January 2008, Government Fleet - Feature
San Diego County 'Sold' on Reverse Auctions
By Cindy Brauer
Process Configurable
The bidding event is highly configurable. Purchasing and fleet work together to configure the event, choosing what information is shared with suppliers, including all bids, low bid only, no bids, bid rank, number of bids, and bidder names and comments, according to McColl.
The process also allows fleet and purchasing to structure minimum bid increments, according to Clements. "Someone can’t bid 50 cents less on a $2 million bid. That minimum bid might be $1,000."
Once all cost information is collected from the auction, the software package allows fleet to quickly and efficiently evaluate all cost and performance data.
Supplier Response Mixed
Clements and McColl both found initial supplier response to the reverse auction process mixed. "In the beginning, some dealers complained, ‘This isn’t fair. We’re not computer people,’ etc.," said Clements.
"The challenge to the County was convincing its supplier base that this technology would help them provide their best possible pricing," said McColl. Some suppliers, while not technically sophisticated, found the reverse auction tool easy to use after only a brief training session, he added.
Buyers and Suppliers Benefit
Reverse auctions benefit San Diego County’s fleet operations and its suppliers. For Clements, a significant benefit is savings in time. "The bid time is shortened. You’re technically talking about an hour’s work of bid time versus 30 days, minimum," he said. Bid analysis is also more efficient, since the software program produces a printed report of all the bid details, Clements noted.
Just as important, vehicle pricing "has done nothing but get better," with reverse auctions, he said.
The reverse auction process is also fairer to the bidders, according to Clements. "Often what will happen with sealed bids is when bids are open, a vendor misses low bid by $1,000 on a $1 million bid. Because suppliers can see the low bid in our reverse auction process, they can adjust their own bid in that situation."
From the County’s purchasing perspective, reverse auctions help "get products and services to customers faster than with sealed bids," said McColl. "We can award sales contracts faster."
In addition to cost and time savings, the system provides a valuable transparency, said McColl. "The tool keeps an audit trail — who posts what bid and when."
Reverse auctions, concluded McColl, help fulfill the county’s vision of technology — to provide strategic sourcing opportunities that drive down costs, as well as maintain quality in the procurement of goods and services.
San Diego County fleet and purchasing track downward-trending bids from three particpating suppliers over the duration of a reverse auction.
How Vehicle Reverse Auctions Work in San Diego County
• Working closely with the County’s purchasing and contracting department, fleet operations develops vehicle specifications and a bid package.
• About 30 days before the scheduled auction, the specifications are incorpo-rated in a request for bid (RFB) and posted to the County’s BuyNet Web site, with the time and date of the reverse auction.
• Prequalified car or truck dealerships are notified of the RFB posting via e-mail and Web site announcement.
• At the stated time, the purchasing department opens the auction. From their desktops, dealerships submit bids.
• Fleet and purchasing department staff monitor bidding by lot or article num-ber on a computer or projection screen. They can view each dealership’s name and the submitted price. Vendors can view only their bid and the low bid.
• Vendors can request a bid be deleted after submitting it to correct an error.
• If a lower bid is entered just prior to the auction close, the software automatically extends the bidding time. The auction ends when no new low bids are submitted.
• At the end of the bid period, the software closes the auction and prints the results for fleet and purchasing evaluation.
• The bid is awarded to the lowest bidder and the award notice is posted online. GF