City looking to save with reverse bidding
When the city wants to buy anything, from pencils to welding materials, it issues a request for bids and then buys from the company with the lowest first offer.
When the city wants to buy anything, from pencils to welding materials, it issues a request for bids and then buys from the company with the lowest first offer.
City officials call that a lost opportunity, and have moved toward a process of letting sellers compete until the lowest price is reached. Officials say it could save the city millions.
"They can see the prices and continue to lower the price they're willing to sell to us at until they're the last one standing," said Rebecca Rhynhart, the city's chief administrative officer.
The city last week issued a request for proposals from companies that would develop a tool for this new system, known as reverse auctioning. Officials hope for it to be in use by June 1.
Reverse auctions are used in both the public and private sectors. Rhynhart said both Los Angeles and Chicago have adopted the model.
The city twice piloted reverse auctioning under Mayor Michael Nutter, resulting in an estimated savings of 4.6 percent and 5.8 percent respectively. Federal agencies that have used the system have shown savings ranging from 12 percent to 48 percent, according to the city.
Rhynhart estimated the system will save between 5 percent and 15 percent on the cost of purchases here. In the first year, when it is being phased in, that would be an estimated $1 million to $2 million savings. At full steam, it would save an estimated $3 million to $8 million, she said.
"Awarding contracts with this new tool means the city will pay the lowest possible price for supplies," Mayor Kenney said in a statement. "It could mean millions of dollars in savings each year that can go for other vital purposes - including expansion of pre-K for our youngest students."
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