Every once in awhile we write about concerns with ways the Government is purchasing products and services from industry. Our latest issue is with the reverse auction craze, or as we like to call it, “The Race to the Bottom”.
It’s simple really. An Army unit wants to purchase 860 triple mag pouches. But…instead of just buying them, they decide to use a reverse auction. What’s that you might ask? Quite simply, a service provider makes money to run a sort of bizarro world version of eBay. Instead of vendors offering products and customers upping the bid in order to win the prize, a client posts a requirement and businesses try to underbid each other in order to “win”. It’s kind of like, “Name That Tune”, as in “I can make that at a profit of 3%”. A legitimate business can’t keep the lights on at that rate. Investment in R&D as well as using Berry compliant, Mil-Spec materials is too costly. Consequently, those who win may have problems delivering on time if at all, or building to spec. When this happens, Service members lose and so does the taxpayer.
Sure, it sounds great from the tax payers point of view, when it works. Pay less right? Well, maybe. The problem is that when a vendor under delivers, the equipment has to be purchased again. This wastes time and money.
What’s more, there’s no requirement to have a business history to win a reverse auction, nor is someone going to check and make sure the product delivered is actually what the customer ordered. They aren’t going to make sure it was Berry compliant or Made in USA either.
Is it possible for an unscrupulous vendor to win a reverse auction? Absolutely.
Is it possible for a unit to NOT get what they were looking for in the first place? Absolutely.
Does this practice hurt legitimate businesses who invest in R&D and follow the rules? Absolutely.
Should reverse auctions be abolished? You tell us.
