Federal Government Saves Millions Of Tax Dollars Using B2B Reverse Auctions

by: Navdeep Sidhu

Reverse auctions have been around for a while with the practice itself originating about couple of decades ago. During the internet boom of mid-late nineties a number of start-ups set out to revolutionize B2B procurement. One of the strategies for improving procurement was the concept of reverse auction.

For those who may not be familiar with the term ‘reverse auction’, it is a mechanism where the buyer opens the bidding process and the suppliers compete for business by bidding low against each other and at the end the lowest bidder wins the business. Its ‘reverse’ of the typical auction (think eBay), hence the name ‘reverse auction’.

Interestingly this practice is resulting in major savings for US General Services Administration (GSA) which provides procurement solutions to US Government. In the recent report  GSA estimated savings worth $7.5 million in federal facilities in New York State by buying power through reverse energy auctions with energy companies. The agency said that the use of reverse auctions allow it to have energy companies bid for the lowest price for providing power to federal buildings. GSA has recently awarded two-year term contracts through these auctions to several energy companies, with new energy rates starting in 2013.

As the energy and utility companies re-invent themselves to do business in the era of smart grids and reverse auctions, they will need to modernize the underlying technology platforms to interact with buyers and sellers in real-time to maximize their profits and growth opportunities. Tighter integration between generators, distributors and grids will make the industry ready for newer business models and result in B2B process improvements ranging from faster transactions to automated meter reads & EBPP (electronic bill presentment and payments). Learn how Idaho Power improved efficiencies between customers and suppliers.