Reverse auctioning
Simply the opposite of a traditional auction. In a
traditional auction the seller generally offers a product for sale and the
potential buyers compete for the product by bidding. The price increases with
each bid. In reverse auctioning multiple sellers are competing for the business
of one buyer, thereby bidding the price down. Instead of firms having one
opportunity to submit their price, they have various opportunities within the
specified bid time to submit a lower bid than their competitor.
When Reverse Auction Is Appropriate
Currently, the use of reverse auctioning has been focused on
procurement of commodity type items and/or items where the specifications can
be well defined and the standards are universally accepted. This technique can
also be applied to the acquisition of services but only is appropriate when
certain conditions exists. These conditions include:
- Price
is the most important selection criteria and is significantly more
important than any other criteria, and
- Requirements
can be clearly articulated in terms of scope, schedule, and minimally
acceptable quality standards.
Reverse Auction example
A Two Step Solicitation:
First technical proposals are solicited and reviewed;
and then all technically qualified offerors are invited to participate in a
reverse auction event. The lowest offeror at completion of the reverse auction
would receive the Task
Reverse auctioning
Simply the opposite of a traditional auction. In a
traditional auction the seller generally offers a product for sale and the
potential buyers compete for the product by bidding. The price increases with
each bid. In reverse auctioning multiple sellers are competing for the business
of one buyer, thereby bidding the price down. Instead of firms having one
opportunity to submit their price, they have various opportunities within the
specified bid time to submit a lower bid than their competitor.
When Reverse Auction Is Appropriate
Currently, the use of reverse auctioning has been focused on
procurement of commodity type items and/or items where the specifications can
be well defined and the standards are universally accepted. This technique can
also be applied to the acquisition of services but only is appropriate when
certain conditions exists. These conditions include:
- Price
is the most important selection criteria and is significantly more
important than any other criteria, and
- Requirements
can be clearly articulated in terms of scope, schedule, and minimally
acceptable quality standards.
Reverse Auction example
A Two Step Solicitation:
First technical proposals are solicited and reviewed;
and then all technically qualified offerors are invited to participate in a
reverse auction event. The lowest offeror at completion of the reverse auction
would receive the Task Order.
SeaPort™ Reverse Auction
Process
SeaPort™ assists NAVSEA to
identify the MAC holders who will be participating in a reverse auction event,
issues an electronic solicitation document, and conducts the reverse auction in
a secure mode. Each solicitation document will set forth all of the specific
requirements and time for participating in the reverse auction. MAC holders may
initially need to receive training on how to participate from the online
service provider. The bid time window is predetermined and published. Bidders
can submit their bids from anywhere with an up-to-date web browser.
Reverse Auction Benefits
The benefits to be gained from utilizing reverse auctioning
when appropriate are increased competition resulting in lower prices and
reduction in time. In reverse auctioning competition is fierce, as it allows
for vendors to bid, re-bid and continue re-bidding until they are unable or
unwilling to go lower. The actual bidding time where the buying activity can
determine the best price to the government is only an hour or two, however, the
time to pre-screen potential vendors should also be considered.
Web Links
Ballard, Tanya. OMB to Issue New Rules on Reverse Auctions.
Govexec.com 20 Nov 2000.
http://www.govexec.com/news/index.cfm?mode=report&articleid=18871
Order.
SeaPort™ Reverse Auction
Process
SeaPort™ assists NAVSEA to
identify the MAC holders who will be participating in a reverse auction event,
issues an electronic solicitation document, and conducts the reverse auction in
a secure mode. Each solicitation document will set forth all of the specific
requirements and time for participating in the reverse auction. MAC holders may
initially need to receive training on how to participate from the online
service provider. The bid time window is predetermined and published. Bidders
can submit their bids from anywhere with an up-to-date web browser.
Reverse Auction Benefits
The benefits to be gained from utilizing reverse auctioning
when appropriate are increased competition resulting in lower prices and
reduction in time. In reverse auctioning competition is fierce, as it allows
for vendors to bid, re-bid and continue re-bidding until they are unable or
unwilling to go lower. The actual bidding time where the buying activity can
determine the best price to the government is only an hour or two, however, the
time to pre-screen potential vendors should also be considered.
Web Links
Ballard, Tanya. OMB to Issue New Rules on Reverse Auctions.
Govexec.com 20 Nov 2000.
http://www.govexec.com/news/index.cfm?mode=report&articleid=18871