0 Replies Latest reply on Apr 1, 2011 8:28 AM by Graham 0966

    More flexible functionality for Dutch auctions

    Graham 0966 Novice

      This is a general question to the community regarding the functionality available for reverse Dutch auctions.

       

      From my limited experience of the reverse Dutch auctions on the Ariba platform it seems that the winning price in these events is clear to all participants and the buyer will only capture the bid from the winning bidder. This limits the attraction of these very powerful events as our buyers prefer not to expose the price they pay and like to understand the best offer available from all suppliers.

       

      On our previous provider's platform the functionality was different in as much as it allowed the buyer to capture prices from all participants and the winning bid was hidden.

       

      How does it work?

      During the event participants can place a bid at any level from zero to the reserve price - the price at which the auction will close if no bids are placed and usually at the same level as the best pre-bid from the RFP.

       

      To explain:

       

      Start price = 50

      Reserve price = 100

      Interval time = 2 minutes

      Interval range = 5

       

      Rather than each interval having a fixed value, in this version of reverse Dutch auctions each interval has a price range.

       

      The auction starts.

      The first interval is 50 – 54 and is open for 2 minutes.

       

      Supplier A bids 72

      Supplier B bids 62

       

      At the end of 2 minutes, as no bids have been placed below the range maximum (54), the auction moves to interval 2 = 55-59 and the clock resets to 2 minutes.

      Should a bidder wish to change their bid they can do so at any stage, as long as it stays below the reserve. If they try to bid above the reserve, the bid is rejected and reverts to their previously accepted value.

       

      At the end of interval 2, as no bid has been placed below the maximum, the range moves to interval 3 = 60-64.

       

      If no other bids are placed, at the end of interval 3, the event will close and the status will change to Pending Selection and the screen for Supplier B will show that they have won.

       

      If Supplier B had wanted to, he could have placed another bid below his current offer of 62 and even below the current range minimum, and the clock would have still counted down to the end of the interval.

       

      So at the end of the event the buyer has a good price from the winner but also has visibility of the best price offered by all other participants – including those bids that were above the reserve price and therefore rejected by the auction tool. This bid visibility can be useful should an issue come to light post auction that means the business is not awarded to the winning bidder.

      Additionally, none of the participants, other than the winner, knows for certain what the winning price was. All they can be sure of is that it was below the maximum of interval 3.

       

      Other functionality

      Events can be built as single or multi-trade (where participants bid a quantity as well as a price)

      Bidding in the preview period is possible.

      The reserve price can (and for best results should) be hidden from bidders.

      Transformation bidding is possible.

       

      I hope this has explained how an alternative version of reverse Dutch auctions work and I'm interested in the views of other members of the Ariba community.

      Graham