Chicago Transit Board Approves the Use of Reverse Auction Procurement

June 8, 2011
New procurement method designed to yield more favorable
pricing for goods and services
The Chicago Transit Board today approved an ordinance permitting the CTA to use online reverse auctioning as a competitive procurement process to purchase goods and services. Online reverse auction procurement is a real-time bidding process that encourages competitive bid pricing by having pre-approved vendors submit lower prices to outbid other competitors within a set auction timeframe.
The CTA currently uses a variety of competitive processes to procure goods and services including invitation for bid (IFB) and request for proposals (RFP). Currently, invitations to bid require vendors to submit price proposals as part of the bid package.  
In the reverse auction bid process, vendors submit all other requirements of the bid package except for the price. The price is finalized during the auction where vendors have allotted time to under bid each other in order to secure contracts.
“Rather than CTA selecting the lowest bid from submitted responses, the reverse auction process creates an environment where a vendor can submit another bid to counter those under discussion. This can help yield lower prices on goods and services than those submitted through current procurement processes,” said CTA President Forrest Claypool. “In this economy, we have to explore every option to save money.”
On July 1, 2010, the state of Illinois enacted the Local Government Electronic Reverse Auction Act (50 ILCS 531/1, et seq.), which allows local government agencies to engage in reverse auctions if it is in the best interest of the agency to do so. As part of this statute, the CTA is unable to procure certain services through reverse auctions, including: professional, artistic, telecommunication, communication, information and construction.
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