Reverse Auction Usage
Now regarded as a standard procurement practice in both the public and private sectors in North America and Europe, signs of usage in Australia and New Zealand are beginning to re-emerge.
Australia and New Zealand
lf you're familiar with the 'adoption curve' you'll know that new technologies and methods go through an initial phase of rapid adoption and excitement followed by a 'this isn't all it's cracked up to be' abandonment phase. This is what happened with reverse auctions in Australia and New Zealand from about 2000-2005. As with all adoption curves we are now in the more mature, steady adoption phase that results from the lessons learned in the heady early days.
For some organisations, and those in the resources sector in particular, reverse auctions are business as usual and have been throughout this millennium. Some resources organisations, such as Alcoa and Rio Tinto, have run many thousands. Coles have been consistent users of the technique and many of Australia's largest organisations run reverse auctions. Subsidiaries of multi-nationals such as Chubb and Kodak regularly use them in Australia.
Given the overseas experience, the public sectors in Australia and New Zealand are now looking closely at the technique. WA are leading the way with a centrally led pilot of 20 reverse auctions. Victorian, NSW and SA government departments have also run them successfully.
In establishing Trade Interchange in the ANZ region, there is now the opportunity for all sizes of organisations to cost effectively employ or trial the technique on a 'pay as you go' basis without the overhead of major systems implementations.
The international picture
The first reverse auctions took place in US in the mid 1990s with rapid adoption in the manufacturing and automotive industries for clearly specifiable components. Following a regulatory change, the US Public Sector began using them in 2000, especially the Department of Defense. Their adoption and usage has continued to grow quickly since then.
In the US, Most medium and large organisations and public sector jurisdictions regularly use reverse auctions. Some organisations, such as Kodak, mandate their use unless justification can be provided for not using reverse auction. Some public sector jurisdictions have completed more than 10,000 reverse auctions since 2000. The US Office of Management and Budget (OMB) is currently undertaking analysis of reverse auction usage in the US Public Sector with a view to clarifying their role and, if necessary, amending Federal Acquisition Regulations.
In Europe, the private sector has been using them since the late 1990's and, following an explicit European Union directive released in 2004, the public sector has quickly adopted them. In the UK the Office of Government Commerce (OGC) was tasked with promoting the use of reverse auctions to all levels of government and, by 2005, over 30% of all local governments had run reverse auctions.
