Intelligent e-auction is not just about price

An intelligent e-auction is not just about price. It is about data, strategy, and fair competition that delivers measurable results – in this case, 27% lower.

📘 Case study: When an e-auction delivers more than just financial savings

An electronic auction is not a magic button for savings. But when properly set up and included as one round of the tendering process, it can be a very powerful tool.

Let’s illustrate this with the example of selecting a supplier for cleaning services for a large facility. The contracting authority prepared the specification carefully, using both existing data and supplier ideas gathered during a preliminary market consultation. To maximize the effect of the e-auction, the contracting authority defined four evaluation criteria:

• unit price for different types of cleaning,

• price stability (in years),

• payment terms (in days),

• use of environmentally friendly cleaning agents (confirmed or rejected).

All three non-price criteria were transparently converted into monetary values, so suppliers knew, for example, that extending the price fixation by one year meant a bonus of €5,000. Similarly, payment in 30 days was the baseline, and for each extension of 30 days the supplier received a bonus of X €.

💻 In the auction room, the software recalculated in real time during the e-auction, so bidders could see exactly how changes in conditions affected their total offer.

🏁 Step-by-step competition process

• The preliminary phase involved 6 suppliers who visited the site, learned about the requirements, and proposed possible improvements, some of which the contracting authority included in the tender documentation.

• 5 bidders advanced to the first stage of selection, submitting initial offers in the required structure.

• The top 3 were selected for the next round, conducted as an electronic auction. The contracting authority allowed suppliers to take part in a “trial auction” to practice how to enter bids and see how changes would affect results. At the same time, the contracting authority explained very transparently why it was holding an e-auction, how it would guarantee fairness and transparency, how the results would be used, and why the chosen criteria had been set.

• The starting price for each bidder corresponded to their offer from the previous round.

• The auction lasted 15 minutes, with an automatic 2-minute extension if someone placed a bid in the last minute. Participants could see the best offer for each item and their overall ranking in the auction.

🧠 Tactics of individual players:

Each finalist chose a different tactic:

• The current supplier started relatively high and waited. They reacted to competition late, but aggressively. It was clear they had set a minimum price below which they would not go, because at a certain point they stopped and did not improve their offer further.

• The former supplier started with a standard bid and then reacted to competitors. Their strategy was first to reduce price and only then use non-price criteria. Their apparent aim was to win the contract “at any cost.”

• A new player immediately pushed the price down and stayed in the lead to create psychological pressure. They too had a minimum price, and once it was reached, they stopped participating in the auction.

📉 Result:

• The price dropped by 27% compared to the best initial offer, and non-price criteria were maximized.

• The winning price was 13% lower than the contracting authority’s internal estimate of the “fair price.”

🔍 Practical benefits:

• Compete not only on price – when suppliers know that eco-friendly products or better payment terms are reflected in the total value of the offer, they will look for ways to improve their bids comprehensively.

• Give suppliers the opportunity to try out the e-auction and understand the exact calculation of each criterion. Set safeguards in the system to prevent entering the wrong price.

• Prefer quality of bidders over quantity – three motivated suppliers are better than ten passive “seat-fillers.” If you include “shooters” who cannot deliver, you lose credibility.

• Know the commodity and the market – you must carefully prepare the specification and understand supplier motivation, while leaving the final negotiation to the market mechanism.

• Try new approaches – avoid routine and predictability in e-auction design. Combine different types of auctions and criteria, and consider splitting the contract volume among several suppliers to maintain competition in the supplier panel.

• Expect diminishing performance of repeated e-auctions.

🔗 Why Promitea?

Promitea is not just e-auction software. It is a complete sourcing platform that enables you to:

• combine multiple rounds of tendering (including preliminary consultation, qualification, negotiation, and e-auction),

• create templates so you set criteria only once and then launch auctions “with a single click,”

• use our extensive library of price and non-price criteria to optimize competition and avoid unnecessary mistakes,

• set your own formulas to convert qualitative parameters into points or money, or get support from the Promitea team,

• work in one environment, integrated into your ERP system, with a clear structure and without switching between different procurement tools.