DoD Finds Way to Profitably Manage Surplus

Use of online auctions generates 80 percent increase in recovery rates for US Department of Defense surplus property

Use of online auctions generates 80 percent increase in recovery rates for US Department of Defense surplus property

Washington, DC — January 10, 2005 — The recent report sponsored by the IBM Center for The Business of Government, titled Government Garage Sales: Online Auctions as Tools for Asset Management and written by Dr. David C. Wyld, Mayfield professor of Management at Southeastern Louisiana University, explores how government agencies are adopting corporate business practices and are using online auctions as a primary vehicle for the proactive management of surplus.

In the report, Liquidity Services Inc.'s (LSI) solution (Government Liquidation) for the United States Department of Defense is highlighted as a best practice example of using online sales strategies to maximize the value of surplus assets. LSI's specialized marketplace is used to sell approximately one million items online each year in over 600 commodity categories. Results from 2003 included in Dr. Wyld's report include:
* $60 million in annual surplus sales conducted online
* 50 percent increase in recovery rate over the prior physical on-site auctions
* Net cash returns to federal coffers at 47.1 percent higher than projected
* Actual Rate of Return (ROR) 85 percent above contractual performance benchmark

In 2004, Government Liquidation increased the recovery rate from 50 to 80 percent over prior physical on-site auctions and generated an actual ROR of 129 percent above the contractual performance benchmark.

This case study is a great example of how government executives are transforming their handling of surplus items from a drain on their budgets into a positive source of revenue, said Dr. Wyld. In doing so, they are mimicking the best practices of the private sector, where companies large and small are recognizing the importance of asset management and their reverse logistics operations for items at the end of their useful life within an organization.

In addition, the ability to drive revenue and save on costs through online auctions allows government leaders to shift their focus back to their primary missions and operations rather than the disposal of property.

By creating a specialized marketplace for government surplus, we have enabled a public-private partnership that maximizes the final selling prices of unneeded and surplus items, said Bill Angrick, CEO of Liquidity Services Inc. In 2004, we increased the DoD's net cash flow by over $20 million per year compared to historic results for the same property.