Study: Reverse Auctions Save Money and Time The federal government could save nearly 12% on its purchases of commodities and some services by using reverse auctions, according to a new study. David Wyld, professor of management at Southeastern Louisiana University, estimates the savings could amount to $8.9 billion a year, with $6 billion of that in the Defense Department. In addition to driving down prices, reverse auctions substantially increased competition and saved time, according to the study. Because of their simplicity, auctions can help agencies expand their vendor base, especially by bringing in new small and disadvantaged businesses. Wyld said small vendors “fare far better in these competitive environments than in other forms of federal procurement.” He said auctions increase transparency, since each vendor knows the price he must beat. “Reverse auctions are indeed coming of age in both the private and public sectors, as organizations are rapidly discovering that [they] can be a ‘faster, better, cheaper’ method of procurement,” he wrote in a report for IBM’s Center for the Business of Government. The study was first reported by Federal Computer Week. Wyld acknowledges that reverse auctions may sour relations between an agency and its suppliers, because suppliers may resent the focus solely on price, ignoring considerations of past performance and service. As the auctions become more widespread, vendors will feel compelled to participate. He recommended that chief acquisition officers adopt an “Auction First” strategy for buying commodities and selected services. He also urged that agencies provide training for their employees and vendors. “On a public policy level, it is clear that in a time of unprecedented fiscal challenges, the federal government could, and should, take far greater advantage of reverse auctioning,” he wrote.