Auctions by Other Names

Buyers nationwide can now compete with one another to bid on used cars, boats, old office equipment and jewelry. On the day of the site's launch, one particularly prized item was a 1.5-carat diamond-encrusted gold money clip. The site is a boon to federal agencies looking to get rid of items ranging from outdated industrial equipment to personal effects seized by federal agents in drug busts. Selling these goods online provides a cost-effective way of reaching a wide audience of buyers, says Bob Hamilton, GSA's fleet and personal property division director.

GSAAuctions.gov allows agencies to conduct sales over an extended period of time with relative ease. Registration is simple and open to the public. Buyers receive a user name and password and then are let loose to shop. A recent cursory inventory of the site showed that the items in greatest abundance were vehicles, computer equipment and accessories and household and personal items.

As the digital middleman in the auction, GSA takes a cut of every transaction on the site. For example, if the U.S. Mint unloads a coin press on GSAAuctions for $6,000, GSA takes a $750 service fee plus 12 percent of the proceeds. While the bulk of the revenues are returned to the Treasury, in some cases the money goes back to the agency that offered up the property.

GSA faces competition from commercial auction sites such as eBay and private online exchanges such as Bid4assets.com, which also auctions government property over the Internet. The agency plans to aggressively squeeze out private competitors doing business with the federal government, Hamilton says. "We want to show [agencies] how quickly it can be done," he says, touting the site's ability to rapidly connect buyers and sellers anywhere in the country. The government might just end up eating the private sector's lunch. GSA can auction an asset with lower commission costs to sellers than private companies. With that attractive incentive in hand, the agency plans to promote the service to the public and to other federal agencies in the coming months.

Small Business Administration Online Loan Sale As a provider of loans to businesses throughout the country, the Small Business Administration is constantly faced with the question of what to do with borrowers who take out loans and then fail to pay them off.

Selling off loans to financial conglomerates, collection agencies or groups of investors is not a new practice. But last December, SBA turned to the Internet as a new conduit for loan sales.

Hoping to introduce greater numbers of small buyers into the loan auction market, SBA partnered with HanoverTrade.com, a Web site run by Hanover Capital Partners Ltd., SBA's transaction financial adviser. Working with Hanover, SBA carved out eight pools of loans from a group of 46 and auctioned them off on the company's Web site.

Selling the loans online offered the SBA more than just efficiency. For more than two months prior to bid day, prospective buyers were able to visit HanoverTrade.com to get information on SBA's contracts and the agency's bidding procedures, as well as to download pertinent data to prepare for the auction. The agency was prepared for problems. Margaret Hawley, an SBA asset marketing specialist, says she had heard horror stories about online auctions gone awry due to technical glitches.

But those nightmares never materialized. On the contrary, SBA was able to sell its eight loan pools, worth a total of about $15 million, to five different entities in less than six hours.

The agency also faired better financially than it had hoped. While it was not able to recover the full face value of the loans, HanoverTrade.com's George Ostendorf notes that SBA achieved the highest percentage of value in the history of its loan sales.

While SBA was pleased with the outcome of the auction, Hawley is hesitant to recommend this kind of sale as a cure-all. "You have to be very cautious," she advises Not only might the setup not be a good fit, but buyers often are reluctant to get involved in online auctions for fear of revealing themselves to one another. To combat that problem, SBA conducted a sealed-bid auction, in which all the prospective purchasers sent in their offers anonymously over the Web site. Hawley says SBA is investigating future online loan auctions as a way to make them appealing to more businesses, and thereby help ensure the survival of the loan sale program.