Reverse auctions enable Haverhill to reap savings

Mass Innovations, From The Beacon, April 2011

Haverhill this past winter realized significant savings by using the state’s new reverse-auction law, which enables municipalities to benefit from competition among contractors who are eager for business.

The city bundled 18 months worth of projected needs of the city’s water maintenance department and saved $94,500 on nearly $1 million worth of pipes, hydrants, valves and related products and services, according to city officials.

A series of three online auctions took place over roughly three hours on Jan. 27. The items put out to bid tended to be standard ones, “and the more standard the product is, the more you’re going to generate in savings,” said Robert DeFusco, the city’s purchasing agent.

Haverhill was among the cities and towns that lobbied for a reverse-auction option, which was included in the “municipal relief” bill signed into law last summer. Haverhill Mayor James Fiorentini said he hired DeFusco as the city’s first purchasing agent because of DeFusco’s experience with reverse auctions in the private sector.

The city tried previously to conduct a reverse auction, but, Fiorentini said, “We were very surprised to learn that you couldn’t do it.”

Initial guidelines issued by the inspector general’s office after the law’s passage stipulated that a reverse auction must come to what DeFusco described as a “hard stop” at a predetermined time, even if contractors were still interested in offering lower bids. The regulations eventually were revised to allow cities and towns to extend the bidding, which significantly increased Haverhill’s savings, according to DeFusco.

During each auction, vendors were able to view the lowest bid, but they could not identify which company had made that bid. Enabling competing bidders to see each other’s bids could lead to even greater savings for cities and towns, DeFusco said.

“It’s a very competitive world out there,” he said. “If your number-one competitor has the lowest bid, you may want to go lower.”

For more information, contact Robert DeFusco at (978) 374-2309.