In a study released on December 11, 2013, the Government Accountability Office (GAO) found that the potential benefits of reverse auctions–competition and savings–have not been maximized by federal agencies.

Key findings include:

• Over one-third of fiscal year 2012 reverse auctions had no interactive bidding, where vendors bid against each other to drive prices lower.
• Almost half of the reverse auctions were used to obtain items from pre-existing contracts that in some cases resulted in agencies paying two fees–one to use the contract and one to use the reverse auction contractor’s services.
• There is a lack of comprehensive government-wide guidance and the Federal Acquisition Regulation (FAR), which is the primary document for publishing uniform policies and procedures related to federal acquisitions, does not specifically address reverse auctions. As a result, confusion exists about their use and agencies may be limited in their ability to maximize the potential benefits of reverse auctions.

The Departments of the Army, Homeland Security, the Interior, and Veterans Affairs used reverse auctions to acquire predominantly commercial items and services–primarily for information technology products and medical equipment and supplies–although the mix of products and services varied among agencies. Most–but not all–of the auctions resulted in contracts with relatively small dollar value awards–typically $150,000 or less–and a high rate of awards to small businesses. The four agencies steadily increased their use of reverse auctions from fiscal years 2008 through 2012, with about $828 million in contract awards in 2012 alone. GAO was not able to analyze data from a fifth agency, the Defense Logistics Agency (DLA), because it collected only summary level information during fiscal year 2012. DLA guidance states that the reverse auction pricing tool should be used for all competitive purchases over $150,000.

Four agencies used the same commercial service provider to conduct their reverse auctions and paid a variable fee for this service, which was no more than 3 percent of the winning bid amount. DLA conducts its own auctions through a purchased license. Regardless of the method used, according to agency officials, contracting officers are still responsible for following established contracting procedures when using reverse auctions.

More details on this GAO study may be found at: http://www.gao.gov/products/GAO-14-108