Environment Agency - Electronic Reverse Auction

Environment Agency saves over £1m through Electronic Reverse Auctions

The Environment Agency has achieved savings totalling over £1m in nine months after deploying a system to award contracts for goods and services via electronic auction.

The system - known as electronic reverse auctions - was inaugurated in August 2002 for a contract to supply electricity to over 300 of the Agency's sites, with four utility companies submitting bids. Auctions have since taken place for the supply of IT consumables, paper and stationery.

The cost-cutting technique works via the Internet, enabling pre-qualified companies to submit bids for contracts below a reserve price. Specifications of the commodities and quantities required are provided to bidders in advance. Conversely to standard auction procedure, bidders must submit progressively lower bids in order to remain competitive. Each bid is exposed as it is submitted, but the source of the bid is undisclosed.

Agency head of procurement, Mark Yeomans, said: "This concept has saved us significant sums by maximising competition for our supply contracts. It is also a more efficient process than traditional tendering. Fittingly, the use of the Internet is kind to the environment by reducing the footprint from travel, energy and paper use."

The Agency is one of the first UK public bodies to utilize this revolutionary procurement approach, extensively used in the US and elsewhere for a number of years. The initiative has garnered the approval of the Office of Government Commerce, and attracted interest from several Government departments.

The Agency has to date contracted out the provision of auction services to Achilles Information of Abingdon, whose track record in e-auctions guarantees the proper management and impartiality of the bidding process.

Further e-auctions are planned by the Agency's procurement teams, who are also examining the feasibility of using the system for the disposal of redundant assets.

Extracted, with permission, from the Environment Agency's website.