Despite federal budget woes and close scrutiny from the Administration, reverse auction – the ultimate Race To The Bottom – is actually becoming more popular among federal buyers.
Tough price competition isn’t a winning strategy for many vendors. So, how do you decide when reverse auctions can open big doors for your business?
Actually, there are ten clues.
The federal contracting community is still hurting from a rough ride through the past few years. Budget cuts, sequestration, and the rise in Low Price Technically Acceptable acquisition have minimized profit margins to bare bones.
And then there’s been controversy swirling around high-profile reverse auction provider, FedBid: most recently, criticism from the Inspector General of the Department of Veterans Affairs, but whose temporary suspension by the Air Force was lifted on February 23rd, 2015
Watch for these ten signs to think twice about whether reverse auction could be a great strategy for your next win – or your first one:
- You’re new to the federal market, and want wins that will let you build your track record quickly.
- You want to get a first win in a new agency to establish past performance.
- You’re the low price vendor in a niche with minimal other differentiators.
- You’re a small business. Small businesses win 80% of the dollars, and 86% of the auctions held, via FedBid.
- You have past performance, and sell products or well-defined services, but want to minimize proposal costs.
- Your target agencies include one or more of: Army, DHS, Interior, or Veterans Affairs (FedBid’s biggest users) or the Defense Logistics Agency (DLA). These five alone drove 70% of reverse auctions in FY2012.
- Your typical contract with the DLA is worth more than $150,000.
- You already hold one or more federal contract vehicles. Almost half of FedBid’s contracts were orders against existing contracts – for example, GSA Schedules, GWACS, or other agency IDIQ’s or BPA’s.
- You’re trying to reach your $25,000 minimum sales goal for your GSA Schedule, and time is running out.
- You want to drive federal fourth quarter sales. 60% of reverse auction buys were made in July through September, the last three months of the fiscal year.
Reverse auction isn’t perfect, of course. But when the fit is right, get bidding!