InformationWeek

The Navy earlier this month signed up for Freemarkets Inc.'s reverse-auction technology, and in the first day it bought $3.3 million worth of aircraft parts for $2.4 million. The Navy began by describing in advance the components it needed for ejection seats in certain aircraft and prescreened the bidders down to three finalists.

The Navy has another auction planned for mid-June and "intends to use reverse auctions wherever feasible," says public affairs specialist Jim Nieb. The Navy makes 300,000 purchases a year and spends $5 billion annually. Freemarkets gets paid a percentage of the auction price, on a sliding scale, starting at a high of 2% on trades of less than $25 million, says Dave McCormick, Freemarkets' VP for public sector business. The percentage decreases as the price goes up.

The U.S. General Services Administration, the central contracting arm for all federal agencies, last week signed contracts with American Management Systems Inc. and Ariba Inc. to develop an online auction Web site to sell surplus government property to the public. The volume of potential business is huge. The GSA sold $260 million worth of surplus goods last year the old-fashioned way and says it could see as much as $10 billion going through its auction unit, GSAAuctions.