ARLINGTON, Va., Sept. 18 (UPI) -- The U.S. Defense Logistics Agency reports its online reverse auction system for competitive contracts worth more than $150,000 has proved itself a money-saver.
The agency said it saved more than $34 million through reverse auctions since fiscal 2010 and aims to save as much as $8.6 billion in material costs through reverse auctions and other money-saving measures by the end of fiscal 2018.
"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," said Charles Howerton, a procurement and systems analyst for the DLA Acquisition Programs and Industrial Capabilities Division.
"Reverse auctions provide incentive for suppliers who are able to restructure their internal operating procedures and costs. It can help them make their operations more efficient and cost effective. It's a win-win."
In reverse auctions, bidders not only see who else is vying for a contract but also the dollar amount of their bids. It not only encourages lower bidding, DLA said, but also saves time since the bidding process online takes less than an hour.
The agency said that although reverse auctions are better suited for competitive commercial items -- i.e. pens, stationery and light bulbs -- it is also proving useful for new long-term contracts because of the economies of scale.
Under DLA rules, reverse auctions are for all competitive contracts worth more than $150,000 and only DLA commanders and directors of primary-level field activities can grant waivers.
"In those cases, the field activity commander must approve the exception, and documentation will be required to explain why a reverse auction was not used," Howerton said.
