Reverse auctions to cut government costs

The Economic Development Ministry is investigating software that will let government departments hold reverse auctions online to score discounts on goods and services.

It is also shopping for software that will let agencies buy computers and vehicles on the web.

Reverse auctions, or e-auctions, would allow government departments to hold auctions in which approved suppliers bid against each other to offer the lowest price for goods or services.

Spokeswoman Emilia Mazur says the auctions could reduce the cost and time of manual tendering borne by government departments and suppliers, and lower the total costs of purchasing "commodity-type" goods and services.

"The use of the tools could assist government to stimulate market competitiveness for goods and services in an open and transparent manner."

Some agencies already have software for online purchasing, but the ministry is shopping for an "electronic portal" that would allow all agencies to buy goods and services online — including computer hardware, office equipment and supplies and passenger vehicles under government-wide contracts.

The portal — to go live by July — will give agencies a cost-effective means of accessing the government contracts and will help suppliers maintain a catalogue of products.

Internal Affairs is responsible for negotiating an all-of-government contract for buying computer hardware and multi-functional devices such as photocopiers as part of a drive to shake up public sector procurement and cut costs.

The Economic Development Ministry will negotiate all-of-government contracts for passenger vehicles and office stationery, and is investigating the possibility of District Health Boards New Zealand securing deals on clinical equipment and consumables.

E-auctions are rarely used in the New Zealand public sector but are commonly used in the private sector and by government agencies in Europe.

They are usually used only after the capability of vendors has been assessed, allowing buyers to differentiate between pre-approved suppliers based on price, Mazur says.

The purchase of the portal and any trials of e-auction software will be funded out of the government procurement reform budget — for which $3 million has been set aside this financial year.

Three all-of-government contracts are due to be in place by June.

It is expected $58 million will be spent under the computer hardware contract in the first year and $18.5 million spent on multi-functional devices, according to a Cabinet paper on the reform.

The ministry estimates the government spends $71 million on new PCs alone each year.

The procurement centres are being set up at a cost of $20 million over four years, but it is expected the reform project will be self-funding from July.

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