Online auctions pay off

Wessex Water has turned to online auctions to tender work, and says it is identifying which frameworks will be tendered through this process. The company said it is already “making significant cost savings” by using an online auction to offer work to suppliers.

Two contractors have battled it out in a web-based auction to secure a contract for electrofusion hire equipment. The work was awarded to the contractor with the lowest weighted bid, taking into account factors such as their resources, scope, quality infrastructure and track record, as well as their auction bid price.

The winning bid received after nearly two hours represented a saving of more than 50% on prices previously paid. Wessex Water’s purchasing manager, Ashley Mee, said he was surprised by how far the price dropped: “With only two suppliers in the running we weren’t sure how competitive they were going to be against each other. But there were a few gasps around the room when the price just kept plummeting.”

Both suppliers were trained to use the software prior to the auction, while staff watched the bidding live from a meeting room. It is a change from traditional methods of post tender negotiations, which could involve a number of face-to-face meetings over several weeks.

It is the third time recently that Wessex Water has employed the reverse auctioning method of tendering, with previous events resulting in hundreds of thousands of pounds worth of savings for power generation equipment and building materials.

Commenting on the auctions, Mee said: “Preparation and planning is crucial. While we appreciate an online auction isn’t suitable for all tendering processes, when we have used it appropriately the money we’ve saved has far exceeded our expectations.

“We are currently reviewing frameworks due for renewal in 2011 to identify those for which an auction may be appropriate.”