Reverse Auction Bidding

Jerry Wilkes

Cumberland County

March 13, 2007

Agenda

• Background and Review

• Prep work

• More prep work

• Lessons learned – maybe

Review: Reverse Auction Bidding

• Conceptually eBay in reverse• Suppliers register to participate• Actual bidding performed over Internet• Participants typically only see own and current

low bid; must initially bid blind to see anything• Dec 13, 2006 CCAP IT presentation by

eDynaCorp

Review: Use in Industry

• Has been used since 1995• Federal Government big proponent• Initial hype followed by disillusionment followed

by realism• Has settled to about 20% of procurements• Savings touted at 5% - 30%• Suppliers understand that it is now just part of

the landscape – but most hate it

Review: Act 88

• Effective Sept. 6, 2006• Changes local government procurement rules to

allow reverse auctions• Bids can be awarded to lowest “responsible”

bidder• Excludes construction and professional design

services• Text of law is sparse ~ hence the Solicitor

Roles

Finance/Purchasing

Solicitor

Controller

IT

Prep Work: Mechanics intended

• Commissioners pass enabling resolution• Select commodity or service; create

specifications, terms, and conditions – including reserve price

• Select RA software/consultant• Set date, advertise• Recruit, qualify, and train suppliers• Conduct auction• Award bid to lowest qualified bidder

Prep Work: Mechanics actual

• Commissioners pass enabling resolution - ok• Select commodity or service; create -

specifications, terms, and conditions – including reserve price – OK Corral

• Select RA software/consultant - ok• Set date, advertise –two week delay• Recruit, qualify, and train suppliers – last

minute• Conduct auction - ok• Award bid to lowest qualified bidder – did not

Select commodity or service; create - specifications, terms, and conditions – including reserve price

• Solicitor disagreed with eDynaQuote re some conditions of site use and indemnity – took time to work out

• Two week delay resulted

• Specifications were (in retrospect) too specific

Lessons Learned

• May work best for clearly defined and competitive commodities and services

• May have to convince suppliers to participate. Need 3 – 6 bidders.

• Don’t use with strategic suppliers• Don’t expect to always save GNPs of money• Consider supplier switching costs• Be conscious of other considerations (e.g.

quality, reliability, and service) as well as price

eDynaQuote?

• Very helpful, patient, and long suffering• Great software – easy to use• Several vendors “out there” with similar offerings

Questions?