use new technology to provide end-to-end online buying environments that encourage buyers to specify award criteria and to differentiate between best value and best price.

Savings all around

By providing an automated approach, such buying services lower the associated transaction costs incurred by vendors and government buyers, which produces cost savings for all of the participants.

The benefits cannot be taken for granted or subsumed by semantics. To do so would be a rush to judgment.

Rather than regulating when government should be allowed to take advantage of the many benefits of dynamic pricing models, the debate should instead center on how to best leverage existing technologies to enhance the decision-making process. The goal: to ensure that awards really are made based on best value.

The spirit behind federal procurement is competition. Competition spurs quality and lowers prices by letting market forces determine market successes.

Technologies such as those used to create dynamic pricing models bring new levels of competition as well as potential efficiencies to the public sector. They make the government market accessible to more vendors and give government buyers fast and easy access to a wider pool of potential bidders. These technologies should be embraced'not regulated out of existence before they have even approached full potential.

Any premature restrictions placed on online reverse auctions'for those who will not let go of the terminology'will diminish the government's ability to move forward. Regulatory initiatives for this new arena could provide general guidelines for incentives to encourage both government and industry to exploit the technology, but that's as far as federal overseers should go.

Let's not rush into regulatory measures before we know the full scope of what the process brings or does not bring. I can only point to the fact that a basic tenet of the government's successful procurement reform was not more regulation, but far less.

So, don't hamper government's chance to realize greater efficiencies through the adoption of commercially proven technologies and business models any more than necessary. Instead, embrace and explore the new processes and technologies that can improve competition and make best value a more meaningful term.

Stephen Candelmo is general counsel and vice president for strategic development at of Germantown, Md.


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