The Benefits of Electronic Reverse Auctions (e-RAs) in the Procurement Process
The nature of business competition is changing drastically. One of the most profound changes currently transpiring in the world of business is the introduction of electronic commerce. The impact of electronic commerce (ecommerce, or EC) on procurement, shopping, business collaboration, and customer services as well as on delivery of various services is so dramatic that almost every organization is affected. In this paper, I will show how electronic reverse auctions (e-RAs) is very significant in the federal procurement process by saving money, time and maximizes supplier competition.
Reverse auctions gained ...view middle of the document...
Once the RFQ is prepared and posted, selected suppliers are invited to bid. These suppliers have been screened and pre-qualified based on established standards.
Benefits of Reverse Auctions
Electronic Reverse Auctions (e-RAs) saves federal agencies and private firms money. Federal agencies are increasing their use of reverse auctions to drive down prices on goods and services, from office supplies to medical equipment. Reverse auctions also provide greater transparency into prices paid, which improves the government’s ability to negotiate with vendors to receive best pricing possible. In its first reverse auction, “Maricopa County received its first flour bid on day one. It was for half a cent less than the contracted price of 38 cents per pound of flour. On the final day, with five hours left, the second bid came in at 34 cents per pound. By the end, there were four different bidders and eight total bids. The final bid came in at 20.5 cents per pound -- a savings of nearly $1 million over three years for the county”.
In e-RAs bidding, suppliers are able to see the bids of others and thus buyers benefit from sellers figuratively “fighting the price out”. It removes geographical barriers and leads to global searches for the best price. Reverse auctions maximizes supplier competition, introducing a larger number of suppliers, thus keeping the bidding process transparent. Reverse auctions leverage the playing field for both big and small businesses, thus allowing established businesses and newly formed businesses to compete fairly in the marketplace and bid side by side for government contracts, creating a win-win for the buyer and for all businesses involved in the electronic reverse auctions process.
e-RAs Saves Time: Electronic reverse auctions are easy to use web-based tools to streamline the competitive bidding process. Although e-RAs does not eliminate multiple quote requirements, it does offer a method of getting the quotes faster and provides the bid history to show price reasonableness based on competition. e-RAs make acquisition processes...