When the government or military have excess supply they often sell these items through a surplus auction. That’s right – with the right credentials you can buy a humvee that’s ever so slightly more rugged than the ones on offer at the Jeep dealership. Historically, however, when public sector gets rid of these assets they are paying auction companies to do the work. Companies that handle surplus sales usually charge the government a percentage of the full value of the assets as if they were new, to cover the cost of getting rid of them.
While cleaning out supply rooms can help free up space and consolidate operations centers, surplus sales haven’t always been a source of revenue for the government. A new company – GovPlanet is aiming to change all that by setting up a profit-sharing auction model for surplus sales.
That model looks more like what you would get from selling items on eBay. Public sector agencies use the GovPlanet platform to auction items and GovPlanet takes a piece of the revenue, similar to a sellers fee on eBay. GovPlanet grew out of IronPlanet an existing auction platform for heavy equipment that uses the same model.
“A little over a year ago we ran a surplus auction for the Defense Logistics Agency and through that process we realized we needed to set up a separate entity designed specifically for the government,” explains Jeff Holmes, senior vice president, Government Services for IronPlanet in an interview with CivSource. Unlike construction or other heavy equipment, government surplus items require a certain level of inspection and secure buying options so that equipment doesn’t end up in the wrong hands.
Holmes explains that potential buyers for government surplus auctions have to state a purpose for what they plan to buy, and can face sanctions if they lie or resell it to an adversarial buyer. This is the kind of inspection and customer tracking that made IronPlanet move to a separate venue for government auctions.
“With the revenue sharing option, we can turn surplus auctions into a revenue center for agencies that need to get rid of excess equipment. That money gets reinvested in new equipment almost immediately, and can fill budget gaps,” Holmes says.
GovPlanet’s most recent two-day auction amounted to some $9.25 million in gross merchandise value and drew more than 25,000 unique auction day attendees and nearly 1,000 unique bidders over the two days. The sale included equipment from the US Marine Corps on the first day, and the second day was an all humvee sale. According to Holmes, GovPlanet is on pace to do all humvee sales on a quarterly basis with current market demand.
During the past year, IronPlanet worked with the DLA to allow Humvee buyers to acquire a Form SF97, the U.S. government-issued certificate that proves ownership and enables vehicle buyers to procure titles in states that allow it.
GovPlanet is also working with state and local governments on surplus auctions. “We’ve been responding to RFPs and getting a lot of good feedback,” Holmes says. “State and local folks understand the model and the ROI. I think you’d be hard pressed to find any public sector organization that doesn’t need to make money where it can, and there are buyers for this equipment. This is a model private-public partnership that we look forward to continuing to build.”