The U.S. Postal Service said this week that it will begin using FreeMarkets Inc.'s B2B eMarketplace online auction site to shop for trailer leases, printed envelopes and fuel.
According to David McCormick, vice president, public sector, FreeMarkets, Pittsburgh, reached a three-month agreement with the USPS. The contract is its first with a federal agency.
For a monthly fee, the USPS will indicate the goods and services it is looking for and the maximum price it will pay. Suppliers plugged into the firm's Web site will then compete for a contract to fulfill the request.
USPS spokesman Gerry Kreienkamp said this is also the first time the USPS has practiced in a reverse auction online, “where the USPS is soliciting for a commodity service. The USPS will set a ceiling price, and then bidders bid under the ceiling price, and the agency accepts the lowest qualified bidders.”
Kreienkamp said the government anticipated annual savings of $3 million to $4 million on trailer leases that usually cost the Postal Service about $35 million annually.
Kreienkamp said that while the current rise in fuel costs was one of the reasons the USPS began this program, it wasn't the only reason. But, “obviously it would benefit us, given the rise in fuel costs, if we could reduce some of our fuel costs through this process.”
The fuel purchases will be made only in the Northeast, Kreienkamp said.
FreeMarkets' clients, including the state of Pennsylvania, pay the auction house a monthly fee to buy everything from electricity to office furniture. Buyers indicate a maximum price they will pay, then suppliers compete for the contracts.
The company said it saves its clients 2 percent to 25 percent on purchases, and last year it auctioned off goods and services worth more than $2.7 billion.