In a final effort to dispose of the machine, Shoby turned to GovDeals.com, an Alabama-based website that functions as a kind of eBay for cities, counties and other government entities looking to sell surplus goods. With some marketing help from GovDeals.com, Pinellas sold the shredder for $8,000 within a month after listing it. The county paid GovDeals.com a 7.5% commission, netting $7,400 -- and avoiding the $12,000 cost of junking the machine.
Along with GovDeals.com, the biggest online auction player in the Florida market with about 60 clients in the state, other sites like Bid4Assets and GovLiquidation.com are marketing themselves to municipalities eager to get rid of the surplus vehicles, equipment and other items they accumulate in the course of operations.
Florida municipalities have sold everything from a 20-quart kitchen mixer ($502), sold by the Lee County School System, to a 1993 Ford Ranger pickup ($351), sold by the Panhandle town of Mary Ester. Hank Rowan, Cocoa's purchasing manager, says that his city has sold some confiscated items, including jewelry and a canoe.
Auction websites designed specifically for government sales began popping up in the late 1990s, says Tom Clark, client services vice president for GovDeals.com. His firm started designing, programming and testing a system in 1999 and launched a test site in December 2000. "It came out of our background in procurement," says Clark, noting that GovDeals.com's parent company, Informs, has been in the procurement software business since 1979.
Clark estimates that the government surplus market is about $4 billion. GovDeals.com declined to disclose its revenue but says it has doubled both its sales and number of clients each year since going live in April 2001.
Auction websites serving governments charge between 7% and 8% commission on average. GovDeals.com's fee is a flat 7.5%. Silver Spring, Md.-based Bid4Assets charges a $5 listing fee and a commission that fluctuates with the price of the item and the services provided but also averages 7.5%, says Jenny Lynch, Bid4Assets' vice president of marketing.
Some Florida communities still find it beneficial to do business in person. Palm Beach County operates a thrift store that sells less expensive items and holds conventional auctions to dispose of big-ticket items such as vehicles and computer servers. Angelo DiPierro, head of the fixed asset management office for Palm Beach County, says the approach gives the county "full control of the process."
Last year, DiPierro says, his 10-employee operation brought in a record $2.1 million from the sale of surplus property for the county, school district, solid waste authority, sheriff's office and municipalities of Boca Raton, Boynton Beach, Jupiter, Palm Beach and West Palm Beach.
He holds nine sales a year, all on Saturdays, and has a database of 11,000 customers. A sale day typically attracts 1,000 potential buyers. DiPierro plans to use the internet in a more limited way. The county is developing its own proprietary system to let buyers make their bids online. The challenge will be for Palm Beach County to get its site noticed by buyers outside its home region.
For many Florida municipalities without the population base or government infrastructure of a Palm Beach County, however, the online auction sites offer advantages. Cocoa's Rowan cites the headaches of staging a conventional auction: Arranging for county staff to run the auction to renting portable toilets, moving the vehicles and equipment to the auction site, advertising the sale and then praying that it doesn't rain. "There was a lot of expense involved," he says.
In addition, internet auctions typically bring more bidders to the table, allowing sellers to avoid the cost and aggravation of a conventional auction. Lee County School District procurement agent Jerry Delozier says that the part of Lee County's annual auction that sold school buses typically attracted only about 35 buyers. GovDeals.com's Clark says his site has "tens of thousands of bidders." Bid4Assets says that 300,000 potential bidders get its e-mail auction alert each week.
Generating more bidders usually means getting higher prices. "We're doing 200% to 300% better" than live auctions, Clark claims. That number is difficult to verify from users, but Delozier cites a school bus sale. In the past, he says, buyers at the live auction seemed to be working in alliance with one another to hold down the price. One surplus school bus, for example, sold for as little as $2,500. "We're hoping to get twice that" for a bus now for sale, says Delozier, who just started selling online in October.
Using the internet also helps small governments avoid the hassle of storing goods until the annual auction. "We don't have to sit on a piece of property," says Rowan.
The next step for the government auction websites involves moving beyond physical property. Next month, Bid4Assets will begin selling tax liens online through its TaxSale.com unit. Bid4Assets has sold tax-defaulted land and residential property for the U.S. Marshals Service and numerous counties, particularly in California and the Western U.S., for several years. But the sale of tax liens online is new.
Bid4Assets' Lynch says that the company is talking with several Florida municipalities about the tax lien sales but as of late October hadn't signed contracts.
"In our online auction business, everybody wins. The buyer gets a bargain, the government gets big bucks for surplus, forfeited and tax-defaulted property, and we profit from the exchange," says Lynch.