Only if EVERYONE bids irrationally in Step f.
That is sort of my biggest issue in concept (the time it may take is a practical issue as well).
There are 3 reasons why people may not bid rationally.
1) They want to play a particular empire.
2) They really do want to play a particular empire. Note this is not the same a 1 above.
3) They know nothing about the empires. e.g. New players.
I know myself personally will always fall into point 2 and probably point 1, I am not really into tourney play just for the sake of tourney play. E.G. The tourney before last I wasn't going to play, but then at the last moment thought the all drone fleet looked amusing. Had I not got that fleet my motivation to play would have gone, and it is lilely that given the issues of arranging games due to time zone differences on top of that I would have dropped out.
Also is this possible in your system:- I'm the last player to need an empire and I want EmpireX (so I'm not totally rational). I get the first bid and say 120%, everyone else is a 'rational' bidder. There is some bidding to stop my 120%, so I say fine, They get the empire at 100%, and his previous empire is up for reassignment which I pass on. You allocate another empire. I bid 120% and we go round again, I pass on any squadron reassigned and wait for the next empire and bid again. I will do this until EmpireX comes up, again someone will stop me getting at 120% we go round again - wait until EmpireX comes up again. Eventually I either get the empire I want at 120%, or others will have been forced to take empireX (to stop me getting it) and I am forced to take the Romulan squadron (At which point I drop out the tourney, and all the remaining fleets are EmpireX).
OK that is the extreme, but if we have 'rational' players mixed in with those who want a particular empire, or worse (for the bidding) a particular squadron of an empire, then you may well find that will force a preponderance of that empire as the 'rational' players keep having to outbid the person who really wants that empire, and will otherwise get it at 120%.
I think the idea of what you are doing sort of sounds OK, barring some bits that need ironing out,
IF you are wanting only serious tourney players who don't care who they play - i.e. your 'rational' players. More casual players, or new players may well be put off by a feeling that balance requires they bid for stuff they don't want to play (or know enough of to feel comfortable playing).
New players in particular may feel put off by the fact they are not even in a position take part in the bidding just because they don't have Distant kingdoms (or some other pack), or know every ship that might let them come up with all the possile squadrons they can bid with.
Dropouts can be an issue as is, anything that might increase the dropout rate is probably not good.
You might need to consider people dropping out during the bidding process as well, especially if it is the base Romulan squadron (do you then reassign it, what if everyone left already has an empire).
Then there is the issue of known player skill. In a bidding process I know that someone like Paul Scott is better than me, so if I see he has a 450 point squad I will want to take something more like 500 (rationally). On the other hand he may not want to let me take something better than him (rationally), so the bidding process starts to fall down - I bid 110% his squad, but he bids that down and I pass, he wins, I bid 110% his new squad he bids it down, he wins etc.
I expect your idea of rational bidding only works if we are all the same skill level.