Uncitral Considers Electronic Reverse Auctions, as Comparative Public Procurement Comes of Age in the U.S.

Abstract

This article reports on the United Nations Commission on International Trade Law (UNCITRAL) review of electronic reverse auctions in procurement systems around the world. The article describes the U.S. experience, including the stalled regulatory initiative regarding reverse auctions. Drawing on the literature and on UNCITRAL studies from procurement systems in Asia, Europe and Latin America, the article cites lessons from other nations' use of reverse auctions. In particular, the article discusses the European Union's new rule on reverse auctions, which is probably the best example, worldwide, of a careful attempt to regulate reverse auctions. The article discusses traditional questions in reverse auctions - when is it appropriate to use reverse auctions - and also addresses the more difficult question of when it is probably inappropriate to use reverse auctions. Given these recurring problems, and the pitfalls inherent in reverse auctions, the authors argue that, on balance, reverse auctions should be regulated, and should not be left to proliferate without guidance and structure. Finally, they suggest that the reverse auctions debate itself marks a watershed in U.S. procurement policy: perhaps for the first time, thanks to advances in communications and comparative study, U.S. policymakers will be able to draw directly on other nations' successes and failures in addressing a complex and difficult issue of procurement policy.

Keywords: Electronic reverse auctions, UNCITRAL, model procurement law, comparative public procurement, abnormally low bids, unrealistic pricing

JEL Classification: H57, K12, K33