Is this the correct way forward?

David is sourcing a new cleaning contract as he is not impressed with his current cleaning company’s performance. He believes that his current supplier has been overcharging him, and due to budget cuts, he is keen to secure a lower price than what he is paying now. His Manager has suggested using an e-auction as the procurement method.

Is this the correct way forward?
A . Yes- an e-auction is an electronic system so it will be easy for David to compare bids
B. Yes- an e-auction will allow David to secure the lowest possible price
C. No- a reverse e-auction would be more suitable as it will secure the lowest price
D. No- a reverse e-auction will ensure only high quality suppliers bid for the opportunity

View Answer

Answer: C

Explanation:

The correct answer is ‘No- a reverse e-auction would be more suitable as it will secure the lowest price’. An E-auction is something like eBay- where bids go up in price. If David wants to secure a lower price, he should use a Reverse E-Auction- where suppliers bid lower than the previous bid in order to win. For example, Supplier 1 offers to fulfil the contract at £50k per year, Supplier 2 can offer to beat this price by bidding £48k per year. Although Reverse E-Auctions may ensure cheaper prices, there are a lot of disadvantages to using this method. See p.21 and p.76 for more information