Reverse auctions are a form of e-procurement which allows buying
organisations to run online events for the purchase of goods or services.
Buyers will invite approved suppliers to bid following the supply of detailed
technical specification requirements over a set period for the right to provide
the goods or services requested. Invited suppliers will participate in a live
on-line bidding event where they are able to submit a bid and see instant
feedback as to their performance ranking against other bidders. Bidders are
provided with enough data to encourage them to place further bids to secure the
tender.
Reverse auctions are commonly used to negotiate the cost element
of goods and services. Once an auction event has taken place, buyers are
provided with data to allow them to compare and contrast supplier performance
and select those that they wish to purchase from based upon their bids and
other non-auctionable factors such as quality and reliability.