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