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Who says eAuctions are only for big companies?
There is a common misconception in procurement circles that online tendering (eRFX and eAuctions) is only suitable for large spend at large organizations. However, eBay has been doing small scale online tendering (i.e. forward auctions) for years and there’s no reason that the reverse wouldn’t also be true.
While the conversation about eAuctions can sometimes get needlessly complex, the true answer is that any spend is suitable for an eAuction so long as it meets three criteria:
- Clear specifications – Is the good or service to be purchased able to be accurately described?
- Competitive supply base – Is there more than one supplier capable of providing the exact item in demand?
- Compelling spend – Is the spend amount large enough to justify the time required for the bidder to review and participate in the eAuction?
Backyard Bounty is a small landscape Design/Build firm in Washington, DC. To accommodate significant growth, they needed to buy additional equipment, including a new work truck for their installation crews. Backyard Bounty had chosen a Ford F-250 Super Duty truck and wanted to make sure they were getting the very best price. Upon reviewing the situation, it was determined that this purchase would make an excellent candidate for a reverse auction, as there were:
- Clear specifications – A new Ford truck is easily specified, and Backyard Bounty chose the specific configuration it needed
- A competitive supply base – At the time, there were 14 Ford dealerships within a 20-mile radius of Washington, DC, providing an ample set of bidders
- Compelling spend – With a cost of about USD 40,000, this represented both a significant purchase for the company and a compelling enough spend for dealers to participate
Backyard Bounty built a simple eAuction on the Scanmarket platform with no prior training, as the system was remarkably easy to use. Standard parameters such as ranked bid and leading light indicators were employed.
Many reverse auctions have been conducted on vehicles. However, individual dealers don’t have much experience with participating in eAuctions so Backyard Bounty, with Scanmarket’s guidance, built a briefing document for the bidders describing the process, their roles, and the information involved. Of the 14 bidders, several decided to go ahead.
Edamarie Mattei, owner of Backyard Bounty said: "The eAuction was held on a Tuesday afternoon. While the number of bids we received was modest, we were still able to secure savings of nearly $2,000 over the best price previously negotiated with the dealers. This represented a savings of about 5% and was considered a very strong success!"