Businesses will vie against each other openly for contracts to provide goods and services to Connecticut’s governments under a new program the Department of Administrative Services is rolling out.
This new reverse auction system calls for businesses to openly bid against each other electronically during an allotted time frame for state and municipal contracts. By allowing all vendors to see each other’s bids and lowering their own bids accordingly, the DAS hopes to increase competition and drive down prices of government contracts.
“Obviously, contractors don’t like that at all,” said Bill Cianci, executive director of the Construction Institute at the University of Hartford. “That is a very adversarial and bitter way to get contracts.”
In order to obtain a contract under this reverse auction system, businesses must pay an additional administrative fee to DAS, the Capital Region Council of Governments and BidSync — the Utah outfit running the auctions.
Across all departments, Connecticut’s state government has more than 800 contracts for goods and services totaling $2.4 billion. The 31 communities comprising the Capital Region Council of Governments also are eligible to participate in the reverse auction system.
Based on the results of other states using BidSync, DAS hopes to cut 10 percent off the cost of its contracts going through reverse auction, eventually savings millions.
The new system will be rolled out on a few select state contracts to start, and then will expand depending on the results, said Carol S. Wilson, DAS director of procurement. The state hasn’t picked the first contracts for the pilot launch of the system, but it is open to all agencies, including the Department of Transportation. Construction contracts are not eligible for reverse auctions.
The same contractors that are eligible to participate in the current sealed bid system are eligible to participate in the reverse auction. Wilson said businesses benefit from the new system through increasing transparency in the process and having the ability to see other’s bids before finalizing their own.
“You are pitting everybody against everybody else,” Cianci said. “There is enough acrimony in the industry already.”
This race-to-the-bottom style of awarding contracts further exacerbates contractors’ problems with the government’s procurement process. Quality is rarely considered, Cianci said. Seeking out the lowest bidder could result in a cut-rate contractor getting the job.
This could lead to poor follow-through on the agreement or change orders that drive up the cost of the contract, Cianci said.
“The lowest bid doesn’t mean that you get the best bid,” Cianci said.
