E-sourcing: another tool for law enforcement?
Most law enforcement supervisors or fleet managers can identify with this scenario. Depending on the size of an organization and its jurisdiction, this process can become onerous, especially without a purchasing agent. To procure vehicles, the commander will prepare the specifications and proposal and determine which merchants to advise. Then, he must decide when and where the bidding process will occur and publish a notice of the event in a local newspaper. The commander will not know how many vendors will bid or their qualifications. The number of steps to this process may total over a dozen in some areas. Suppliers have only one opportunity to submit a bid and do not know what others will offer. (2) Whether buying motorcycles or selling surplus property or vehicles, e-sourcing--purchasing negotiations conducted online--may prove helpful for law enforcement agencies.
Types of E-Sourcing
There are two main types of e-sourcing events. Online reverse auctions have only one buyer but many sellers. A buyer initiates reverse auctions by distributing purchasing specifications, such as requests for quotes, and suppliers compete against each other in Web-based, real-time auctions to win the buyer's business, driving down the price in the process. Online forward auctions have one seller but many buyers. A seller notifies buyers of the products or services available, and buyers compete against each other in Web-based, realtime auctions, driving up the demand and prices as they bid. (3)
When law enforcement departments need new vehicles, using an online reverse auction could dramatically expedite the purchasing process, potentially attract new vendors, and possibly result in lower prices. For example, an agency could contract with an e-sourcing company to host and conduct the reverse auction, providing it with the specifications, suggested vendors, and a region from which to draw them. The company might suggest expanding the vendor list nationally or even globally. The department can employ other potential sources, such as state procurement agencies, to determine a fair price as many have arrangements for fleet purchases. From that point, the e-sourcing company takes over, quickly qualifying vendors and examining their track records for reliability and quality. The actual event can occur within days, and the agency has the right to say no if, in the end, it can obtain a better price elsewhere.
Law enforcement organizations also have the option of purchasing the software and conducting these auctions themselves. They can buy a license effective for a certain period of time for an unlimited number of events. For example, the Kentucky Council of Area Development Districts recently formed a partnership with an e-sourcing company to create the Area Development District Online Procurement Services (ADD-OPS). (4) In this case, buyers from any Kentucky municipality, county, region, or private agency can connect with thousands of vendors. The instructional technology coordinator for the council recounted how the Green River Area Development District recently contacted ADD-OPS about purchasing a high-end digital copier. (5) Based on research, the price for the copier and a 3-year maintenance contract was over $36,000. A reverse auction was held with bidders able to see competing bids in real time. Closing bids ranged from $22,460 to $31,076, a savings in the first amount of almost 40 percent. (6)
What does this cost? "There is no fee charged to the local government for setting up and running an auction, and there is no fee charged to any vendor for participating. It is only when an auction results in a low bid, which is accepted by the local government buyer, and a purchase order is issued that any fees are charged. In this case, the winning bidder pays [the e-sourcing company] a fee (on a sliding scale less than 2 percent of the selling price) for the benefit they have received from participating in and winning the auction. The local government pays nothing and neither do any of the other participating bidders." (7) Further, the council hopes to gain significant savings in future procurements by consolidating quantities in bulk and seeking larger numbers of geographically dispersed vendors that might otherwise not be aware of the procurement. (8)
Pros and Cons
What do vendors and suppliers think about this process? One article detailed Minnesota's reverse auction efforts and quoted an all-terrain vehicle vendor saying he is comfortable with the process, and it has helped move inventory. (9) Some vendors and suppliers may have reservations about the process, and their experiences will affect their openness. Additionally, law enforcement executives will have to consider the political ramifications involved. For instance, a sheriff facing reelection who conducts reverse auctions online and awards contracts to out-of-state vendors might face repercussions, finding it difficult to ask local car dealers to support his next election campaign. In the opening scenario, the chief directed the commander to find a way to dispose of 10 surplus vehicles. He could hold a live, public auction, although that entails a lot of work, such as posting notices of the sale, hosting viewing opportunities, conducting the auction, and, then, collecting the money. For many agencies, this may be the time to contemplate online forward auctions--the more familiar type where buyers bid for excess property, materials, or equipment. (10) Using e-sourcing to conduct a forward auction offers an enhanced pool of potential buyers, a speedier process, and bidders who see the amounts bid as the auction moves forward.
Departments must address other considerations as well. In some jurisdictions, the laws, statutes, or codes of the state and local region currently may prevent these types of auctions, although areas are changing rapidly to allow them. These processes may not be a panacea for all procurement efforts; a literature review reveals a cautionary note when applying reverse auctions to such things as intellectual and construction services.
E-sourcing is simply a tool--one that also can be abused. While e-sourcing may result in a lower price, law enforcement agencies should consider additional factors in their decision to use it. Quality, reliability, and long-term relationships are just as important. However, departments should contemplate e-sourcing for commodity purchases with many suppliers or when they need to dispose of inventory. If the shift commander in the opening scenario performs a quick search on the Internet, he may discover e-sourcing before spending a great deal of time preparing a sealed bid and being disappointed with the results. This tool potentially may save agencies money and time--significant factors to their communities' residents.
(1) For illustrative purposes, the author employs masculine pronouns throughout the article.
(2) For additional information, see Curtis W. Exley, "Fleet Management: Vehicle Rotation Criteria," FBI Law Enforcement Bulletin, August 2002, 1-10.
(3) Information in this paragraph is derived from Jemin Patel, "Establishing Mutual Equity for Buyers and Sellers with E-Sourcing," Contract Management, March 2005, 18-19.
(4) Area development districts are a means to collaboratively serve regions as clearinghouses, technical centers, and conveners. For an explanation of the concept of an area development district and more information regarding ADD-OPS, see http://www.kycadd.org/idl.html.
(5) John Penfield, IT coordinator for the Kentucky Council of Area Development District, e-mail to author, September 20. 2005.
(7) John Penfield, e-mail to author, September 25, 2005.
(9) Kevin Duchshere, "Reverse Auctions Helping State to Find Lowest Bids Online," Minneapolis Star Tribune, February 16, 2004, sec. B, p. 3.
(10) For additional information, see Nole Bullock, "Dynamic Selling of Surplus Property," Police Fleet Management, January/February 2004; retrieved on March 21, 2006, from http://www.pfmmag.com/JanFeb04/janfeb2004dynamicselling.htm; and the state of Oregon Web site at http://www.oregon.gov/DAS/PFSS/SURPLS/index.shtml.
Dr. Capron is an instructor in the Division of Criminal Justice at California State University in Sacramento. Mrs. Capron is a professor at William Jessup University in Rocklin, California.
By Timothy A. Capron, Ph.D., and Rhonda A. Capron, M.B.A.
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|Title Annotation:||Focus on Technology|
|Author:||Capron, Rhonda A.|
|Publication:||The FBI Law Enforcement Bulletin|
|Date:||Jan 1, 2007|
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