The Death of the $500 Hammer

Ariba hosts monster reverse auction for federal government

In a move that saved the government some large green in its sourcing but could eventually deprive David Letterman of a rich source of humor concerning $500 hammers and $2000 toilet seats, Ariba recently hosted the largest reverse auction held by the federal government to date. Ariba Sourcing, Marketplace Edition, was the powering technology that included a branded Web site for the General Services Administration (GSA) Federal Technology Service (FTS):

On Sept. 22, 2000, GSA FTS, the federal government procurement organization, ran its first Ariba-powered online reverse auction using Aribas business-to-government (B2G) e-commerce solution on the portal, resulting in savings of over $2 million. The real-time bidding event was originally scheduled to last one hour, but actually ran over four hours as prices continued to descend.

IT commodities sourced during the reverse auction included 6,000 desktop computers, nearly 1,500 printers, and approximately 200 laptop computers. (The IT nature of the auction precluded the inclusion of toilets seats and hammers, so Letterman may have a vein of humor to mine for a little while longer.) The request for quotation (RFQ) contained multiple lines of product requirements including memory size, processor speed, multiple ports, cache, modems and video cards. The Ariba Sourcing live online auction saved the buyer, Defense Finance and Accounting Service (DFAS), nearly 22 percent over best costs from an existing Blanket Purchasing Agreement.

Within a short period of time, Ariba experts were able to implement the product, train us and help us run an event that has created enormous gains for DFAS, said Manny DeVera, director of the GSA Federal Technology Service. We are confident Ariba will continue to provide the highest level of service, helping the governments savings grow.

Ariba, in conjunction with ACS, a provider of commercial and government IT solutions, implemented GSAs private sourcing exchange technology in less than three weeks, allowing GSA to begin posting RFQs almost immediately. GSA estimates that it will post between five and 10 RFQs on Ariba Sourcing over the next six months, and is expected to purchase $6 billion worth of goods and services this year alone.

In the one-week period we had for GSAs first auction, we posted the RFQ, registered 15 suppliers, provided training for the buyer and suppliers and performed a simulation of the event the day before the actual auction was held, said Rick Feldt, Ariba vice president of sourcing. Our swift completion of the steps required to create a successful auction allowed DFAS to realize substantial returns quickly.

Remarking on his organizations first reverse auction, Tom Bloom, director of DFAS, said, We saved over $2 million and are pleased that the auction was so effective. The purchasing process culminated in a live, online bidding event with DFAS and the qualified suppliers nominated to participate in the RFQ auction. The Extended Bidding feature created an automatic five-minute extension to the bidding session for each bid placed five minutes before the close of bidding. This extension allowed the suppliers to re-evaluate their last bid in light of the new information posted on the bidding board. Ariba Sourcing also provided DFAS with all the information necessary to select an appropriate supplier at the end of the bidding event.

But even if this reverse auctioning trend catches on, and the government begins paying realistic prices for goods that had been more marked-up than a hotel minibar Coke, Letterman and countless water cooler comedians wont be totally out of luck as far as grist for the comedy mill. Theres a world of election jokes out there, just ripe for the taking. Heres a head start: Ballots and Bingo comparisons, anyone?