Reverse Auction Pilot

Problem

The City of Philadelphia is always seeking new and better ways to buy things, and reverse auctions are a technique to secure low prices by getting vendors to bid against each other in a dynamic setting where the current lowest price is known to all participants. We sought to test how well reverse auctions would work for certain types of procurement.

Pilot Description

We tested buying certain services (emergency HVAC repair) and commodities (Bituminous materials = materials for street paving) via reverse auction to see if we got new vendors, lower prices, and same or better results. We attempted four reverse auctions of which two were successfully. Via a Misc Purchase (MP) we hired two different vendors to run our reverse auctions.

Outcome

There were cost savings. The reverse auction for Emergency HVAC Parts and Service projected estimated savings of 4.6%, and the reverse auction for Bituminous Materials projected estimated savings of 5.8%. We also got at least one new firm to bid on these contracts. However, the emergency HVAC contract/vendor has had some invoicing issues and the reverse auction process secured such low pricing that we think firms submitted unrealistic bids.