Reverse auctions, also
known as eRAs or e-auctions, are online negotiations in which the
buyer and seller roles are reversed. Their purpose: to encourage
selected vendors to compete with each other in a real-time online
A number of firms choose to hold
reverse auctions for large pieces of business from third parties
such as event companies, A/V services, general contractors,
translation services, catering firms, etc.
If your company does not have a
licensing agreement with an electronic auction software provider,
such as Scanmarket (www.scanmarket.com), Ariba (www.ariba.com) or
HedgeHog (www.hedgehog.com), or a partnership with a company
that provides these services, you can purchase them for a one-off
auction or a small series of bids. The auction provider will need
the contact details of all your vendors and details on your
auction. Expect to pay up to 10 percent of the average bid to cover
the cost of the auction itself. In most cases, the business you are
bidding out should be in the $100,000-plus range to warrant the
effort, time and cost of an online auction.
To have an auction with integrity and
results, you need at least three serious bidders. Prequalify each
of them; if you do not have any intention of hiring a bidder, it is
unethical to invite the company to participate in your auction.
* Ensure anonymity. The planner should
not share information with the vendors about their competitors.
* Vendors should play fair and not
attempt to discover who their competition is. In addition, they
should not ask you for exceptions, extensions or favors, and must
maintain complete confidentiality with any proprietary information
that has been shared.
HOW IT WORKS
The meeting planner’s
* Choose vendors to bid.
* Create and provide a thorough,
detailed request for proposal to bidders, giving each vendor ample
time to review them.
* Provide a scope of work or letter of
intent, allowing invited bidders to opt out of the auction if they
feel they are not a good fit for the job.
The auction manager’s
* Send out invites to bid.
* Send the URL of the site that will
host the auction.
* Configure the software for the
* Provide meeting planners with the
final report of the bid results.
The bidder’s role:
* Agree to prepare a bid; log in at the
* Abide by the rules, determine a
strategy and participate online as necessary.
* Prepare the follow-up paperwork.
* Patiently wait while the bids are
compared and a winner is chosen.
Auction in action
The auction manager and planner see
everything, including names of vendors and the time they place
bids. The planner is given a URL to watch the action. Depending on
how many bidders are invited, the auction can take anywhere from
one hour to all day. Often, vendors wait until the last minute to
Vendors with online bid experience will
devise a strategy and generally will have predetermined their
starting bid and their lowest bid.
The experience is similar to that of
watching paint dry until the very last part of the auction.
However, it is important to monitor the auction frequently to
ensure problems with software or access can be resolved
Making the Call
Does the lowest bid win? Most often,
yes, but it is critical not to get sidetracked by the lowest number
until you can compare the full bids, side by side.
Louise M. Felsher, CMP,
CMM,is senior event operations manager with
George P. Johnson Experience Marketing in San Carlos,