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CASE STUDY

City of Lima, Ohio

Lima: Energy Procurement

This small U.S. city—population 37,000—was burdened with high energy procurement RFP development costs and a limited pool of respondents and contract options.

Solutions

  • Cost Reduction:

    Entice broad competition for the city to drive down year-over-year energy spend

  • Procurement Optimization:

    Eliminate a costly RFP process by converting to a reverse auction for 3rd party electricity & natural gas procurement

2

Intiating Contracts

2

Contract Extensions

$1,652,000

Approximate savings over 10 years

34

Suppliers competing across all contracts

What is a reverse auction? 

A reverse auction is a procurement method in which the traditional roles of buyer and seller are reversed, meaning there is only one buyer with many potential vendors. 

These types of auctions have been employed by both government entities and the private sector for decades, offering a proven method to enhance the procurement of goods and services. Specifically, energy reverse auctions offer a transparent and competitive marketplace through which businesses and secure new energy contracts. Suppliers offer an identical product but can compete on their willingness to supply it at varying costs. 

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How a reverse auction with Procure worked for Lima, OH 

The City’s in-house Request for Proposal (RFP) process during the mid-2010s was near the $100,000 mark for any single RFP issued. With limited supplier responses and a regulatory mandate to entertain at least three offers, the City was finding it difficult to engage competition and see fair market pricing.

In 2018, however, the City employed a hosted reverse auction for the first time, immediately eliminating half a million dollars in RFP development, administration, and review.

The opportunity to compete for this municipality’s business attracted triple the number of usual respondents, creating an environment for the sharpening of supplier pencils to a degree the City had not seen before. The result was a $390,000 in term savings over their previous contract spend.

In the subsequent years, the City has utilized the reverse auction process to continue to save on RFP costs and reduce their energy spend. With a new contract extension in 2020 for a term from 2023 to 2027, their 10 years of procuring electricity with reverse auctions is on target to have engaged over 30 potential suppliers across three contracts and save the City over $1.6M.

Results

2018 – 2019
Approx. $390,000 in term savings against previous contract spend

2020
Approx. $410,000 in term savings against previous contract spend

2023-2027 (extension of 2020 contract)
Approx. $552,000 in term savings against previous contract spend

Ongoing
Per RFP event eliminated: $100,000

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