Letter to the Editor: Reverse auctions for state projects would benefit taxpayers

 

While I am excited to have brought new conversation to Illinois’ pension crisis, I also believe the state could initiate a new way of doing business with its vendors. By utilizing reverse auctions to prospective vendors, we could offer great opportunities to small businesses and the state alike, during the purchase of large commodities.

Reverse auctions have been beneficial to the federal government, and their usage has gradually increased the federal government’s contracts to small businesses, which is a phenomenal feat in these modern times of bulk production. But I think our state government would be most benefitted by this form of business, as we embark upon tackling its debt and doing business efficiently so that the people can be better served.

I can offer a great example of reverse auctions being used to benefit a school district right here in Chicagoland. Back in 2009, the St. Charles School District was approached by an online bidding company to utilize the reverse auction process to get competitively driven pricing for its annual purchase of copy paper. This purchase included different sizes and different colors, and the school district typically spent close to $300,000 annually for its paper needs.

The school district understood the process and agreed to try it, under the belief that there was no chance the bidders would offer below the Illinois State contractual price that was already negotiated for public sector entities. The online bidding company inquired with many suppliers, organized the electronic auction with proper bid specifications, and set the state contractual price at $28.75 per case of 8 ½ x 11 inch white paper. This would ensure that if no supplier bid below that contractual price with the state, the school district would do its typical purchase with the state negotiated price.

However, the school district was overjoyed to see that the first four of five suppliers had their opening bids below the State price. In fact, after lowering bids from the five suppliers, and 20 first-place turnovers, the winning bid was at a price of $23.73 per case.

I’d imagine St. Charles’ taxpayers were also pleased with this news, as their school district had saved 17 percent of its usual annual payment of $300,000 for commodity paper at its schools. The bidding action was then released on the day of the auction, offering transparency to all, as a Bid Submission Report indicates each company’s final price, down to the minute it was offered.

Reverse auctions should be initiated statewide. Transparency is inherent in the process, it offers small businesses their best shot, and brings major savings to the state via the best offered price.

I will continue to keep the conversations open about constitutionally paying our pensioners, understanding and cleaning the procurement processes that shackle our nationally recognized universities, and with this latest idea, help the state gain a better relationship with all of its businesses through better cost-efficient transactions.

 

Mark Batinick

State Representative, 97th District

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