e-auctions (reverse auctions)
Discussion
We've got through to the final round of a tender process and we are now up against 2 final competitors which will be run as an e-auction.
It's for a 7 figure deal and one that I've been working on for the best part of 3 years now.
It's only for the first part of the project with another 2 or 3 to come so winning it is pretty important. I know for a fact that we were the preferred bidder when initial tender docs went in (quality and price) and that the guy running the project wanted to run with us originally, until the Purchasing Department got involved!
We want to win it but we don't want to give away a huge amount on it as it's fairly tight as it is and my major concern is that one of the other two may decide they want to win this to get in on the next couple by going in at close to break even or even just buying turnover as I've come up against this before.
Does anyone regularly get involved in this and are there are strategies or hints anyone has?
Appreciate it's a wide open question but I want to be as prepared as possible having never been through the process.
As I understand it, all parties will have visibility or initial quotes and it's a case of bettering each others offers until the last man is standing. You can't go in with 'snipe' offers like you can on eBay as the time resets back to 10 minutes if it's got less time than that remaining when an offer is received.
I can understand doing this from the clients point of view if all they want is the cheapest bid but it doesn't factor in quality or delivery etc. Not that I can do much about that now.
It's for a 7 figure deal and one that I've been working on for the best part of 3 years now.
It's only for the first part of the project with another 2 or 3 to come so winning it is pretty important. I know for a fact that we were the preferred bidder when initial tender docs went in (quality and price) and that the guy running the project wanted to run with us originally, until the Purchasing Department got involved!
We want to win it but we don't want to give away a huge amount on it as it's fairly tight as it is and my major concern is that one of the other two may decide they want to win this to get in on the next couple by going in at close to break even or even just buying turnover as I've come up against this before.
Does anyone regularly get involved in this and are there are strategies or hints anyone has?
Appreciate it's a wide open question but I want to be as prepared as possible having never been through the process.
As I understand it, all parties will have visibility or initial quotes and it's a case of bettering each others offers until the last man is standing. You can't go in with 'snipe' offers like you can on eBay as the time resets back to 10 minutes if it's got less time than that remaining when an offer is received.
I can understand doing this from the clients point of view if all they want is the cheapest bid but it doesn't factor in quality or delivery etc. Not that I can do much about that now.
If there's been a tender process have you not had to answer questions that allow your quality and delivery offering to be assessed? Although price payable will be a factor, I'm sure they will be assessing overall cost, which includes will it be delivered on time and how much will it cost to do whatever they need to do with it once they have it.
Re the auction itself. You normally can't see how much others are bidding, just where you are ranked. If you go in high with your initial bid (have you been asked to submit a pre auction qualifying bid?) this may at least allow you to see how many others you are playing against. Eg, if you are ranked 6th you will know there are at least 5 others.
Then during the bidding process you can usually bid as many times as you like. Small increments to move you up the ranking are usually sensible.
It may seem hard but auctions are actually pretty fair. It's a real time and impartial market place, you v your competitors and you actually get the chance real time to win. Good luck.
Re the auction itself. You normally can't see how much others are bidding, just where you are ranked. If you go in high with your initial bid (have you been asked to submit a pre auction qualifying bid?) this may at least allow you to see how many others you are playing against. Eg, if you are ranked 6th you will know there are at least 5 others.
Then during the bidding process you can usually bid as many times as you like. Small increments to move you up the ranking are usually sensible.
It may seem hard but auctions are actually pretty fair. It's a real time and impartial market place, you v your competitors and you actually get the chance real time to win. Good luck.
jamie w said:
If there's been a tender process have you not had to answer questions that allow your quality and delivery offering to be assessed? Although price payable will be a factor, I'm sure they will be assessing overall cost, which includes will it be delivered on time and how much will it cost to do whatever they need to do with it once they have it.
Re the auction itself. You normally can't see how much others are bidding, just where you are ranked. If you go in high with your initial bid (have you been asked to submit a pre auction qualifying bid?) this may at least allow you to see how many others you are playing against. Eg, if you are ranked 6th you will know there are at least 5 others.
Then during the bidding process you can usually bid as many times as you like. Small increments to move you up the ranking are usually sensible.
It may seem hard but auctions are actually pretty fair. It's a real time and impartial market place, you v your competitors and you actually get the chance real time to win. Good luck.
We've all been assessed and I'm told on the quiet we were cheaper but 2 others were fairly close by and therefore purchasing have decided they're going down the e-auction route.Re the auction itself. You normally can't see how much others are bidding, just where you are ranked. If you go in high with your initial bid (have you been asked to submit a pre auction qualifying bid?) this may at least allow you to see how many others you are playing against. Eg, if you are ranked 6th you will know there are at least 5 others.
Then during the bidding process you can usually bid as many times as you like. Small increments to move you up the ranking are usually sensible.
It may seem hard but auctions are actually pretty fair. It's a real time and impartial market place, you v your competitors and you actually get the chance real time to win. Good luck.
So can only assume they are happy with quality of all offerings. Interesting if you can't see the actual bids, only ranking as that will take lots of bids at smaller increments.
I'll know more when we receive the official invitation to the auction with instructions but I'm told it's on it's way and it's taking place next Tuesday.
That's pretty aggressive timing for running an auction given that you haven't even had the instructions yet!
There's usually a statement that the customer is not obliged to accept the lowest auction bid - enabling them to assess other factors, or more cynically just pick their favourite supplier.
You could still be in the preferred position you think you are with the auction being used to see if they can take a bit more out of your price. Which is not very fair on your competitors if they are just being used to leverage your price down!
At least you are in control in an auction. Moreso than a process where you submit a bid with no further chance to improve it with news arriving a few weeks later as to whether you have been successful or not.
There's usually a statement that the customer is not obliged to accept the lowest auction bid - enabling them to assess other factors, or more cynically just pick their favourite supplier.
You could still be in the preferred position you think you are with the auction being used to see if they can take a bit more out of your price. Which is not very fair on your competitors if they are just being used to leverage your price down!
At least you are in control in an auction. Moreso than a process where you submit a bid with no further chance to improve it with news arriving a few weeks later as to whether you have been successful or not.
We often take part in e-auctions (usually using that hateful piece of junk, Ariba). Our auctions are lower value (£50k-£250k) but represent a fair chunk of work for us. The approach we have settled on is the same as any other competitive bid - put in the price we are happy with and ensure that we ace the qualification process.
Buyers are often unscrupulous, we had one lot sending us messages saying that bidding was hotting up and we needed to drop the prices etc when we were the only ones bidding for the work! You will also want to check the terms of the auction, often they say that they reserve the right to choose the winner and it is not only on price - in which case then it's no different to any other tender process.
Good luck
Buyers are often unscrupulous, we had one lot sending us messages saying that bidding was hotting up and we needed to drop the prices etc when we were the only ones bidding for the work! You will also want to check the terms of the auction, often they say that they reserve the right to choose the winner and it is not only on price - in which case then it's no different to any other tender process.
Good luck
Although I'm not involved personally, a lot of councils are now using e-auctions to get the best price for certain services. These are only accepted from pre-approved contractors who have already met certain standards (financial standing, minimum quality standards etc). Although the council(s) reserve the right to not simply accept the lowest bid I'd have to say that it's rare for any higher bid to succeed.
It seems a very strange way for someone to spend a 7-figure sum to me. Also called a Dutch Auction I think.
I suppose you could go in at £99, win the auction, then if the price you actually got it for is too low for you, resign the contract?
But congratulations on winning this particular lottery - let's hope they don't move any more goalposts and that you can make a profit out of it.
I suppose you could go in at £99, win the auction, then if the price you actually got it for is too low for you, resign the contract?
But congratulations on winning this particular lottery - let's hope they don't move any more goalposts and that you can make a profit out of it.
Well it worked for this particular customer. We were 6.8% cheaper than second place in the tender but they deemed that close enough to warrant the auction.
Auction started at the highest bid which was a around 3% more expensive again than second place.
We ended having dropped 11% off our original price but there's still plenty in it and the customer saved a fortune. Interestingly we only ended up winning it by the skin of our teeth with the second place bigger lopping a higher % off their original price.
It was a nerve-wracking 30 mins.
Auction started at the highest bid which was a around 3% more expensive again than second place.
We ended having dropped 11% off our original price but there's still plenty in it and the customer saved a fortune. Interestingly we only ended up winning it by the skin of our teeth with the second place bigger lopping a higher % off their original price.
It was a nerve-wracking 30 mins.
AB said:
Well it worked for this particular customer. We were 6.8% cheaper than second place in the tender but they deemed that close enough to warrant the auction.
Auction started at the highest bid which was a around 3% more expensive again than second place.
We ended having dropped 11% off our original price but there's still plenty in it and the customer saved a fortune. Interestingly we only ended up winning it by the skin of our teeth with the second place bigger lopping a higher % off their original price.
It was a nerve-wracking 30 mins.
Sounds like it was a very good procurement method for the buyer - they flushed out a real price which keeps them happy and you happy.Auction started at the highest bid which was a around 3% more expensive again than second place.
We ended having dropped 11% off our original price but there's still plenty in it and the customer saved a fortune. Interestingly we only ended up winning it by the skin of our teeth with the second place bigger lopping a higher % off their original price.
It was a nerve-wracking 30 mins.
I'd have been happier if we'd have been given the order first time around obviously. We're known as good value and we rarely lose jobs on cost. We're just making less now but my view was that a lower % of something is better than nothing.
We'll have to make sure there's no cock ups and we've managed to get some margin back by battering our own suppliers.
We'll have to make sure there's no cock ups and we've managed to get some margin back by battering our own suppliers.
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