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A Reverse auction is
an auction in which the roles of buyers and sellers are
reversed. In an ordinary auction (also known as a forward
auction), buyers compete to obtain a good or service, and
the price typically increases over time.
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In a reverse
auction, sellers compete to obtain business, and
prices typically decrease over time.
It is an online real time dynamic auction between
a single buyer and a group of pre-qualified
suppliers competing against each other to win the
business of supplying goods or services.
Reverse Auction is used to procure items/
services, where the bidders bid down (reverse) the
price, during a specified time period, from their
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originally quoted
price.
The bidder
who quotes the lowest by the end of the bidding
schedule is selected and awarded the contract/
Purchase Order.
Known as Online Reverse Auction, it is conducted
through the internet with simultaneous bidding
by the bidders, operating from “one or more
locations”.
n other words, the venue for the auction is on an
internet website called host. Bidding starts with a
start price ,provided to the host by the firm for
which Reverse Auction is being done, just before start
of the bidding process. |
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Start
bid price is based on certain criteria like
estimated price etc.
Final/ Acceptable Price :
The bidder quoting the lowest price is
finally selected as the lowest offer (L1) and is
awarded the order/ contract. Price obtained at
any stage in the event is legally binding on the
bidders.
Auction Time (Duration) :
The bidding competitors keep on offering
(lowering) new prices in the given time period
which is pre-specified to them by the auction
host. However, the automatic extension feature
is also there to ensure that if a bidder wants
to reduce the price further he shall be given a
chance.
The bidding event is terminated when no
bidder is further reducing the price after a
lapse of certain predetermined period. There is
a provision by which a bidder has to reduce his
price by a minimum decrement amount (say, each
time by X amount) .
How is Reverse Auction different from the
existing practice?
For Indentors:
Except for certain terms and conditions
stipulated in the tender enquiry by the
Purchasing section and price bids to be
submitted by the bidders ,electronically,
directly to the host, instead of the Purchaser
there is no difference in the procedure to be
followed, for the indentor. That is, starting
with raising of indent to finally arriving at
techno commercial suitability stage the practice
is same as without Reverse Auction.
It is only
the price bid opening event that shall now be
taken care of through online price reversals by
the participating tenderers, hosted by the
service provider.
For Purchasing personnel:
Soon after issuing Limited Tender/ Open/ Global
enquiry called Request For Quotation (RFQ) in
Reverse auction, Purchaser shall send a copy to
the host with suggested suppliers.
Host shall contact the suggested suppliers to
take confirmation on their agreement to
participate through Reverse auction.
Host shall also look for more parties than
suggested by us. However, the host shall seek
the Purchaser's permission on case to case basis
Purchasing section shall finally send the vendor
list to the host of those found
techno-commercially suitable, for hosting
Reverse auction by MJ
Purchasing section shall provide the base price
(called Start Bid Price) from where the Reverse
bidding shall start.
Host, after completing the Reverse auction
process shall send the details to Purchasing
section for order placement etc. |
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