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Friday, 10 July 2015

How a Reverse Auction Works


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A reverse auction is a modern development that has sped up and improved the process of tendering for contracts. If you're in business and are looking for a contractor for a project, you don't have to wait ages for paper tenders to come in. And if you're a contractor, you can modify your original quote to better a competitor's offer. So a reverse auction is a win-win way of doing business.

A reverse auction works pretty much like any other online auction, except that the positions of buyer and seller are reversed. Instead of the seller posting their product for others to bid on, the buyer posts a project that they want a contractor for. The sellers/contractors in a reverse auction place bids indicating what rate they are willing to undertake the project for.

A reverse auction reverses a standard online auction in another way, too. In a reverse auction, the successful bidder is often (but not always) the one who offers the lowest price. However, as bidders may also have to submit a resume or state their experience or expertise, a buyer may not always choose the lowest bidder in a reverse auction, as they may prefer the quality offered by a higher bidder.
The process of bidding on a reverse auction will vary slightly from situation to situation. Some reverse auctions are only open for a very short time (e.g. three days) while others are open to bids for longer. Some reverse auctions will allow contractors to place multiple bids, others may not.

A reverse auction can also be used by people wanting to find a supplier for certain goods. In this type of reverse auction, the buyer will say something like “I need this amount of a certain product. What’s the best price you can give me for that?” And the reverse auction proceeds as normal, with sellers offering their goods for various prices, competing to underbid their rivals and so forth.

A reverse auction for bids/quotes on a project can also open the project up to a wider range of potential contractors. This is particularly the case with reverse auctions dealing with services that can be provided at a distance. Quite literally, contractors from around the world can bid on a reverse auction.
However, if a buyer prefers contractors or suppliers from a certain area for whatever reason - a desire for face-to-face or telephone contact, reducing the cost of shipping, etc. - then they will be able to specify this when placing their project/need online for the reverse auction.
Reverse auctions are an efficient way of finding the best deal or the best tender for the goods and services you need. And for sellers, a reverse auction really puts the competing back into competition!

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