March 18, 2011

GOV. MALLOY: NEW PARTNERSHIP BETWEEN CRCOG, DAS FOR REVERSE BIDDING

Improves Efficiency, Cuts Down on Costs, Generates New Revenue

(HARTFORD, CT) -- Governor Dannel P. Malloy today announced an agreement between the Capitol Region Council of Governments (CRCOG) and the Department of Administrative Services (DAS) to conduct online reverse auctions for the purchase of commodities. This agreement will not only achieve significant savings but will also generate new revenue for the state.

CRCOG, a voluntary association of municipal governments serving Hartford and 30 surrounding communities, recently contracted with BidSync of Utah, an experienced vendor in government agency bid notification, to conduct the reverse auctions. The CRCOG/DAS agreement affords DAS the opportunity to "piggyback on" or use the contract at absolutely no cost to the state. The DAS agreement is structured to allow all Executive Branch agencies, including the Department of Transportation and the units of higher education, to utilize the reverse auction system.

"This is the type of creative partnering that all state agencies and municipalities should be exploring," Governor Malloy said. "We all have a shared responsibility to help get our fiscal house in order, and initiatives such as this between DAS and CRCOG are a major step in that direction. As a former mayor, I can say first hand that this is an ideal example of how team work between government entities results in a total win-win situation. The state is saving money on purchasing which benefits the taxpayers and the revenue generated enables CRCOG to better serve its municipal members. This is cooperative efficiency in government at its best," Governor Malloy stated.

According to DAS Commissioner Donald DeFronzo and CRCOG Executive Director Lyle Wray, the agreement represents the first such state/municipal partnering initiative in reverse auction bidding, and it is expected to yield mutual cost-savings benefits.

"This is a classic example of doing more with less," Wray said. "By streamlining bureaucracy through information technology, we'll get a broader pool of potential bidders with much less paperwork and a much faster bidding process," he added.

"We're anxious to explore the possibilities this holds for the state," DeFronzo said. "As the principal purchaser for state agencies, DAS typically has more than 800 active contracts for goods and services at any one time, so the cost-saving potential down the road could be major," DeFronzo stated. He added that DAS will begin piloting reverse auction bidding on several commodities over the next few months.

Unlike a sealed bid opening, a reverse auction is a bidding process in which multiple pre-qualified suppliers openly bid against one another electronically in an allotted time frame, and the suppliers are allowed to see each other's bids. Vendors' prices are open and adjusted in real-time in order to increase competition and subsequently drive down prices. The winning bidder pays an administrative fee to BidSync based on a percentage of the contract award. One percent of that administrative fee goes to CRCOG, and through the agreement, one-half of that one percent reverts to DAS.

Other states including Utah and Nebraska have also contracted with BidSync for reverse auction bidding and have reported more than a ten percent reduction in contracted costs for goods and services. With DAS contracts totaling more than $2.4 billion in value, millions of dollars are likely to be saved over the term of those contracts. Over the next twelve months alone, as the new system is initiated, DAS estimates $10 million in cost savings, or cost avoidance through use of the reverse auction tool and through related contract negotiations. Though currently in its pilot phase, as the number of reverse auctions increases, costs would continue to decrease, and both DAS and CRCOG would continue to share a percentage of the growing number of administrative fees from the winning vendors.

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For Immediate Release: March 18, 2011

Contact: Donna Micklus
Dept. of Administrative Services
Donna.Micklus@ct.gov
860-713-5195 (office)
860-989-8384 (cell)

Twitter: @GovMalloyOffice

Facebook: Office of Governor Dannel P. Malloy