DLA using reverse auctions for large contracts
The Defense Logistics Agency is now using reverse auctions on all competitive contracts valued at more than $150,000, the agency said.
DLA Director Navy Vice Adm. Mark Harnitchek directed in June that reverse auctions be used for new contracts.
The agency has saved more than $34 million through reverse auctions since fiscal 2010, when contracting officers began tracking savings from reverse auctions.
Most of the savings stems from about 400 auctions held so far in fiscal 2012, said Charles Howerton, a procurement and systems analyst for the DLA Acquisition Programs and Industrial Capabilities Division.
“The current fiscal environment, where we have to do more with less, forces DLA and a lot of other folks to be very careful with how we spend public funds. A big chunk of the savings we’re expecting to achieve in the next five years will come from reverse auctions,” Howerton said.
Unlike traditional bidding, where suppliers don’t know who is competing for a contract or how much they’re bidding, reverse auctions allow suppliers to see what others are bidding, thereby encouraging them to propose a lower figure. The actual bidding process only takes about 30 minutes to an hour.
Reverse auctions were designed specifically to increase competition and reduce government costs, Howerton said, adding that contractors who say the tool diminishes profits are wrong. Rather, it forces contractors to be more efficient and offer items and services at the best possible price.