by Louise M. Felsher, CMP, CMM | June 01, 2008

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 bidding war.

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.

Setting up

If your company does not have a licensing agreement with an electronic auction software provider, such as Scanmarket (, Ariba ( or HedgeHog (, 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. Other guidelines:

* 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.


The meeting planner’s role:

* 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 role:

* Send out invites to bid.

* Send the URL of the site that will host the auction.

* Configure the software for the auction.

* Provide meeting planners with the final report of the bid results.

The bidder’s role:

* Agree to prepare a bid; log in at the designated time.

* 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 bid.

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 immediately.

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, Calif.