A large part of a key procurement reform passed in 2017 that was saving taxpayers money will be struck down when a new law passed this session goes into effect.
Senate Bill 2024 was signed into law by Gov. Tate Reeves and removes the need for state and local governments to use reverse auctions for term contracts. These types of contracts govern the supply of a commodity at a set price over a term, often a year. This is done with some types of commodities, such as asphalt or concrete pipe, to lock in a low price when fluctuations are possible.
A reverse auction is one where sellers bid against each other in real time to win a buyer’s business, usually electronically. Each vendor is pre-qualified and it allows a seller to purchase commodities from multiple bidders. Also known as an E-auction, the auction facilitator receives a fee from the winning vendor for helping put on the auction and secure bidders.
The bill originally was aimed revising the bid process on counties and municipalities for banking services for taxpayer funds, but both chambers attached reverse repealers, which means the bill can’t reach the governor’s desk without further work.
That further work turned out to be language added in conference that ended the requirement for reverse auctions on term contracts. This has the effect of largely doing away with the reverse auction requirement, according to the author of the 2017 legislation, state Rep. Jerry Turner, R-Baldwyn.
Evidence of that is in Madison County, which purchased a reverse auction software. Of the 19 auctions in 2021, 18 of them were for term bids.
Since conference reports can’t be amended according to legislative rules, members of the two chambers can only vote yes or no on a conference report.
SB 2024 will likely result in a reduction in the hundreds of exemptions handed out by the state’s Public Procurement Review Board for state and local government entities each year. The PRRB is responsible for 100 state agencies, 82 county boards of supervisors, 298 municipalities and 140 school districts.
In just the last two years, the board approved 209 exemptions worth an estimated value of more than $156 million. Many of these exemptions were for commodities such as limestone (used in road and drainage work) and asphalt that the entities, such as $5 million for asphalt for the Mississippi Department of Transportation approved by the PPRB in March or a $350,000 contract for Holmes County for gravel.
In 2017, the Legislature passed a bill, House Bill 1106, that was later signed into law by then-Gov. Phil Bryant that changed public procurement in Mississippi. Reverse auctions, barring an exemption granted by the procurement review board, were required on commodities or equipment of more than $50,000 purchased by government entities both at the state and local level.
Governmental entities statewide have chaffed against the requirement. In a 2020 report by the Joint Legislative Committee on Performance Evaluation and Expenditure Review (PEER), the report writers surveyed 54 purchasing entities and found that there was a perception among the purchasers that reverse auctions increased the time necessary to make a procurement and decreased the number of vendors willing to participate and didn’t result in a significant price savings.
Vaughn Blaylock, who owns a Mississippi-based reverse auction company, Southern Procurement, says the key to a good reverse auction with lots of bidders is the request for procurement, which specifies what the entity wants ( a garbage truck, gravel or office supplies, for example), the quantity and the performance or capabilities of the item or items. The RFP is key because it can be written to favor only a select or even a single vendor using several methods, such as specifying the parameters of a particular brand or even including how many employees or the location of a vendor.
One example of that is from the Vicksburg Warren School District, which Blaylock worked with to secure a contract for band uniforms. A vendor that owns most of the band uniform market in the state uses a proprietary fabric blend and specifying that blend ensures that only that one vendor can participate in a bidding process. Blaylock found a similar fabric blend to substitute in the RFP, which opened competition.
Vicksburg Warren School District Athletic Director Preston Nailor, who was quoted $800 per uniform originally, told the Northside Sun he saved about $250 to $350 per uniform by using the reverse auction process.