Discover the benefits of eAuctions for procurement and how to use their benefits for cost-effective sourcing and supplier collaboration. Explore how to leverage this dynamic tool to elevate your organisation’s procurement processes.
EAuctions are gaining traction in the public procurement market. They’re being recognised for their efficiency, which not only applies to the speed with which bidding can be completed but also to the fairness and transparency of the process.
In fact, live Auctions have many benefits over traditional auctions and other government procurement methods. Two particularly useful benefits are increased competition and innovation amongst suppliers. They drive the quality of products, works, and services and also keep prices reasonable for both parties, but especially buyers.
We’re going to look at more benefits that auctions online have for procurement, as well as how to use the benefits to enhance the effectiveness of procurement for public sector buyers.
Types of eAuctions
There are two types of eAuctions: Reverse and Forward.
In reverse eAuctions, the bidding price is gradually reduced until all but one of the suppliers opt-out. The winner provides buyers with the best quality at the best price. Reverse auctions tend to be the favoured method.
Forward eAuctions most closely resemble traditional auctions because the bidding price is gradually increased. Suppliers drop away until there is only one left who is awarded the contract.
Prep Before the eAuction
Price is not the only factor in awarding contracts, which is why buyers use a “qualifying” process to determine the quality and value-for-money proposed. Buyers evaluate suppliers to see if they meet the criteria and enter a competitive opening bid. They invite suppliers that fit the bill to participate in the live eAuction.
In traditional auctions, buyers interact directly with suppliers and vice versa. Public sector buyers must manage the entire process themselves, putting a considerable burden on the procurement team.
EAuctions are entirely different. Instead of buyers being the central point of contact from start to finish, they can essentially sit on the sidelines and watch the auction unfold as suppliers compete directly with one another
EAuctions are almost entirely automated using web-based software. For instance, bids are updated in real-time, so that buyers and suppliers can see each bid as it comes in. Suppliers can see their ranking in terms of the current price and decide whether they want to continue. The auction closes when no new bids are entered five minutes after the last submission.
Delta eSourcing offers a reverse auction tool which buyers can use as a stand-alone service or incorporate into their overall procurement suite of services.
Typically, eAuctions are completed within three hours, which is significantly shorter than traditional public sector procurement auctions, which can take days as buyers have to sift through proposals and keep suppliers informed of progress.
Automated online eAuctions have many benefits for buyers and suppliers.
- Cost savings: eAuction automation is estimated to save buyers 15% – 20% on procurement costs.
- Legal compliance: Software automatically ensures that buyers’ tenders comply with all legal requirements and regulations, preventing expensive penalties.
- Transparency: Transparent online bidding processes give buyers an accurate view of how the auction is progressing. Suppliers can see their position amongst other bidders, indicating that all competitors are being treated fairly and fostering confidence in the buyer going forward.
- Multiple bids: The traditional process allows suppliers only one bid/proposal, but live eAuctions enable them to participate by submitting multiple bids to increase their chances of winning the tender.
- Competition: Multiple eAuction bidding opportunities increase competition between suppliers which ultimately results in the best market price for buyers.
- Opens the market: Buyers benefit from a wider supplier pool as eAuctions make it possible for more (new) suppliers to enter the market. Buyers are exposed to suppliers with new ideas, new production methods, and new solutions, enabling them to engage with different suppliers globally and even explore opportunities for diversification.
How Buyers Can Make eAuctions Work For Them
There are several ways in which buyers can use eAuction benefits to overcome procurement challenges and maximise the efficiency of their supply chains.
Ensure the tender and its instructions are clear. Ambiguous and confusing tenders are likely to discourage quality suppliers who’d rather bid on a contract that makes sense immediately and doesn’t require some back-and-forth to gain clarity.
Use live online auction software wisely, especially regarding transparency and real-time updates. The quicker and more accurate the data, the more suppliers may feel inclined to keep bidding, and the better the value for buyers.
Make full use of pre-qualifying processes so that only the most promising suppliers participate in the auction.
Standardise the process with standardised formats, documents, evaluation, and tender awarding procedures. This makes it easier for automation software to analyse proposals, pick out the ones that meet the criteria, and send Invitations to Tender (ITQ).
Buyers must exercise their rights to choose different suppliers. This means that buyers aren’t obliged to stick to the same suppliers in the same supplier pool. Public procurement is business and one of the principles of business is to get the most value at the lowest (reasonable) price.
Instead of resting on their laurels, big players must up their game and approach new tenders with innovation and value in mind or risk being sidelined by talented SMEs.
Lessons for Buyers
There are lessons for buyers to learn that will help them with future tenders. An important lesson in online bidding has to do with pricing and it comes from having many suppliers vie for the contract. As the auction continues, the incoming bids reveal the price range for that offering. This gives buyers insight into the true value of specific works, products, and services, which they can use in upcoming online auctions.
As a public procurement specialist, Delta eSourcing guides buyers through eAuctions from Invitations to Tender (ITT) to awarding the contract. The ease with which auctions are managed ensures that buyers enjoy all the benefits of the process, especially those related to cost savings and efficiency.
So, if you’re new to public sector procurement or your business needs a boost to increase the effectiveness of your tenders, simply contact Delta eSourcing or book a free demo. You’ll see how to optimise eSourcing, eProcurement, and eAuctions to ramp up supply chain operations and establish your reputation as an important player in online auctions in the UK’s public sector.