Reverse auctions: ending an RFQ with a live auction on price

A reverse auction ends an RFQ on price alone. The vendors you found technically acceptable are invited to a live auction: each bids a rate for every line, the lowest total is best, and every new bid must go below the best price by a set amount. It suits a few price-driven buys with a frozen specification, not every day's buying.

The order of things

1. Set it before any vendor has the RFQ. On the RFQ's page, Set up a reverse auction. (Your company's admin can allow it later under Settings → Rules → Reverse auctions.) The auction is for goods with a rate per unit; an RFQ with a service line cannot have one.
2. Vendors quote, and you judge them as for any RFQ: a confirmed quotation with a rate on every line, and a technical verdict of acceptable on every line.
3. Send the terms for approval. The start price, how much lower each bid must be, the time and the reserve are the approvers' to approve (Settings → Approvals → Auctions). From then on the RFQ's lines, makes and amendments are fixed, until the auction ends or is called off.
4. Schedule a start. The vendors that are technically accepted then, with an email address, are invited, each with a link of its own. At least two are needed (a company rule). Until it has closed, nothing of the RFQ can be awarded.

The terms

• Start price: the total of the lines' basic values (before GST) the auction opens at. The lowest quotation so far is shown beside the field.
• A bid must go below the best by: a percentage of the best price, or a sum in rupees. A percentage rounds up to the paisa. The first bid must be below the start price by this much.
• Lasts, and the extension: a bid in the last few minutes gives everyone a few minutes more, up to a number of times, then it closes at the end it has.
• Reserve price (optional): the most the company would pay. Only the approvers and those who control the auction read it; vendors never do, and a buyer reads only that one is set.

Live

The buyer's page follows it: the clock (the server's, never the browser's), the best price, who stands where and every bid with its time, the newest first. Those who control the auction can pause it (the clock stops and the end moves by as long as it stood, so nobody loses time), resume it, or call it off, always saying why.

What a vendor sees is its own bid and place, the best price with no name, and the time left. Never who else bid, how many, the reserve or any verdict. A vendor bids on its own page by the link in its invitation, behind a code sent to its email; that page keeps its session going while the auction lasts.

Worth a look. The buyer's page points out, never as proof, vendors that bid from the same network address and vendors whose bids come within a few seconds of each other again and again (your company's rules say how few seconds and how often: *Settings → Rules → Reverse auctions*). An office, a consultant or a quick rival explains each. A vendor never sees these notes.

Two bids at the same instant cannot both win: they are taken one after the other, and the second must beat the first. A bid that arrives after the end is refused, whatever the vendor's page said.

When it closes

The clock's end closes it at the second. The lowest bid wins the auction, not yet the order: each vendor that bid now has its last bid as its quotation (a new version, marked as from the auction; everything else it offered stays, a discount it quoted does not), so the comparative statement ranks them, the technical review and the award go on as for any RFQ, and the winner's make and specification are still checked. A vendor that did not bid keeps what it quoted. If the lowest bid is above the reserve, the page says so.

Before any award, check the winner. On the closed auction's card, someone who may set auctions says that the winner's make, grade and certificate are as accepted, with what they saw: it is kept with their name, and nothing is awarded until it is said. If the winner does not meet them, judge its lines not acceptable on its quotation: the next lowest bidder then leads, and is checked in turn (the comparative statement shows the passed-over offer). With no bid, or every bidder judged not acceptable, there is nobody to check and the quotations are compared as for any RFQ.

An auction is never edited once it has closed: a bad result is a new RFQ. The bids are never changed or removed.

Good to know

• The auction ranks on the basic rate. A vendor's freight and other charges, and GST where your company counts it, may rank offers differently on the comparative statement; the statement shows it.
• Calling it off, or cancelling the RFQ, ends it. What was bid stays on record.
• Every rule is yours: Settings → Rules → Reverse auctions (approval of the terms, vendors needed, how long, how a late bid extends it, how much lower each bid must be, notice before the start, and how close and how often bids in step are pointed out).