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The auctioneer's cry can still be heard as state and local governments periodically put surplus goods on the block. But governments are finding that selling surplus goods online can be more efficient--and can bring in a lot more money than a traditional auction.
by | November 2001

The auctioneer's cry can still be heard as state and local governments periodically put surplus goods on the block. But governments are finding that selling surplus goods online can be more efficient--and can bring in a lot more money than a traditional auction.

For Edmond, Oklahoma, the proof was in the golf balls. At a typical city surplus auction, a box of golf balls had sold for $2. Online, they have gone for 18 times that amount, at $36 a box. These are the same used, dirty, nicked golf balls, fished out of water hazards and picked up from driving ranges. The difference is the crowd doing the bidding. Instead of people only from nearby neighborhoods and within driving distance of Edmond, online auctions are "attended" by millions from all over the country.

The city has used online auctions for a lot more than golf balls. It has sold police vehicles, backhoes and dump trucks online, with 10- year-old vehicles selling for between $1,800 and $5,000. "Pretty much anything we have to sell we put out there," says purchasing manager Brenda Mayer.

Edmond started its auction experiment in the summer of 2000 with govWorks, an e-government pro-vider that since has gone out of business. At the same time, the city put goods out on eBay to compare how sales would go on a commercial auction site. The city ended up netting more on eBay because fees for posting the goods on the site were lower. "We ended up getting double what we expected," Mayer said.

MARKETING MARACAS

Oregon has been doing online surplus auctions for more than two years. Unlike Edmond, which sells only its own goods, the state also has an arrangement to sell surplus items from 180 cities, counties, water boards and other government entities within a 300-mile radius of Salem. "We sell everything from maracas to cranes," says Nole Bullock, a program representative in the state Department of Administrative Services. The department gets a percentage of what it takes in for other governments.

The state started with a pilot project, going online to sell car stereos, leather jackets and other items turned over from police custody to the state. The state saw a 250 percent increase in net revenues after it sold 140 items by online auction, says Bullock.

The seven or eight traditional auctions the state had been holding each year cost about $15,000 each in overhead. Agencies selling goods were responsible for bringing them to Salem. The state had to pay for advertising, auctioneering fees and overtime.

E-MAIL ONSLAUGHT

As Oregon found, switching to online auctions takes some getting used to. Purchasing managers have to take into account whether and how to ship goods, retrain staff and deal with new forms of accounts payable and receivable. And "the sheer volume of e-mail-based inquiries that come in a day could take one-plus employees a day," Bullock says. "I've had over 100 a day." Many of them are inquiries that can't be answered, such as, "If I buy this car, will it make it to Illinois?"

Oregon chooses which auction sites to use based on the goods being sold. The state generally uses eBay to sell things that are easy to ship, because of the volume of traffic on that site. The state has looked into Liquidation.com because the site has a strong European presence, providing a bigger market for some items, such as furniture made by prison inmates; because the prisoners work for less than minimum wage, their output can be sold only within the state or out of the country. Another site the state has found useful is Bid4Assets.com because of the support it provides in finding buyers. When the state became the owner of a fast-food restaurant by eminent domain, Bid4Assets helped Oregon sell off everything in one big lot, from the windows to the bathrooms fixtures. Oregon has also used Amazon.com and Yahoo.com.

VIRTUAL WAREHOUSE

It was a real eye-opener for the metropolitan government of Nashville- Davidson County to find, during a pilot project, that instead of having to pay $6,000 for someone to take away a used stump grinder, a customer using GovDeals.com actually offered to pay that amount to take it off the metro government's hands. "Computers, desks and other things that weren't selling in the past, we're getting revenue for those now," says Nancy Whittemore, assistant finance director. "We were just stockpiling them. Or they'd sit there for so long we'd end up taking them to the dump."

In the future, the city-county government would like to use an intranet to manage the movement of surplus goods internally. Rather than move a desk to a warehouse and then to a different government office, for example, online shopping would mean the desk could be moved directly from one office to another. "Our vision is to move to a virtual warehouse," Whittemore says. "We've come a long way from where we were a year ago when we were just stockpiling surplus property."

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