Public Sector Reverse Auctions
Throw off your shackles
In addition to cost savings, probity compliance and safer price negotiations represent two of the most important arguments in favour of the use of reverse auctions in the public sector (see 'Transparency' section).
For public sector procurement, probity is the highest order consideration. All it takes is for a disgruntled supplier to take their complaint through political or other channels (one Australian jurisdiction has five entry points for procurement disputes) and the organisation suddenly has twice as much work to do as they review, investigate, document and report every interaction and justify every decision.
As a result of this, the default approach for many public sector organisations and their procurement professionals is not to negotiate once tender responses have been received. This provides the highest level of safety for both the individuals and their organisations. But, safety comes at a price: There is often a considerable difference between the price the supplier would like to receive and the price they are willing to sell for (see 'Saving Time' section). Further, there is the importance of clustering suppliers around true market price in order to provide a greater choice of supplier for the buying organisation (see 'More Choice' section).
The massive growth in the use of reverse auctions in the public sector in Europe and North America is driven in large part by the high probity levels and the ability to negotiate in relative safety. For more information on overseas public sector usage see the 'Related Links' and 'Library -Downloads' sections.
ANZ Public Sector Usage
Whilst established as a standard procurement practice in the public sector in North America and Europe, usage in Australian and New Zealand public sectors is just emerging. Organisations that have used them include the health departments of NSW, VIC and SA, VIC Forests, Sydney Water and WA Department of Treasury and Finance.
WA Department of Treasury and Finance
Whilst interest in reverse auctions is high across many ANZ public sector jurisdictions, WA is leading the way. WA DTF have embarked on a 20 auction pilot program in order to determine suitability. The plan is to have as many departments as possible run at least one reverse auction during the pilot phase.
Reverse auctions conducted by WA DTF include a copier / binder (TAFE), Adobe software licenses (TAFE), printer / copier paper (WoG), agricultural machinery, media buy agency commissions (WoG). In each case, where public information is available, the reverse auctions were regarded as highly successful.
Further Information
This page begins to describe the issues faced and unique benefits that a government procurement team can derive from reverse auctions. If you would like to know more please call us, or explore the public sector documents and links in the 'Related Links' and 'Library -Downloads' sections of this web site.
