Perhaps the most successful federal example of a reverse auction came in 2000, when the Defense Finance and Accounting Service (DFAS) needed 6,200 computers and a few hundred more laptop PCs and printers.

The General Services Administration opened the acquisition to a reverse auction, in which companies try to underbid one another to get the contract. At the end of the process, DFAS had bought its desktop computers, 200 laptop PCs and nearly 1,000 printers at a savings estimated at more than $2.2 million compared with what it likely would have spent under more conventional procurement terms, said David Drabkin, acting assistant commissioner for acquisition at GSA’s Federal Technology Service.

Indeed, the DFAS case seemed to open the door for widespread reverse auctions, Drabkin said. “Reverse auctions were de rigueur for government contracting,” he added. “Everybody was getting involved.”

States got into the act, too. Pennsylvania conducted reverse auctions through Ariba’s FreeMarkets.com to buy coal to heat state office buildings and aluminum to manufacture license plates.

Then the technology bubble burst, and reverse auctions rapidly declined. Now, federal agencies don’t use the procurement tool to the degree that they could, Drabkin said. But that attitude might be changing.

Part of the problem is that some agency officials apparently believe reverse auctions aren’t allowed, Drabkin said. However, “there is no prohibition currently in the [Federal Acquisition Regulation] or in any statute to using reverse auctioning as a tool in government procurement,” he said. “In fact, when you look at the FAR Part 1 we wrote in 1993, [there is] some very helpful language that says if it’s not prohibited, it’s permitted.”

To boost federal agencies’ use of reverse auctions, GSA recently signed a five-year contract with online marketplace FedBid to provide such services.

Reverse auctions work only for some commodity buys, Drabkin said. The approach doesn’t work well for integrated solutions. “It does work very well with off-the-shelf types of purchases, items that can be characterized and quantified,” he said.