As with all of government, the Department of Defense is facing slimmer budgets and looking at ways to save money. Basically as Ashton Carter, Deputy Secretary, Department of Defense, put it: “To do more, without more.”
In December 2010, John Young, a senior fellow at Potomac Institute for Policy Studies and a former U.S. undersecretary of defense for acquisition, technology and logistics wrote an article for Defense News encouraging the Department of Defense to use reverse auctions to save money. Young stated in his article,”There is constant debate about acquisition practices, with simple and obvious steps frequently overlooked. Reverse auctioning can save money, increase competition, cut contract officer workload, reduce procurement complexity, provide transparency, and help prevent fraud and graft. Reverse auction tools should be added to the DoD and defense industry acquisition tool kit and used whenever possible to get maximum value for each taxpayer dollar.”
In October 2011, David C. Wyld, Professor of Management at Southeastern Louisiana, published a report for the IBM Center for the Business of Government titled “Reverse Auctioning: Saving Money and Increasing Transparency.” In this report, Dr. Wyld recommends that the government adopt an auction first policy. Wyld estimates that the federal government could save $8.9 billion by increasing use of reverse auctions. He estimates that the Department of defense alone could save over $6 billion. In addition to increased savings, his report indicates that there is increased transparency of the acquisition transactions. A case study of the Department of State found that increased use of reverse auctions also increased the competition among suppliers, and dramatically reduced the acquisition contract time for department staff.
Over the last decade the DOD has made a few attempts at using reverse auctioning, but has not taken any steps to make it a common practice. However, in the last two months both the Defense Logistics Agency and the NAVSUP Fleet Logistics Center Norfolk have published Requests for Information (RFIs), looking for reserve auction tool suppliers. It looks like they may be getting the message.