Millions Today, Billions Tomorrow: A Report on Reverse Auction Implementation at The Department of Health and Human Services

Let’s throw “another shrimp on the barbie, “log on the fire,” or whatever metaphor you would personally use to describe how to add another success story about the Obama Administration’s emphasis to move agencies to use reverse auctions as part of their overall procurement strategies to not only save taxpayer dollars, but just as importantly, add transparency and enhance competition in the massive world of federal procurement.

Last week, Dan Gordon, who serves as the Administrator for Federal Procurement Policy for The Office of Management and Budget (OMB), testified before the U.S. Senate’s Committee and Task Force on Government Performance. The hearing was an update on the progress being made on the OMB’s efforts to help federal agencies meet the Obama Administration’s targets for tens of billions in procurement savings and process reforms. If you’ll recall, the President issued a mandate in March 2009 calling on federal agencies to save $19 billion in Fiscal Year (FY) 2010, rising to a target of $40 billion by FY2011. 

Mr. Gordon reported that “two promising cost-savings trends have already emerged” and one of these was the fact that “agencies are driving competition by using innovative buying tools such as online reverse auctions.” While we here at the Reverse Auction Research Center (http://reverseauctionresearch.blogspot.com) have previously spotlighted the work being done by the U.S. Customs and Border Protection Service – a part of the Department of Homeland Security (DHS) (See: http://bizcovering.com/business/how-to-revolutionize-governmental-buying-the-customs-and-border-protection-service-blazes-the-way-in-the-federal-sector-with-reverse-auction-buying/), on this occasion, Mr. Gordon spoke of the savings achieved by the Department of Health and Human Services (DHHS). He reported that:

•  Online reverse auctions

Agencies are increasingly obtaining the economies and efficiencies made possible by conducting web-based “e-procurements.” In particular, agencies are using electronic reverse auctions, where vendors use an online site to bid prices down to win an agency’s work, in order to generate greater competition. This practice is helping agencies obtain lower prices, especially on their purchases of commercial off-the-shelf products, and these web-based tools have become a routine part of how we conduct procurements in the 21st century: agencies conducted thousands of electronic reverse auctions last year. The Department of Health and Human Services, for example, offers on-line reverse auction services to customers who use its “Electronic Commodities Store” (ECS) – a government-wide acquisition contract for IT hardware and software products. Last year, agencies placing orders under ECS using reverse auctions reduced their costs by roughly 17 percent. Beyond the immediate savings, electronic reverse auctions provide a convenient way for agencies to maintain documentation of each auction online for use in the development of better price estimates and purchasing strategies for future requirements.