07/06/2011

Procurement of design by 'reverse auction' blocked – for now

While ACEC Ohio succeeded in keeping language out of the state budget bill that would have permitted local governments to award A/E contracts by reverse auction, it is likely the battle will have to be fought again in the near future.

Language that would have permitted the use of reverse auctions for procurement of both design and construction services appeared unexpectedly among a raft of amendments that the Ohio Senate considered for inclusion in its version of the budget bill.

ACEC Ohio worked with other design- and construction-related associations to excise the provision from the Senate’s version of the budget bill, but shortly thereafter State Rep. Kristina Roegner (R-Hudson) introduced H.B. 246, which contains the exact same language that had been proposed in the Senate.

In a reverse auction, a buyer puts a contract out for bid, either using specialized software or through an online marketplace. Sellers offer bids on the item, competing to offer the lowest price that meets all of the specifications of the bid. As the auction progresses, the price decreases as sellers compete to offer lower bids than their competitors.

It appears the effort to allow local governments to use reverse auctions in Ohio is being driven by one or more companies that specialize in developing these specialized websites for private industries and public agencies.

Nationwide there have been few reported attempts at using reverse auctions for procurement of design and construction services.  Several years ago, however, The Army Corps of Engineers conducted a year-long pilot program on the procurement of construction services using reverse auctions and found there was no evidence of savings using reverse auctions over the sealed bid process.

In 2004, the state of Minnesota attempted to use reverse auctions to award state highway design projects, only to be told by federal authorities that the practice was illegal and would jeopardize receipt of federal highway funds.