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Government considers online reverse auctions
11:48 26 Oct 2005
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Online reverse auctions are “very likely” to be used across most construction projects procured by central government departments, according to insiders.
The apparent change in policy, which will be a step away from the best practice teachings of Egan and Latham, is believed to have come from the findings of the Gershon Review, which looked into reducing government costs.
It is believed that the government’s attention has been drawn to the success of private sector organisations such as Network Rail and Tesco, which use reverse auctions to cut down costs by
getting contractors to price-bid for packages of work during an allotted online bid period.
Some procurement sources believe it might not be too long before the industry is invited to take part in a live price auction for the first time on a central government construction project.
“Part of the Gershon Review identified the need for one national procurement strategy across all government departments, which will cut down costs,” said one insider.
“Research into the benefits of the construction industry using integrated teams and best practice has been carried out, but the truth is that construction will be lumped into the same mould of procurement as other departments.”
It is unclear whether central government will make reverse auctions for construction services mandatory for government departments, or whether it will leave it to their own discretion.
Making the procurement process mandatory could open up an interesting conflict with both the Highways Agency and the organisers of ProCure 21, which oppose the use of reverse
auctions in favour of quality bidding rather than price.
An Office of Government Commerce spokesman said: “We are committed to actively promoting the use of electronic procurement tools across the public sector, as they are supportive of the efficiency review.”
The apparent change in policy, which will be a step away from the best practice teachings of Egan and Latham, is believed to have come from the findings of the Gershon Review, which looked into reducing government costs.
It is believed that the government’s attention has been drawn to the success of private sector organisations such as Network Rail and Tesco, which use reverse auctions to cut down costs by
getting contractors to price-bid for packages of work during an allotted online bid period.
Some procurement sources believe it might not be too long before the industry is invited to take part in a live price auction for the first time on a central government construction project.
“Part of the Gershon Review identified the need for one national procurement strategy across all government departments, which will cut down costs,” said one insider.
“Research into the benefits of the construction industry using integrated teams and best practice has been carried out, but the truth is that construction will be lumped into the same mould of procurement as other departments.”
It is unclear whether central government will make reverse auctions for construction services mandatory for government departments, or whether it will leave it to their own discretion.
Making the procurement process mandatory could open up an interesting conflict with both the Highways Agency and the organisers of ProCure 21, which oppose the use of reverse
auctions in favour of quality bidding rather than price.
An Office of Government Commerce spokesman said: “We are committed to actively promoting the use of electronic procurement tools across the public sector, as they are supportive of the efficiency review.”