The doctor kicked off a post taking a swipe at some common e-auction myths here: http://blog.sourcinginnovation.com/2007/12/03/the-doctor-goes-mental-on-auctions.aspx
Obviously, I have a view as well (!), so here are a few more to add to the list
Reverse e-auctions damage supplier relationships. In a comment on a recent post, David Stone put it best: It is the decision to go to market that threatens relationships, the method by which you go to market is not relevant, you handle the threat by efficient communication and supplier management. If a change of provider is required, an auction actually gives suppliers greater visibility of our sourcing reasons and handled properly can strengthen relationships.
Reverse e-auctions are only about price. In the EU public sector, at least, they are not. Since January 2006, any public sector body using an e-auction must award the contract to the winner of the auction. This means that buyers must factor their evaluation of non-price factors into the e-auction itself – so a bidder who is ranked first in the e-auction is in first place overall. I’ve seen a whole range of this kind of auction in the intervening 20 months: from Consultancy Services at 35% price, 65% non-price through to Electricity at 90% price, 10% non-price.
Reverse e-auctions are only appropriate for commodity items, not for services. If you can specify it, you may be able to auction it. For example, you can auction architect day rates, though you probably can’t auction the design of a building.
I have written two white papers on the subject of reverse e-auctions:
- A giant step forward for eActions (about the impact of the 2006 public sector regulations on e-auctions)
- Does procurement e-auction design matter? (about how different auction designs affect the auction result)
If you’d like a copy then feel free to drop me a line.