Birmingham City Council has reduced its procurement costs by £1.7m using electronic auctioning technology.
The system, which uses reverse auctions to encourage suppliers to underbid each other, has already cut office supplies expenditure at the council from £1.5m a year to £612,500.
Mike Steele, Birmingham’s principal procurement manager, says the online reverse auction has been built into the council’s tendering process.
‘With a traditional tender, each supplier submits a single price and is considered on that,’ he said.
‘Now all bidders can see who has submitted the lowest price and decide if they can bid lower within the bidding period.’
Each auction typically lasts for an hour, after which time the council considers each potential supplier’s lowest bid.
Steele says councils should be cautious about how they use reverse auction systems, making sure they procure the right things to get the best value.
‘You have to make sure you pick the right commodities and services before you embark on a reverse auction,’ he said.
‘If you don’t then you often see little effect. But if you do you can make spectacular savings.’
In the past, council procurement arrangements have been viewed as inefficient and even grubby, says Datamonitor analyst Martin Atherton. ‘Online reverse auctions are a step up for local government procurement, because they remove the potential for favouritism,’ he said.
‘Now it is seen as a strategic discipline and it has to be tight to help meet government efficiency targets.’
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