ATLANTA, GA. March 2, 2001 The U.S. Navy recently put Procuri's Internet-based application through its paces as they conducted reverse auctions. (In a reverse auction, suppliers compete for a purchaser's contract by lowering their bids.) The Navy set out to purchase 1,000 desktop computers, 1,025 aircraft landing wheels and approximately 40 aircraft test kits using Procuri's e-procurement tools.
The one-hour reverse auctions, conducted on the Internet were the first steps in the Naval Supply Systems Command's (NAVSUP) plan for wide-scale deployment of e-procurement technology. In December 2000, Procuri landed a five-year, $2.25 million contract with NAVSUP for e-procurement tools used to conduct forward and reverse auctions. The deal represents more than 10 percent of the Navy's allotted $20 million budget for e-business pilot programs.
According to Charles Nemfakos, Deputy Under Secretary of the Navy, "Our departmental strategy to bring about progressive change is based on two precepts: First, we're not creating new government infrastructure to pursue our goals, but instead we're harnessing the private sector to provide us our solutions. Second, to bring about some of the change, we're adopting proven electronic efficiencies, which have been successful in the commercial arena. The eBusiness Operations Office is one of the important first steps in our transformation strategy."
In the reverse auction for desktop computers, bidding opened at $1,250 per unit. The Navy set its maximum acceptable price at $1,200 the contracting officer's estimate of street price. During the auction, six suppliers entered 17 bids. The winning bid, $983 per unit, represents savings of about 18 percent.
In the second reverse auction, suppliers' bids on aircraft landing wheels yielded approximately 12 percent savings from the pre-auction budget.
The third reverse auction was set up to procure environmental test kits, which check the life support systems of the Navy's F-15 aircraft. The winning bid enabled the Navy to purchase substantially more units, resulting in savings of more than 40 percent on a unit-cost basis.
Navy requirements for pilot programs allow 90 days for proof of concept for e-business initiatives. Procuri's system clearly passed muster. Within days after the second auction, 30 supply officers and contracting officers from Navy procurement centers around the world gathered for the training they need to integrate Procuri's technology into their procurement activities. Procuri will play an integral role in NAVSUP's annual purchases in excess of $4 billion worth of equipment, supplies and services.