It's been big news - and a big boost - for reverse auctions in the public sector with the news coming out of the highest levels of the federal government this week. First, we had the announcement by Defense Secretary Gates that called for major procurement reforms in the Department of Defense - calling for increased use of reverse auctions to help increase competition and savings in the $400 billion of annual spending carried-out world-wide by the U.S. military (see "Defense Secretary Gates Calls for Procurement Reform...and He Puts Competitive Bidding at the Forefront of the Pentagon's New Priorities" - http://reverseauctionresearch.blogspot.com/2010/09/defense-secretary-gates-calls-for.html).
Now, President Obama has added a great deal of specifics - and specific goals and priorities - to his previously-announced Accountable Government Initiative. On Tuesday, the President issued a directive to the Senior Executive Service that accompanied a memo from Jeff Zients, who is the Federal Chief Performance Officer. According to President Obama, there will be six priorities in the Accountable Government Initiative:
"Our performance management efforts are focused on six strategies that have the highest potential for achieving meaningful performance improvement within and across Federal agencies.
1. Driving agency top priorities;
2. Cutting waste;
3. Reforming contracting;
4. Closing the IT gap;
5. Promoting accountability and innovation through open government;
6. Attracting and motivating top talent."
And for a very good overview of the two memos - from President Obama and the follow-up from CPO Jeff Zients, please read the article from my friend John Kamensky, who is a Senior Fellow
IBM Center for the Business of Government ("Finally, a Name!" - Finally, a Name! | IBM Center for the Business of Government).
The big headline news for us in the procurement area is the spotlight that the Mr. Zients shined specifically on the important role that reverse auctions will play in achieving priority #3 to reform federal contracting. In his memorandum, CPO Zients first highlighted the fact that reverse auctions have already been a major driver toward the previously announced goal to bring down the growth of procurement spending to produce the targeted $40 billion in savings in FY2011:
Saving $40 Billion from Contracting Annually by FY 2011
In March 2009, the President directed agencies to save $40 billion in contracting annually by FY 2011 and to reduce the use of high-risk contracts. Responding to the President’s mandate, we took immediate actions to arrest the unsustainable growth in spending on contracts by working with agencies to apply fiscally responsible acquisition practices. These efforts successfully reduced the growth in contracting spending from an average of 12 percent over the last decade to 4 percent in FY 2009. Agencies identified $19 billion in savings from contracting for FY 2010, and we remain on track to achieve this savings through a combination of program terminations and reductions, new and stronger applications of strategic sourcing, and continued implementation of innovative procurement methods, such as the use of web-based electronic reverse auctions.
Zients also specifically cited as an example of the power of reverse auctions to drive savings the experience of the GSA (General Services Administration). In his memo, CPO Zients detailed how reverse auctions helped the GSA save over $200 million on the procurement of the over $1 billion annually that the federal government spends on the pens, folders, and Post-It Notes that are necessary for having offices operate!
So, the message coming from the highest levels of government is crystal clear - agencies across the federal government are being challenged to reform their contracting methods with an eye towards not just producing cost savings, but to make their procurement operations more competitive, more transparent, and more streamlined and efficient.
We'll be closely following developments across all federal agencies here at the Reverse Auction Research Center (http://reverseauctionresearch.blogspot.com/). And if you are needing advice on how to take advantage of what promises to be a real inflection point in how the business of government operates, contact us today.
David
From the Reverse Auction Research Center: (http://reverseauctionresearch.blogspot.com/)
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