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Veterans Health Administration

VA Saving Millions With Innovative Purchasing Tool

Box of medical supplies

Saving time, Saving Money — The reverse auction is a commercial online service that allows VA buyers to purchase quality products — everything from printers to bath towels — at significant savings. The system has saved VA $2 million since March.

A new way of buying medical supplies for its hospitals has saved the Department of Veterans Affairs $2 million since March 2011

Some people use coupons to save money when they go shopping.

Sadly, the coupon route is not an option for the Department of Veterans Affairs when it goes shopping for the medical supplies it needs to care for America’s Veterans. But the professional buyers at VA recently figured out a way to buy quality merchandise for a lot less, and it’s already saved VA big bucks in 2011 alone.

“Earlier this year we began using a commercial online reverse auction service,” explained Susan Taylor, Deputy Chief Procurement Officer for the Veterans Health Administration’s Office of Procurement and Logistics. “It’s free to the government, it requires no software or system installation to use, and it’s already saved us about two million dollars since March. In this kind of economic environment, two million dollars is not small change.”

“It’s online shopping, pure and simple. Better yet, it’s one-stop online shopping.”

— Norbert Doyle, Acting Chief Procurement and Logistics Officer, VHA

Taylor noted that in addition to the cost savings, the reverse auction has also been helpful in supporting VHA’s socio-economic small business goals. “Sixty-four percent of our reverse auction awards this year went to small businesses,” she said, “and half of those went to Veteran-owned small businesses.”

So what’s a reverse auction, anyway?

“A reverse auction is a competitive process in which a buyer, like VA, solicits bids from sellers during a period of time set by the buyer,” Taylor explained. “During the reverse auction, sellers have the opportunity to submit a single bid or multiple decreasing bids. So the more competitive the requirement, the better the savings.

“Let me give you an example,” she continued. “Recently, we posted a ‘buy’ for exam lights to the GSA Contract Community. It closed with five sellers bidding a total of 19 times. The winning bid was $7,233…that’s 14 percent under what we estimated the lights would cost. Fourteen percent isn’t too shoddy. I’ll take 14 percent any day.”

Taylor, who brought the reverse auction idea with her when she transferred to VA from another agency, gave another example of just how much money the Department is saving with this new way of buying.

“We posted a ‘buy’ to the Open Market for sterilization trays. It closed with 13 sellers bidding a total of 32 times. The winning bid was $27,253, which is 10 percent below the government estimate. Ten percent here, 14 percent there…it adds up pretty quickly.”

Norbert Doyle, Acting Chief Procurement and Logistics Officer, said VHA’s purchasing process was less efficient, and less cost effective, before the reverse auction came along.

“Previously, VHA contracting personnel had to log in to multiple systems to post their requirements,” he explained. “They were also relying on conventional processes such as the phone, fax, and email to obtain quotes from vendors.

“On top of that, any supplemental price negotiation involved manual, time-intensive efforts. The reverse auction eliminates all of that. It’s online shopping, pure and simple. Better yet, it’s one-stop online shopping.”

Susan Taylor agreed that the reverse auction saves both money and time. (And time, as we all know, is money.)

“Our buyers can now use a single tool to quickly post to a wide range of different competitive scenarios,” she said. “For example, we can try posting to the VA Federal Supply Schedule contract community. Then, if the item is unavailable through that community, we can repost with a few clicks to GSA, NASA, SEWP (Solutions for Enterprise Procurement), or the open market.

“Similar advantages are available for managing what we call ‘set-asides,’” Taylor continued. “Reverse auction enables buyers like VA to solicit only Disadvantaged Veteran-Owned Small Businesses. Then, if necessary, we can repost the requirement to the Veteran-Owned Small Business or other set-aside communities.

“Everybody wins,” she said. “VA wins, the American taxpayer wins, small businesses win. Most importantly, our Veterans win.”