A case study of the Army Reverse Auction

Abstract

Acquisition reform has attempted to change the procurement process over the past several years. Some believe the reform measures have been changes in policy or revisions of a paperwork process. The draw down of the workforce and financial constraints demand acquisition professionals conduct business in a smarter, more efficient manner. The technology today provides Internet platforms that allow the commercial marketplace to take advantage of electronic commerce. The Army has implemented a reverse auction program designed to capture many of the practices in use in the commercial industry. Foremost, dynamic pricing replaces fixed pricing models observed in traditional procurement strategies. Reverse auctions offer the Government the means to replicate a successful commercial practice that is becoming the accepted way of doing business. This thesis reviews performance of the Army's Reverse Auction pilot program after its first year of use. Three buying cases and 40 other reverse auctions are reviewed. The comparative analysis identifies commonalities for success and differences between past experiences with the reverse auction. The thesis concludes acquisitions for items that resemble commercial products and based on price are most successful in reverse auctions. The 43 auctions reviewed resulted in $1,606,393 saved. The mean savings was 21.83% for the auctions reviewed.