Agencies can use reverse  auctions as a tool to further promote competition and lower prices, among  other potential benefits. Federal Agencies’ Use of Reverse Auctions Decreased between Fiscal Years 2013 and 2017

We found the value of awarded reverse auctions decreased  approximately 22 percent across the government between 2013 and  2017, from about $1.9 billion to about $1.5 billion. In our current review, contracting officials reiterated this  perspective. Selected Agencies Paid over $13 Million for Reverse Auctions Conducted in 2016

The five agencies we reviewed indirectly paid about $13.4 million in fees  to reverse auction providers in 2016. Without such  understanding, the risk increases that agencies may be paying more in  fees than necessary for the level of service required. Further, we found that agencies in our review indirectly paid  approximately $3.3 million in fees for reverse auctions conducted in 2016  even when an alternative no-fee reverse auction platform was likely  available. We did not  determine whether particular platforms were more appropriate or resulted  in lower overall prices to the government. Our  review found that, while certain agencies or agency components had  guidance that provided some information about reverse auction fees,  none of the agency-level guidance we reviewed fully addresses  contracting officials’ role in understanding and assessing reverse auction  fees, details fee structures for reverse auction platforms used by the  agency, or requires that contracting officers compare the options for  reverse auction providers that are available to them, particularly regarding  no-fee alternatives. Collectively, the agencies concurred with 18 of the 21 recommendations  we made, and did not concur with three. Appendix II: Agency Policies and Guidance Reviewed

Appendix III: Objectives, Scope, and Methodology

This report examines (1) federal agencies’ use of reverse auctions  between 2013 and 2017, (2) the extent to which selected agencies  achieved benefits through reverse auctions, and (3) the extent to which  selected agencies have insight into reverse auction fees. We also used this data to identify six of the largest users of reverse  auctions for that period—Departments of the Army, Homeland Security  (DHS), the Interior, the Navy, State, and Veterans Affairs (VA)—by  number of auctions and dollar value. For five of the six selected agencies (Army, Navy, DHS, Interior, and  State), we collected additional data on auctions awarded in fiscal year  2016—the most recent year of detailed data available at the time that we  began our review. To identify the extent to which selected agencies achieved the benefits of  reverse auctions, we analyzed the 2016 data we collected on reverse  auction use at our five selected agencies to identify factors related to  competition (e.g., the number of participating vendors in auctions and the  number of bids received, and the frequency of iterative bidding, defined  as when there are multiple bidders and at least one bidder submits more  than one bid during the auction) and savings (e.g., savings as calculated  by the reverse auction providers). In addition, to obtain contracting officials’ perspectives on the benefits of  reverse auctions, we interviewed the contracting officials involved with  35 of these 40 auctions: for the remaining 5, knowledgeable officials were  not available to interview.
Why GAO Did This Study

Reverse auctions are intended to result in enhanced competition, lower prices, and reduced acquisition costs. GAO has previously found that agencies did not maximize these benefits.
GAO was asked to review federal agencies' use of reverse auctions. This report examines (1) the use of reverse auctions and the extent to which selected agencies achieved benefits, such as competition; and (2) the extent to which selected agencies had insight into reverse auction fees.
GAO collected and analyzed data on federal agencies' use of reverse auctions from fiscal years 2013 to 2017. For five of the largest users of reverse auctions—the Departments of the Army, Homeland Security, Interior, Navy, and State—GAO reviewed documentation for 40 auctions that resulted in contract awards in fiscal year 2016 (the most recent data available when the review began), and that were selected to obtain a mix of dollar values and levels of competition, among other factors. GAO also interviewed contracting officials and analyzed agency guidance.

What GAO Found

Federal agencies' use of reverse auctions—a process where vendors bid against each other with lower prices to win government contracts—declined between fiscal years 2013 and 2017, from about 34,000 to 19,000 auctions valued at about $1.9 billion and $1.5 billion, respectively. In fiscal year 2016, the year GAO studied in detail, nearly three-quarters of auctions at the agencies GAO reviewed resulted in iterative bidding—when there are multiple bidders and at least one bidder submits more than one bid during the auction (see figure).
Contracting officers said reverse auctions reduce administrative burden, especially during peak contracting times. Reverse auctions data indicate that selected agencies may have saved more than $100 million in 2016.
The five agencies GAO reviewed indirectly paid about $13 million in fees to reverse auction providers through awardees in 2016. However, 28 of the 30 contracting officials GAO interviewed did not fully understand how fees were set. Further, in 2016, agencies GAO reviewed indirectly paid approximately $3 million in fees for reverse auctions for which a fee-free alternative was likely available. None of the guidance GAO reviewed provided sufficient information for contracting officers to assess the appropriateness of these fees (see table). Without better information, contracting officials may be offsetting potential savings by paying more in fees than necessary for the level of services required.

What GAO Recommends

GAO is making a total of 21 recommendations to the five agencies in GAO's review, including that agencies inform contracting officials about fees to better compare available provider options. Defense, State, and Interior concurred with this recommendation. DHS did not, stating that contracting officials should obtain this knowledge during market research. GAO believes managing this information centrally could eliminate confusion and minimize duplicate efforts.