Authority Tests the Waters of Online Bidding
The Delaware County (PA) Regional Water Quality Control Authority (DELCORA) put two orders for chemicals out to bid and saved $87,500. The savings resulted from the use of Internet-based reverse auctions instead of the usual sealed paper bid process.
DELCORA saved $47,500 below the estimate on liquid caustic soda and $40,000 on the purchase of liquid chlorine.
An Internet-based reverse auction is a real-time online competitive bidding event in which bidders compete to sell the requested product or service to the buying organization. The process enables bidders to know immediately where their bids rank, and to alter their bids immediately if they choose. In the DELCORA liquid chlorine auction, two companies participated, and a total of 49 bids were submitted before the auction ended. In the auction for the liquid caustic soda, three companies submitted a total of 107 bids. With each bid, a company lowered its price from the previous lowest bid.
Both auctions were conducted by eDynaQuote, a provider of Internet-based competitive bidding services headquartered in Erie, PA.
“At the end of the auction for the liquid chlorine, when we had saved $40,000, I was pretty happy,” says Sue Hart, Procurement Coordinator of DELCORA. “Needless to say, I was even happier at the end of the second auction when we saved an additional $47,500. I know we could never have saved this much with the old paper bid process. Having the vendors able to reduce their bids immediately made a world of difference for us.”
DELCORA is a municipal authority that provides wastewater management services for businesses, industries, and citizens. The authority is run by a nine-member board of directors appointed by the Delaware County Council.
“The Board of Directors wanted to expand our opportunities to competitively reduce costs,” said Joseph Salvucci, Executive Director of DELCORA. “The Internet-based reverse auction process allowed us to achieve significant savings.”
Prior to the auction, DELCORA passed a resolution authorizing use of the competitive electronic auction bidding (reverse auction) process. The agency then issued and advertised the bid notices in the usual manner. The bid specifications and other relevant information were posted on the eDynaQuote Web site, eliminating the need to make and mail paper copies of bid specifications.
Instead of submitting sealed bids on paper, bidders registered with eDynaQuote and signed in to the secure site on the announced day and time of the auction.
With a non-electronic sealed bid process, the bids are opened on a designated day at a specific time, and the low bidder is announced. Vendors do not have an opportunity to submit new, lower bids. The reverse auction process, however, allows vendors to know immediately where their bids fit with respect to their competition, and they can then lower their bids accordingly.
“Organizations that use reverse auctions usually experience significant savings, and this event was no exception,” said Doug Luthringer, Client Development Manager for eDynaQuote. “The process also allows them to save resources—such as paper and postage—and time by creating a more streamlined procedure.”
The ability of Pennsylvania local government units—municipalities, school districts, councils of government, and authorities— to use the Internet in the competitive bidding process was made possible by the passage last summer of the Local Government Unit Electronic Bidding Act, PA Act 88 2006. The bill was co-sponsored by two Delaware County State Senators, Senator Edwin “Ted” Erickson (R-26) and Senator Dominic Pileggi (R-9). The act allows Pennsylvania local government units to use the Internet in their competitive bidding process and take advantage of the significant potential for saving time and money.
