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Reverse auction is a process where multiple sellers compete against each other for a contract to sell goods or services to a buyer. In a reverse auction, sellers submit anonymous bids with increasingly lower prices, similar to a traditional forward auction where buyers bid. Reverse auctions gained popularity in the mid-1990s with online tools and are now commonly used by large companies to reduce procurement costs. Key benefits include time and cost savings for buyers compared to traditional negotiations.

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34 views

Samm

Reverse auction is a process where multiple sellers compete against each other for a contract to sell goods or services to a buyer. In a reverse auction, sellers submit anonymous bids with increasingly lower prices, similar to a traditional forward auction where buyers bid. Reverse auctions gained popularity in the mid-1990s with online tools and are now commonly used by large companies to reduce procurement costs. Key benefits include time and cost savings for buyers compared to traditional negotiations.

Uploaded by

aj_rom3
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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By Abhishek Jamwal

Auction is a well known tool and is said to have originated as far back as 500 B.C. In normal auction many buyers compete for purchase of item(s) put for sale by single seller (also known as the forward auction). The prospective buyers compete amongst themselves by offering multiple quotes, each higher in value than previous quote, and highest bidder purchases the item. Such auctions are demand driven.

In Reverse Auction, many sellers of goods and services compete amongst themselves for providing goods and services that a buyer requests for. Thus it is supply driven. With the development of internet based online auction tools in mid 1990s, Reverse Auction started gaining popularity and has developed into a remarkable purchase tool for the corporate world and is being used mainly for purchase of articles and goods. This tool not only save costs for the buyer but also save considerable time in finalizing contracts. RBI, SBI, IOCL, HPCL, BPCL, EIL, ISPRL and ONGC have already started Reverse Auctioning.

Reverse Auction is a Web-based application for procurement. Easy to use, web based tools have been developed to streamline the competitive bidding process. The bidder can submit his bids from the comfort of his office (within the country or abroad). The process permits the bidder to remain anonymous but all bidders have an equal opportunity to see the lowest bid at any particular point of time.

Bidders are permitted to revise their bids any number of times within a given timeframe.
Thus prices are free to move in very competitive and dynamic conditions.

The vendors begin competing with each other. This brings about a high level of profitability, control, and simplicity to corporate procurement process.

Negotiations are not required to bring the price down and the buyer can be sure that the price is the most favorable that the market can offer.
No single bidder is given an unfair advantage. Reverse Auction process also speeds up the contract award process.

The Reverse Auction process is a remarkable procurement tool and can save considerable time and costs for the buyer. The process however needs to be handled carefully and it should be ensured that adequate numbers of bidders are competing. Also the possibility of cartelization should be avoided.

The buyer needs to ensure that realistic procurement prices are ascertained before commencing the Reverse Auction.

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