Help or Hype? Estimating the Impact of Reverse Auction on Materials Procurement Cost
The first Navy purchase by reverse auction occurred in May, 2000. It was touted as a means of achieving significant cost savings, and initial results looked very promising. Since then, many Government agencies have adopted e-commerce as standard operating procedure, and companies have incorporated reverse auction and web-based procurement methods at varying levels of complexity. The purpose of this paper is to define the e- commerce processes, to identify which materials are most suitable for reverse auction, to assess the “life cycle” of any savings (one time vs. ongoing reductions), and to describe some of the benefits and pitfalls of these techniques. Several cases are reviewed, along with statistical analysis of a results database which focuses on DoD purchases. The study examines whether the actual results have met expectations, whether these technologies are better suited for commercial vs. DoD procurements, and whether e-commerce will support cost effective acquisitions in the future.
Sandra B. Enser is a Project Manager for Northrop Grumman Corporation, in Fair Lakes, Virginia. She has been working for Northrop Grumman for nine years, and her current role is Kinetic Energy Interceptors (KEI) Sea Mobile IRAD Ship Design and Safety Manager. She has 27 years of economics, cost estimating and engineering experience in a variety of programs, including AEGIS Shipbuilding Program, 21st Century Surface Combatant studies, DDG 1000, Airborne Laser, and KEI. She holds a BA in Economics from Smith College, and an MBA from George Mason University.