Success in eAuctions can be a difficult prospect, especially if you’re just starting out. We’ve come up with our top five golden rules for success in this tricky field:
Contractual restrictions can reduce or eliminate a particular opportunity’s attractiveness. Ensure that what you are auctioning is not currently tied into a contract with a current supplier – while this sounds obvious, there are numerous examples of buyers either voiding auctions or paying contract buy-outs as they were unknowingly tied into a prior commitment.
At all times, it is important to offer the best commercial scenario to maximise suppliers’ interest and drive further competition. Important spend to you doesn’t always mean attractive spend to the market. You need to consider aggregating spend, extending contract length and inviting suppliers accordingly. It is important to understand the auction from a supplier’s point of view as well as your own.
When setting up an auction, your ability to award the market to any invited bidder is essential. You may already have a supplier who can provide the item that you want to buy. They can offer the best product for the best price in the market. However you need to invite as many qualified (or “qualifiable”) suppliers as possible, with a minimum requirement of 2 suppliers. If there are only 2 or 3 suppliers in the market it is still possible to run an auction as long as you are commercially attractive to them. With more suppliers in the auction, there is an increased possibility of achieving more attractive terms. However, suppliers still need to want your business.
Prior to the auction, there is the option for suppliers to discuss and understand the buyer’s requirements, as no clarification is generally provided during the eAuction. For the buyer the scope of work must be clearly defined for both incumbent(s) as well as the challenger(s). It may be that an extended support team is involved to fully check and provide further clarity, verifying any outstanding queries with suppliers prior to the eAuction. Clearly defined requirements are an essential ingredient of any auction, and the more complex the goods or services, the more important this area becomes. The impact of poor preparation may result in the buyer not being able to offer the contract as soon as the auction has concluded. For more complex goods and services it is recommended that an eAuction becomes part of your sourcing process. Typically this will be the final stage after RFI and/or RFP stages have honed and established the requirements and specifications.
As a buyer you have the authority to run the process on your terms. However, you must be committed to awarding the business after the eAuction based on the criteria you have defined for assessing and awarding the contract. This involves verifying budget availability and getting buy-in from your own internal stakeholders, fully informing them of the post-Auction scenarios. The last thing you want to do is jeopardise the outcome of the e-Auction, or create a reputation in the market for fishing for pricing and supplier information.
And one for luck…
The last piece of advice for eAuction success is to call in the help of a third party with a wealth of experience and success in the area. Xoomworks Procurement can help you with our Sourcing-as-a-Service proposition.
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