The use of so-called reverse auctions to lower contracting costs at the Veterans Affairs Department and General Services Administration came under tough scrutiny on Wednesday at a House joint committee hearing.
Rather than saving money, critics said, the tool drives out competition, favors a single auction company and risks a lowering of quality in the work if applied to complex projects such as construction.
Reverse auctions are a contracting process used by the government since the late 1990s to promote competition by having the agency buyer solicit bids from multiple sellers, in contrast to a standard auction where a seller solicits bids from multiple buyers. GSA in July launched a new reverse auction initiative aimed at the purchasing of supplies, or commodities, more than complex services.
But both a recently concluded two-year House investigation and a just-released Government Accountability Office report faulted the technique, noting that more than one-third of fiscal 2012 reverse auctions had no interactive bidding, and agencies paid $3.9 million in fees for those auctions. In March 2012, Veterans Affairs temporarily suspended the tool’s use so it could study the claimed savings for purchases of information technology products, medical equipment and supplies.
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