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"From Ebay To Bomb Bay - The Government Launches Its First "Reverse Auction," Government Contracts E-Links

May 15, 2000

Co-Authors: Daniel R. Forman and Raymond F. Monroe.

In May 2000, the U.S. Navy plunged into the world of eBusiness on-line procurements by awarding a $2.4 million contract to Hi-Shear Technology Corp. for the ejection seats in the B-1, F-15, F-16, and F-117 aircraft.

  • The reverse auction took 51 minutes.
  • According to the Navy, it saved over 28% as compared to the commercial marketplace.

How Did The Navy Do It?

The Navy's reverse auction used secured Internet-based technology. Vendors, pre-selected by the Navy based on product description, were given passwords to gain access to a virtual marketplace. In that on-line world they competed head-to-head in real-time by lowering their quotes as other quotes were posted.

More Reverse Auctions Are Coming

  • The Navy is scheduled to conduct additional on-line reverse auctions in June.
  • The Army and the U.S. Postal Service will be running their own on-line reverse auctions in the next few months.

The government likes the reverse auction technique. It anticipates that on-line reverse auctions will make the procurement process more efficient, nimble, and effective.

What Are The Legal Rules Of Engagement?

The legal ramifications of the on-line reverse auctions are yet to be determined. But, there are likely to be an abundance of issues. For example, whatever happened to soliciting and evaluating vendor past performance information? With a reverse auction, does that happen, must that happen?

Another obvious issue is whether vendors not invited to compete in the on-line auction phase of the procurement can protest their elimination. This would be much akin to protesting elimination from the competitive range or elimination from a GSA schedule mini-competition. Given proper notice of the procurement and of elimination from the procurement (query what notice is proper), there may be enough time for the normal protest process to coexist.

But once on-line bidding becomes widespread (and it likely will), and the timeframe from elimination to on-line auction is minimized, will we see a demand for protest by mouse click?

Daniel R. Forman
Partner – Washington, D.C.
Phone: +1.202.624.2504