Suppliers bid for local authority contracts over the internet in real time
An online auction held at Hammersmith Town Hall in June has cut an estimated 2m off the cost of stationery for the London councils that took part.
The Office of Government Commerce paid for the e-auction as part of a government incentive to encourage wider use of electronic marketplaces. Participants included several London councils and other public sector bodies.
Hosted by the London Borough of Hammersmith & Fulham, and run in partnership with Ealing Council, the e-auction harnessed the combined buying power of London's 32 boroughs to reduce the cost of goods such as stationery, paper and electronic office and school supplies.
Companies interested in tendering for the four separate contracts submitted costs and proposals before the auction. Each bid was then judged on non-price related issues such as service levels, ordering and delivery processes and invoicing, before being admitted to the auction.
In a "reverse" auction, suppliers bid on predetermined lots, placing bids in a downward trend. With conventional auctions, bids increase. Suppliers were able to see the bids placed but not the identity of the bidder, and competed in real time by under-bidding as the auction unfolded. At the event, an estimated 20% was shaved off the cost of goods.
The e-auction was managed by Achilles On-Line Auctions, and consisted of four separate bidding events, each comprising a basket of items - over 1,000 of which were stationery.
Each of the companies used a web browser to see where their bid sat in relation to the other firms on an interactive graph.
The councils had formed the London Contracts and Supplies Group to make the purchases, and both the councils and the bidding companies needed only a PC connected to the internet to participate.
A spokesman for Achilles said, "The only issue that arose during the auction was a bidder's browser that froze due to a problem with their PC. The issue was quickly resolved without Achilles having to use any of the various contingency provisions offered, such as surrogate bidding."
Achilles provided system training for participants prior to the auction, plus support before and during the event.
Stephen Burke, leader of Hammersmith & Fulham Council, said, "Collaboration in procurement has existed for some time but e-auctions take it to a new level. This is an innovative way of driving down costs. It benefits taxpayers and boosts investment in services. The collaboration is also an apolitical partnership with all of the London boroughs getting together with other public bodies to reduce costs for everyone."
This was first published in July 2005