Category: Article
In an article by Matt Chafkin from Inc Magazine, the writer provides some tips for competing to win in a reverse auction. He also includes a history and opinions from both buyers and suppliers regarding the technology that is quickly becoming industry standard for businesses that want to remain competitive in America today. Below is an excerpt. The full article can be found here.
How to Compete in a Reverse Auction
A growing number of large companies are forcing suppliers to bid through reverse auctions. Here’s how to survive one with your margins intact
By: Matt Chafkin
On days when Gartner Studios is trying to lock down a major sale, Greg Gartner turns his employee lounge into a war room. An arsenal of laptops and phones and reams of data are brought in for employees to use. Shouting matches among workers are common. So is heavy perspiration. If Gartner’s team wins the deal, there’s a lot of whooping and the boss hands out tequila shots. These back-breaking dealmaking sessions can last for eight hours or more.
For Gartner, a company that supplies stationery and related products to mass market retailers and office superstores, selling paper ain’t what it used to be. Deals that 10 years ago would have started with a cold call and ended months later with a handshake are now governed by a process that was virtually unheard of when the Stillwater, Minnesota, company was founded in 1998: the online reverse auction.
During a reverse auction, a customer allows suppliers only a short window of time to bid down the price on their products or services. The practice was pioneered by automotive and aerospace buyers, which used reverse auctions to procure commodity parts. Today, many large companies use them to buy everything from paper clips to their employee health care plans. Reverse auctions are loved by corporate purchasing managers, loathed by suppliers, and rarely discussed publicly by anyone involved.
Click here to read the full article.
Stephen Lewis Brings More than 17 Years of Business Management and Development to Louisville eAuction Service Team
LOUISVILLE, KY- February 2nd, 2010 – BidBridge, an eAuction services provider for the public and private sectors, today announced the addition of a new Vice President of Sales. Stephen Lewis is an experienced Fortune 500 Senior Sales Manager who will bring more than 17 years of business management and development experience to the BidBridge sales team.
Lewis joins BidBridge in a leadership, management and coordination role for the sales team. Prior to joining BidBridge, Lewis was the Senior Zone Sales Manager at Paychex, Inc., where he led and supported the efforts of a regional sales division of skilled sales professionals and support staff. He holds a B.A. in Organizational Management from Ashford University and completed the Executive Scholars Program in Marketing & Sales at Northwestern’s Kellogg School of Management.
“Stephen’s extensive experience, strong work ethic and professional attitude make him an integral addition to our sales team,” said BidBridge CEO Jim Headlee.
“As a leader in the eAuction services industry, BidBridge was the logical next step for me and a great professional opportunity,” said Lewis. “Representing a cutting-edge technology and forward-thinking procurement strategy, the company has a lot of potential for expansive growth in 2010.”
About BidBridge
Founded in 2002, Louisville-based BidBridge provides fully managed e-auction services to both the public and private sectors. Through its competitive sourcing and online procurement system and services, BidBridge assists its buyers in achieving true-market value for the goods and services needed for ongoing business operations. Significant cost reductions and procurement efficiencies have allowed BidBridge’s buyers to save millions of taxpayer, corporate and investor dollars, ultimately producing a positive effect on compressed budgets.
For more information, please visit: www.bidbridge.com.
A national insurance company partnered with BidBridge for the purchase of steel case furniture through its dynamic eAuction platform.
Due to the unique nature of the furniture, two steel case suppliers competed in the reverse auction process, logging 56 bids and 25 time extensions, demonstrating the competitive nature of the dynamic bidding environment.
First place changed hands 19 times, with the two suppliers concluding their bidding with a 0.01% spread between first and second place, indicating true market value was achieved.
The insurance company achieved a 23% savings versus budget for this purchase.
By Anna Field
Published: December 22 2009
The Obama administration will use an “Ebay in reverse” system as part of its efforts to cut $40bn in contracting costs from the federal budget each year.
Officials said yesterday they had already found $19bn (€13.3bn, £11.8bn) in savings for the current fiscal year.
The strategy, which would also see federal agencies banding together to buy the likes of stationery and software, was part of President Barack Obama’s directive to end unnecessary contracts and improving acquisition management, the White House said.
“We are here today for a simple reason: at a time when we face not only a fiscal crisis, but also a host of difficult challenges as a nation, business as usual in Washington just won’t do,” Mr Obama said after the White House’s Office of Budget and Management announced its plans for cutting waste.
“After years of irresponsibility, we are once again taking responsibility for every dollar we spend, the same way families do,” the president said.
US government spending on contracts more than doubled between 2002 and 2008, with contract spending reaching $540bn last year. Notably, the value of “high risk” contracts, awarded without open competition, increased by 129 per cent to $188bn during the Bush administration years.
Mr Obama in March issued a directive to government agencies to save $40bn in contracting costs in the year ending September 30 2011. The report published on Monday identified $19bn, or 3.5 per cent, in savings that could be made by the end of September next year.
“No business, large or small, could survive the continued waste and mismanagement the federal government has experienced,” Jeffrey Zients, OMB deputy director for management, told reporters on Monday morning. “It’s illogical, it’s unacceptable, and we will fix it.”
As an example of how money could be saved, the Department of Energy’s national nuclear security administration would conduct “reverse auctions” where contractors could bid online, with the lowest bid winning.
This “Ebay in reverse” system was expected to save the NNSA about 18 per cent on each contract, Mr Zients said.
Under the cost-saving measures, agencies have identified initiatives to reduce by 10 per cent the money spent through new high-risk contracts.
Going once, going twice
Saturday, November 14, 2009
by: Jonathan Bilyk
Brad Cauffman has heard the refrain from frustrated would-be vendors for years. “They see the final price that we accept, and they say things like, ‘All I had to do was drop my bid by $500? I would’ve done it,’ ” he said. “So to us this just made sense to try it out.
“And from what we’ve seen, we’ll probably do it again.”
Earlier this summer, Cauffman, assistant superintendent for business services at the St. Charles School District 303, supervised what would be a first time event among Illinois school districts — a reverse auction.
The item up for bids in this case was paper — an entire truckload of copier and printer paper. Or, to be more precise, the item up for bids was the right to be paid by District 303 to supply the truckload of paper for the 2009-2010 school year.
Traditional auctions begin low and do not end until potential buyers reach the point at which they are not willing to pay more. But in a reverse auction, it is the sellers who compete with each other in a race to the bottom, to find the lowest price at which they are willing to sell their products to an interested buyer.
Since the 1990s, the process has made consistent gains in popularity in the private sector, as companies of all sizes have used the process to trim costs compared to traditional purchasing and bidding techniques.
However, the reverse auction concept has found slower going in attempting to gain a foothold in the public sector.
In Illinois, for instance, local governments were limited by law to methods like the sealed bid when using tax money to purchase goods and services. That essentially made using reverse auctions illegal, or legally questionable, at best.
This summer, however, the state enacted a new law specifically permitting local governments and taxing bodies to use the reverse auction process to purchase goods. The law, however, continued to bar local governments from using reverse auctions to secure bids for construction projects or to obtain professional services, such as engineers.
One of the chief sponsors of the new law was State Sen. Chris Lauzen, R-Aurora.
“It sounded like it made perfect sense,” Lauzen said. “We want to provide high quality service to our citizens, and to do it at the lowest possible cost.
“And this seemed to be a good way to try to do that.”
Within weeks of the measure becoming law, District 303 had signed on with Louisville-based BidBridge to organize just such an auction for its paper contract.
The way BidBridge’s process works is simple: BidBridge and the buyer — in this case, District 303 — prequalify certain companies to bid, reviewing, for instance, their capability of meeting the district’s supply requirement.
From there, BidBridge schedules a time for the auction, which is conducted electronically. The auction lasts 30 minutes, but can be extended by three minutes, should a supplier put in a lower bid before the auction ends. That then allows the other bidders to submit lower counter bids, as well. The auction ends when no supplier submits a lower bid within three minutes.
The program creates a scenario in which buyers can sit in front of a computer somewhere and watch their price go down and down and down.
“It’s a wonderful feeling,” Cauffman said.
District 303’s reverse auction for paper lasted about 52 minutes and ultimately saved the district about $18,139, or about 12 percent, when compared to the state contract for paper.
So far, District 303 is the only unit of local government in Kane County to take the reverse auction plunge.
But the results garnered by the auction have caught the attention of others in the area, prompting a number of local taxing bodies to begin either looking into the possibility of reverse auctions or talking directly with BidBridge about running similar auctions in the future.
Officials at Geneva School District 304 are reviewing their contracts to see if there might be some that would benefit from a reverse auction.
Assistant Superintendent for Business Services Donna Oberg said her district might not benefit from the reverse auction as much as larger districts, such as District 303.
“We probably don’t have the space to store that much paper, for instance,” Oberg said.
Rather, she said, the Geneva district has sought to save money by maintaining its membership in the Lake Bluff Consortium, a group of 42 school districts that buys its paper in bulk. While the district pays a little more than what District 303 paid, the paper is delivered as the district needs it.
However, that consortium does not help the district with contracts for other consumable products, she said, and the district would consider BidBridge or other companies’ aid in obtaining lower prices for those products.
Reverse auctions have also gotten the attention of the Batavia School District 101.
Kris Monn, District 101’s assistant superintendent for finance and operations, said his district is very excited by the opportunities offered by reverse auctions.
“It just seems like a terrific way to drive down costs,” Monn said. “We are trying to find the next big ticket item that we have coming up, so we can hopefully use this process.”
Guy Ramsey, an operations analyst with BidBridge, said his company has also had contacts with the city of Batavia, Aurora, Campton Township, the Geneva Park District and even Delnor Hospital.
“We’ve gotten a lot of attention in Illinois since the St. Charles bid,” Ramsey said. “But you can make a lot of headway when you save someone’s neighbor a lot of money.”
Ramsey, however, noted that his company’s ability to use reverse auctions to save taxpayer money will be limited in Illinois by the construction and professional services exclusions in the law.
But, he said, lobbies for construction-related industries in Illinois and other states have prevented BidBridge and other supporters of reverse auctions from successfully changing the law.
Lauzen said he would support such a change in the law.
“That’s a huge exemption,” Lauzen said. “Construction is where the real money can be saved, and I would eventually like to see the law broadened.
“But, for now, this is a start.”
What is a reverse auction?
Unlike a traditional auction, reverse auctions use a bidding process to help buyers obtain the lowest prices for the items they are seeking.
Suppliers essentially compete to see who can go lowest. In the end, the process can save thousands of dollars for local governments looking to buy anything from copier paper to automobiles, say those who run the service.
By JIM HEADLEE
Published November 6, 2009: Community College Times
Uncertain economic times have forced businesses, government agencies and academic institutions across the country to tighten budgets and search for new cost-saving strategies.
To stay on the cutting-edge of technology and progressive business, a growing number of schools and higher education institutions are looking into the benefits of reverse auctions for procuring goods and services.
In the past, organizations in the public sector have practiced procurement through more traditional means, like one -price-per-supplier response. But today’s procurement strategies don’t always adhere to best practices that can help organizations drive prices closer to market value. While the concept is not a new one, many organizations have been lax to adopt a procurement platform that features reverse auctions as its core component.
Reverse auctions fill a much-needed void in the procurement process by offering visibility for the purchasing organization, true competition between suppliers, standardized buying methods and reduced overall spending. Implementing a reverse auction platform can greatly reduce both purchasing costs and transaction processing costs.
Research by PriceWaterhouseCoopers and Killen & Associates indicates reverse auctions can log a 5 percent to 10 percent savings in purchasing costs while increasing profit margins by 28 percent to 50 percent. Aberdeen Group reports that with e-procurement, transaction processing costs drop by as much as 70 percent.
To leverage the most efficient technologies, community colleges looking to use reverse auctions for purchasing should consider an e-procurement platform. E-procurement offers organizations significant advantages over traditional platforms, including greater visibility for the purchasing organization, real-time updating, a dynamic and time-efficient experience and secure management—all while promoting increased competition between suppliers, ultimately driving down prices for goods and service.
In order to successfully integrate a reverse auction/e-procurement platform, community colleges must take three key factors into account:
Full support within the buying organization. In many cases, multiple parties at a community college are involved in the purchasing process. Making sure all levels involved in the decision embrace the strategy—from board members to directors to central purchasing to the department requesting the goods/services—is crucial.
Open specifications allowing for competition between multiple suppliers. Sometimes procurement specifications are developed in a way that significantly favors one supplier. In order to promote true competition, the reverse auction process should only take place if the purchasing process includes open specifications revolving around factors such as quantity needed, delivery expectations, peripheral costs, payment terms and discounts, and ceiling/floor guidelines.
Willing participation from a base of multiple, educated suppliers. To ensure a truly competitive environment, many e-procurement services practice strategic sourcing, a process that is difficult for community colleges to undertake on their own time. More experienced reverse auction platform providers have a diverse base of suppliers with which they have established relationships and notify of upcoming bid opportunities. Some providers even go the extra mile, exhausting every possible channel for finding new suppliers to compete for the business.
As an example of how the reverse auction process can benefit the education industry, San Diego State University (SDSU) worked with an e-procurement services provider on two bids. In the first bid, four suppliers competed to provide the institution with HP Blade Servers and backup software. The bid, taking place earlier this year, lasted a total of one hour and seven minutes and logged 128 unique bids. At the conclusion of the event, SDSU had saved $18,000 against budget.
In May, the institution’s second bid returned similar results. Seven suppliers competed to provide the university with new tables and chairs for the university library. First and second place suppliers were only separated by a margin of .31 percent. The lower the percent separation, the stronger the indicator that the university achieved market value for the procured goods.
SDSU provides a compelling argument for why more institutions should consider a reverse auction platform to obtain goods and services. As technological and procurement landscapes continue to evolve, the education industry needs to be at the forefront of these niches.
Headlee is CEO of eBridge.
Note: This article outlines tips for creating open specifications and providing a neutral format, essential for the success of a reverse auction.
In this article, Eileen Youens shares her tips for improving bid specifications.
Youens explained that using active-voice language in bid specifications is one of a number of strategies to achieving the ultimate goal of the bidding process: maximizing the number of responsive bids from responsible bidders.
“And to get that, the bidders need to understand what you want,” Youens explained. “Don’t make it hard for them.”
Additional Specification Tips Include:
– Use “active voice” in your bid solicitation documents
– Make documents clear, simple and accurate: Avoid legalese and fancy-sounding words
– Look for hidden brand-specific requirements
– Use a short, descriptive document title and section headings that are clear and easy to understand
– Proofread bid documents for readability, making sure it is written at an eighth-grade reading level
To read the full article, click here.
- BidBridge Featured in Illinois Policy Institute Monthly Newsletter
BidBridge Featured in Illinois Policy Institute Monthly Newsletter
How online reverse auction saves tax payers millions
Jim Taylor and his family just made it through a bad storm. They’re all a bit shaken but safe. Their roof, however, wasn’t as fortunate- and now it needs to be repaired. How should Jim go about finding someone to fix his roof? Which construction company would do the best job at the best price?
After the storm, Jim wants the best roof protecting his family- and fast. So, he searches the phone book and calls various companies, asks about prices and references for quality of service, and chooses a repair service. This process, however, could be much simpler. If Jim could jump online and go to a reverse auction website where qualified roofing companies compete for his particular project, he could save a lot of money and time and still end up with his roof expertly repaired.
To read the full article, click here or follow the link below.
http://www.illinoispolicy.org/news/article.asp?ArticleSource=1377
On August 24-25 purchasing agents from across the country will gather for he 2009 NIFP Forum. As the leader in procurement consulting, BidBridge is proud to represent the reverse auction industry at the NIGP Forum next week.
Members of the BidBridge team will be in attendance at booth # 728. Be sure to “swing” by. We’ll have a free gift those who mention this article. (Remember, we are the home of the Louisville Slugger!) We’ll also be showcasing an auction demonstration! You won’t want to miss it!
See you in St. Louis!
Starting today, we will begin a feature in which we update our readers on the latest happenings here at BidBridge. We will talk about some the successes we have shared with our buyers, the latest news about the company, and other items of interest. Without further ado…
Press release for our event with the City of Chicago
To view the release, simply click the link above. The release was picked up by outlets like AOL Money News, Forbes.com, MarketWatch, and Reuters. In brief, the City purchased Runway Snow Removal Units and saved nearly $1 million in partnering with BidBridge.
2009 NIGP Conference
BidBridge is excited to announce that we will be attending the 2009 NIGP conference in St. Louis. We can be found at booth 728, so make sure stop by and say hello! We will have special giveaway items for some our visitors. Look for more details next week here at the BidBridge Procurement Strategies Blog.
Event Summary – Daphne, AL – Various Trucks
In the City of Daphne, Alabama’s second event with BidBridge, three suppliers competed to supply a variety of heavy duty trucks including garbage trucks, street sweepers and knuckle booms. The bidding lasted for 1 hour 32 minutes thanks to 110 time extensions and a combined 84 total bids.
The most competitive element of the event was for a dual side-loading recycling truck, receiving 54 bids with 32 first place turnovers throughout the course of the event.
The City of Daphne was thrilled with the event and plans to not only award quickly, but purchase additional vehicles based on the competitive pricing they received through the BidBridge event.
Employee Spotlight
As we are growing, we want you all to feel connected. Each weekly post will include a short bio on a member of our team. This week we are featuring Jacquelyn Campbell.
Jacquelyn Campbell joined the BidBrdge team in July 2009. She is serving as an Operations Assistant, working to source additional suppliers and assist the Operations Coordinators in managing events and ensuring we continue to drive the results we historically have achieved for our buyers.
Jacquelyn comes to BidBridge after three years of management experience at Enterprise Rent-A-Car. There she worked in a variety of roles, most recently serving in Human Resource Management. Jacquelyn is a graduate of the University of Louisville, where she received a Bachelor of Arts degree in Communication.
We are proud to have Jacquelyn as the newest member of our team!
BidBridge featured in Dean and Provost magazine
There is no online version of the article available, but look for an article entitled “Save money on major purchases with reverse auctions” on page 6 of this month’s issue.
The article introduces the concept of reverse auction to universities nationwide, saying:
“When you make major purchases using a traditional sealed-bid process, sellers don’t always offer their lowest possible price. But if they could revise their bids to underprice their competition, you could save a lot of money.”
We couldn’t agree more!
The article cites recent successes that San Diego State University has had in partnering with BidBridge over the past few months. The article is further evidence that the reverse auction concept is gaining more and more momentum in the purchasing world. BidBridge is proud of its role in helping to build that momentum!