Do you ever miss the old days of pen and paper? The lost art of letter-writing? Carefully folding a note full of beautiful flowing prose so it fits snugly into its envelope, only to be sent off to the eventual recipient. Well, if you’re looking for that bit of nostalgia sealed bid auctions might be the exact procurement strategy that you’re looking for.
In procurement, a whole slew of various auction-types is used in order to conduct business, award contracts, and source suppliers and vendors. One of the most common auction-types in procurement is the reverse auction. The reverse auction essentially swaps the role of the buyer and seller. There’s only one buyer, the procurement team with the contract for goods or services, and a pool of sellers, vendors, and suppliers.
In reverse auction bidding, the sellers bid lower and lower prices until there’s only one seller left with the lowest price. This is a common type of auction used in procurement because of the way it flips the roles of a traditional auction and allows the procurement team to award the contract at the lowest possible market value.
Although reverse auction is a very popular procurement strategy, it isn’t the only auction-type that procurement teams and procurement professionals need to be aware of. In fact, more often than not, procurement teams will use an array of auction tactics in order to best serve the variety of contracts and company needs presented.
Sealed-bid auctions, for example, are another popular auction-type that uses a masking-element to keep buyers and/or sellers honest about where they value the item or contract being auctioned.
A sealed-bid auction is also referred to as a blind-auction. This is because the bidders in a sealed bid auction have no knowledge of what the other bidders are submitting. Traditionally, each of the participants will place their bid in a sealed envelope to be opened by the auctioneer. Then the best bid wins. It’s as simple as that.
There are many ways to incorporate a variety of auction-types into your procurement strategy. The sealed bid auction enforces bidders to be true to their own perception of value as well as the market value, in addition to accounting for the competition. As such, competitors are likely going to take the opportunity to make their very best bid.
Since each bidder only gets to submit one proposal, they need to come to play. This can be of benefit to the team conducting the auction as the values of the bids may increase accordingly.
Common Calls for Sealed Bid Auctions
While they are useful, sealed-bid auctions sound like they’d be pretty rare. Well, that is true in the private sector, but it isn’t always the case in the public sector. When it comes to government and public entities, the sealed-bid auction is actually a very common process.
This is specifically the case for public schools, government buildings, and a wide variety of other entities that fall into the public sector. Schools could use a sealed-bid auction for something like raising a new playground or football field.
For a more recent example, there was quite a bit of sealed-bid auctioning happening between the government and the private sector over the course of the ongoing COVID-19 pandemic as the government and the private sector worked in concert to provide additional resources to the medical professionals and front-line workers.
Utilizing Procurement Technology
No matter how your auction-strategies end up looking like utilizing procurement software to manage them is swiftly rising as an industry-standard. Procurement software will help you manage and run any type of auction for any type of contract.
Not only the auction though, but procurement software will also help you with the entire process, from sending out an RFP to short-listing vendors, and even connecting the procurement life-cycle through all of its phases in your organization. The wide capabilities of procurement software are only one of the reasons it’s so quickly becoming recognized as an industry standard.
Every procurement strategy is going to look slightly different. That’s because every organization is going to have slightly different needs. Understanding the different types of auctions, sealed bids, reverse auctions, traditional auctions, and others will help you and your team identify the very best opportunities for your organization.
For more information on the wide variety of auction types that procurement professionals use, visit ProcurePort. ProcurePort is the internet’s premier place for everything procurement from knowledge and information to software and technology, and everything in between.