Viewpoint: Selling assets to the public

By Dave Coleman

Sealed bid asset sales are reminiscent of the days of quill pens, parchment and lumpy wax seals. However, unlike those other quaint objects of yesteryear, the practice of requiring sealed bid auctions is still with us in cities and counties across the country, the operational equivalent of dinosaurs walking the earth.

The reason sealed bid auctions for asset selling are still alive and well is part force of habit, but in some cases, no one has bothered to update the laws specifying sealed bids as the way to sell an asset. The time has come for this cumbersome, expensive and ineffective process to be abandoned in favor of online auctions, a more practical method of selling used assets and one that produces consistently greater returns.

Using online auctions instead of sealed bids to sell used and surplus equipment provides several important advantages, including:

– A more open, fair processthat provides transparency and is less corruptible.

– Higher selling prices for equipment, which are achieved because prospective buyers can bid as many times as they want and in response to fellow bidders. Online auctions benefit from the human instinct to compete in a timed upward auction.

– A larger buyer base, achieved through additional marketing of the auction to a broader audience.

– Lower costs, including use of fewer local government staff hours and resources to manage the auction.

For example, a government asset, such as a used backhoe, might bring $50,000 in an Internet auction but might sell for only $35,000 in a sealed bid program run locally out of city hall. In effect, using the more familiar — but less fair and even less sensible — alternative of a sealed bid deprives the taxpayers of $15,000. In addition, the extra time and expense of a sealed bid auction requires even more public money that could be better spent elsewhere in this time of extreme economic challenges for local governments.

Historically, sealed bid auctions were implemented as a lower cost alternative to staging a full-blown live auction. In effect, the practice was adopted as a way to liquidate government-owned equipment more efficiently and at less cost. The alternative of sealed bids was never seen as a perfect replacement for live auctions — everyone at the time probably knew they were giving up the benefits of live bidding, such as greater competition and higher sale prices. Simply put, it was a less-than-perfect alternative that is no longer needed. Now, online bidding can restore the benefits of a live auction at even lower costs and while providing a larger pool of prospective buyers.

Times have changed drastically since the heyday of sealed bid auctions. We are all familiar with the many ways that technology has made our lives and work more efficient and less expensive. You can add online auctions to the list, and it’s high time we overcome obstacles of inertia and unfamiliarity to make online auctions the new norm for cities and counties selling used equipment. All agencies throughout New Jersey and many others nationwide are leading the way. Sealed bids should go the way of the dinosaurs in favor of the alternative of online auctions.

Dave Coleman, [email protected], is director of PentonEquipmentAuctions.com, an online auction site affiliated with American City & County.