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Reverse auctions are gaining popularity as a procurement tool in the challenging economic climate.

Two Periscope Holdings’ customers were featured in GovPro’s article, “Total Transparency in Real Time Using Reverse Auctions.”   Click here to read full article. 

Excerpt below:

Two users of BuySpeed Online have realized first-hand many of the benefits of reverse auctions to provide measurable savings for public agencies. Knox County, Tenn., recently led a multi-agency auction in the joint purchase of 164 police vehicles, and the Arizona Departments of Transportation, Game and Fish, and Education have also seen tangible savings from reverse auctions.

Knox County’s Purchasing Division began planning its first reverse auction in August 2010. The reverse auction capability had been added with a recent update of BuySpeed. The capability enabled Knox County to self-administer reverse auctions without involving a third party or having to pay a fee. The Purchasing Division identified 22 police vehicles in the Sheriff’s Office budget that could potentially be acquired through this competitive method. After conversations with several other local government agencies, the Purchasing Division was able to recruit two additional agencies – the Blount County Sheriff’s Department and the City of Knoxville – to compete their needs with Knox County. The resulting multi-agency cooperative bidding event was for 164 Police Interceptor Vehicles.

The reverse auction takes the place of a competitive sealed bid process, and the vendor does all the data input. All terms and conditions are determined before the auction begins. In the case of motor vehicles, detailed variables such as the wheel base and hubcap covers are specified before the auction. Delivery time is also specified. Any bid that doesn’t comply isn’t considered. Although the Knox County reverse auction stretched over 21 days as required by law, anyone could start bidding immediately as soon at it opened or anytime during the three-week period. Most activity happened in the last hour.

On Nov. 2, 2010, at 2 p.m., the state’s first agency-managed on-line reverse auction closed and resulted in measurable savings for three local governments. Five different vendors submitted a total of nine bids with Alexander Lincoln-Mercury Ford submitting the winning bid.

The price dropped $645,000 from the auction opening for purchase of Knox County police vehicles, and the final bid came in $2,300 under the state prices per vehicle; the county saved enough to purchase extra vehicles. The other governments involved in the reverse auction were also pleased with the outcome. “The ability to leverage our combined organizations is truly a win/win for all of us,” said Keith Shields, Deputy Director of Fleet Services, City of Knoxville.

Knox County Purchasing Director Hugh Holt says there are a lot of administrative savings in reverse auctions, and time can be saved on the back-end related to followup with vendors. “The vendors saw it happen before their eyes,” he said. “It’s the most transparent bidding process a public agency can use.” There is less chance of a protest – and the resulting huge administrative expense – because everything is based on cost.

Knox County has also received feedback from vendors who participated in a reverse auction, and they agree it is an easy process. “The web site for Knox County Purchasing is the easiest that I have encountered,” said Herb Odom of Alexander Lincoln-Mercury Ford. “I was able to work in the system without a problem.” Reverse bidding has also enabled Knox County to increase cooperation and collaboration with other local agencies.

Vendors were notified through the automated system of the reverse auction, and Knox County offered a non-mandatory prebid/training program. During training, attendees saw how the system works in a test environment with a mock reverse auction. The training session drew a full house – about 20 to 25 vendors and participating agencies. Knox County also offered a “how to participate” handout on the day of the auction including screen shots of the system. “We left them fully equipped to participate,” said Diane Woods, Knox County contract and systems administrator. “These folks are salesmen, but given the ease of the system, anybody can use it.”

Currently Knox County has a reverse auction on the street for passenger buses for the county’s Head Start program and vans for the health department. “We are looking for other opportunities to use this tool,” said Holt. “It may not fit every transaction, but there are some that it fits very well, and any time we can save time and money, that’s what we’re about.”

Although legislation was passed several years ago to allow reverse auctions, Jean Clark, Arizona’s State Procurement Administrator, said the state moved cautiously. First the state considered using a third-party, independent provider to manage the auction, but the pilot program never came to fruition. After training on the reverse auction capability added to the state’s BuySpeed e-procurement system, the state saw the possibility of using the new tool. A key strategy was to find examples of products that could clearly demonstrate true dollar savings to help jump-start the program.

Reverse auction successes in Arizona include a State of Arizona Department of Education print job contract that was awarded at $1,254 below budget, or 20 percent below the opening price. In another reverse auction, Arizona’s Department of Transportation saved 5.2 percent on the purchase of seven heavy-duty chainsaws. The auction involved multiple small vendors throughout Arizona, and the contract specified the product had to be delivered instead of picked up, which saved shipping costs. In 24 bids submitted for Arizona Department of Game and Fish all-terrain vehicles, the contract was awarded at 13.6 percent below opening bid.

Clark’s office is responsible for procurement statewide, including 120 agencies, manages long-term statewide contracts, and does some direct purchasing and contracts for agencies that do not have their own procurement staffs. Some procurement is delegated to larger agencies with their own procurement departments, and the state-level staff gets involved in possible protests and oversees statewide policy.

One way the reverse auctions saved time for Arizona was by shortening the time the auction is open, from 14 days to a 5-to-7-day period. The Arizona statute does not specify a minimum period of time the auction must be open. Arizona also had good feedback from participating vendors, who are happy with the process. “They appreciate the fact that they don’t have to make a decision in a vacuum,” said Clark.

Arizona was also careful in providing specifications, terms and conditions before the auction began. “Everyone has agreed to terms and conditions up front,” said Clark. “They can see if they want to modify their prices or not.”

The state held webinars to “walk” the vendors through and explain the software application. A mass notification is sent to vendors listed in the state’s database for a specific commodity code; the notification also tells them about the training.

Clark says Arizona is looking to use reverse auctions for a taxi service contract and is looking to expand the strategy into the construction arena. “Construction and project managers feel it would work,” she said. “We have the plans and documents out there and they are just filling in the pricing. If it’s online they can compete against each other. We are going to try it, but the industry may not care for it.”

Clark urges procurement professionals having trepidation about reverse auctions to give the process a try. “It is beneficial and something they should embrace as one of their procurement methods,” she said.

In the public procurement world, we hear the words streamline, transparency, and savings thrown around regularly.   Everyone claims their procurement practices achieve transparency, create efficiencies, and offer vendor equality, but very few have the results to prove it. 

When Periscope says we do something, we mean it, and we have proof to back it up!

Transparency Establishes Accountability – Transparency involves full visibility to all agreements between government entities and their vendors.  There’s no picking and choosing which contracts are open record versus which contracts are non-disclosed.  Recently, a large southeastern state spent millions implementing multiple disparate eProcurement systems that fail to post contracts to a central location for public viewership. The casual observer or “John Q. Public” has to dig through the state’s website, understand the difference between a statewide and agency contract, and follow the links to multiple contact websites. 

On the contrary, the state of Arizona implemented BuySpeed eProcurement, calling the project ProcureAZ.  ProcureAZ exemplifies transparency.  Anyone with a web browser can visit ProcureAZ’s website and view all Arizona state and agency contracts in one place.  This transparency establishes accountability with the general public.  Citizens deserve the assurance that their hard-earned taxes are spent wisely.  We need more accountable government entities that not only preach but practice true transparency.

Less is Not Always More – When it comes to public procurement contracts and catalogs, the term “less is more” doesn’t apply.  Some eProcurement systems only offer 200 – 300 catalogs, creating major inefficiencies.  Ordering from non-catalog statewide contracts is complex and lengthy, since you have to contact vendors directly, as opposed to simply placing an order in the system.  Efficiency is thrown out the window, while staff workloads increase.  Often, there is an option to load and maintain additional catalogs to the tune of $25,000 – $50,000 per year, but this approach diminishes cost savings and causes entities to choose what contracts are worth the extra investment. 

With BuySpeed eProcurement, there’s no contract or catalog limit and no additional contract or catalog fees.  Whether an agency has 100 or 10,000 contracts, BuySpeed hosts each catalog at no additional cost.  Our QuickBuy functionality enables users to quickly search and purchase off thousands of catalogs, with the click of a mouse. Periscope’s unique approach to cataloging maintains efficiency and cost savings.

Level the Playing Field – State and local governments stand as economic engines pumping billions of dollars back into the economy.  With this powerful influence, public sector entities should be impartial with vendor selection and include both the “little guys” (local small businesses) and the “big dogs” (national vendors).  We’re finding more and more eProcurement systems offering set contracts with massive suppliers undermining local and minority businesses. 

BuySpeed has tremendous success in public sector because we provide means to practice vendor equality.  One of our top priorities is to level the playing field for vendors, so you can drive business to local economies.  That is why we include all contracts, no matter how small the vendor, in our catalog search.  We also provide tools to create agency -specific categories including MBE/WBE/DBE, and we offer the ability to track certification associated with these categories.  In addition, the NIGP Code can be used to identify vendors for solicitations and as a tool to gauge the level of true competition.  Leveling the playing field ensures procurement practices are fair and non-discriminatory.

Periscope is committed to procurement integrity.  If we say we do it, we do it, and we do it well.  Make sure your government entity is practicing fair and honest procurement practices with transparency, efficiency and equality.

Periscope Holdings, Inc. celebrated its 10-year anniversary.  Founded in 2001, the company has experienced tremendous growth as a leader in the public procurement arena. Numerous public entities have realized the strategic benefits of implementing BuySpeed eProcurement and utilizing the NIGP Commodity/Services Code.  Periscope would like to thank its clients for the company’s success in bringing open and efficient procurement into practice.

“We owe our success to our loyal clients and to our hard-working team members,” said Brian Utley, president and CEO of Periscope Holdings, Inc.  “A decade ago, I saw the need for accountability in public purchasing.  Our team hit the ground running to develop a solution that brought disparate procurement processes into one unified system.  Ten years later, I can say with great pleasure that we’ve brought millions upon millions of savings to public entities across the country.”

Periscope continues to bring new procurement ideas to life through research and development.  The company is committed to maintaining cutting-edge software that will keep their clients ahead of the procurement curve.  In the decade to come, Periscope plans to carry-out its mission to eradicate waste and bring value to every dollar spent by their clients.

As we endure tight economic times, public sector leaders across the board face tough budget decisions.  Government agencies are becoming more creative as they build solutions that help avoid cutting jobs, evade raising taxes, sustain citizen services and save money.  One solution gaining popularity is reverse auction solicitation.

Reverse auctions are a form of strategic sourcing in which the roles of buyers and sellers are reversed; therefore, prices decrease as auctions progress.  With Periscope’s eProcurement solution BuySpeed reverse auctions are conducted online in real-time enabling suppliers to track and bid down against competitors.  This process ensures the best possible price and lowest cost to government agencies.  Reverse auctions are a growing procurement trend because lower costs on goods and commodities free up funds to be used elsewhere, helping burdened budgets.

Many of our clients including Knox County, Tennessee and multiple Arizona State Departments recently conducted reverse auctions, and in each case savings resulted from using this technique. For more details on their success see “BuySpeed eProcurement Solution – Reverse Auctions Prove Measurable Savings”.

Whether purchasing vehicles or chainsaws reverse auctions can help create savings for your entity. To learn more about how to make reverse auctions work for your agency contact Periscope Holding Inc. at info@periscopeholdings.com or (877) 472-9062.

Why is it that some governmental entities have data files that are in disarray and resolving issues is neither quick nor easy, while other entities have no such problems? The answer lies in the management of master data.  John Walters explores this topic in the August 2010 issue of GoPro magazine. http://govpro.com/mag/nigp-master-data-management-201008-09/index.html