Company generates savings through online bidding process
If you want to buy a used CD or collectible knick-knack, eBay may be the place to go. But what if you need a new fire engine or a winter's supply of road salt?
For city governments, businesses and other institutions, Louisville-based BidBridge may be the answer.
Like eBay, BidBridge runs an online sales site. BidBridge, though, is meant for purchases of $50,000 or more, and it reverses the customary roles for buyer and sellers. In what's called a reverse auction, vendors must vie to offer the lowest prices, just as they do in typical government contracts awarded through sealed paper bids.
BidBridge "delivers electronic sealed bids, but we go beyond that," said company President Clay Masters. The traditional process with sealed paper bids "really is somewhat limited," because vendors make just one bid. There are no ongoing negotiations to lower the price.
With a reverse auction, "you're providing those suppliers the opportunity to place multiple bids" - a "dynamic environment versus a static environment," Masters said.
"On the buyer's side, typically we're delivering savings of 13 percent" compared with the budgeted price, he said.
With BidBridge, bids are kept secret, just as in the conventional sealed-bid approach. But vendors can check online at any point to see where they rank against their competitors and can lower their prices to improve their positions.
The reverse auctions have worked for Louisville Metro government, saving close to $1 million over the course of 20 to 25 auctions, said Craig Bowen, the city's executive administrator of purchasing.
Claremore, Okla., which has been using BidBridge for about a year, saved an estimated $80,000 on the recent purchase of a $300,000 firetruck, said City Manager Troy Powell, an enthusiastic fan of the reverse auctions.
"I love it. I think it's the wave of the future," Powell said. "I think BidBridge is really on the cutting edge of how things should be done in government, and that's why we started using them."
When contracts are awarded in a single-bid process, "obviously, there's a lot left on the table," Powell said. The ongoing bidding allowed under the reverse auction forces bidders to "actually give us their bottom dollar."
BidBridge recently completed a rebranding effort following its acquisition early this year by RQSI, a Louisville investment company.
Founded in 1999 as Asset Management Technologies, the company has worked with buyers and suppliers throughout the Southeast and Midwest, with clients in Kentucky, Ohio, Indiana, Georgia, Oklahoma, Arkansas and North Carolina.
Now it's expanding into other states, including Colorado, California, Utah, Oregon, Wisconsin, Mississippi and Florida.
BidBridge has 11 employees - up six this year. It also has 11 field representatives not counted as employees.
The company works closely with clients in "a very highly consultative, high-touch environment," Masters said. A key element is working to attract a variety of auction participants.
Not every purchase is appropriate for an auction, he said. A contract under $50,000 - a single vehicle purchase, for example - would probably not benefit from the process.
"Our average transaction today is north of $515,000," he said. Two deals - one for a wastewater treatment plant and another for a park project - were for more than $20 million.
Even relatively small projects can have a big impact on a small city's budget, he said. "If you are able to save 13 percent off a $100,000 estimated price, that $13,000 may build a new little league ball park in that community."
Clients don't pay directly for the service. BidBridge collects its fee from the winning bidder, and then only if the deal closes.
Therefore, "our interests are very much aligned with that buyer from the very beginning," Masters said. The only way BidBridge gets paid "is if they're satisfied with the bid."
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