Reverse Auction System for Non-Commodity Procurement
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Solution Overview
Problem
In the procurement of non-commodity goods, services, and systems, vendors face challenges in understanding how their proposals are evaluated relative to competitors, limiting their ability to modify their bids or proposals after submission, and thus reducing opportunities for contract acquisition.
Innovation Solution
A reverse auction method and system where a purchaser creates a description of required goods or services, normalizes vendor proposals to ensure comparable performance, and pre-negotiates downward bidding increments with each vendor, allowing for a competitive auction process while protecting proprietary information.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If vendors submit proposals with different component configurations to meet performance requirements, then each vendor can optimize their own system design, but the proposals become incomparable and the evaluation process becomes complex
Solution Approach 1:
The purchaser performs preliminary normalization actions before the auction by communicating with each vendor to understand their component configurations and adjusting the evaluation basis. This preliminary assessment allows the purchaser to normalize different vendor proposals to a common performance baseline, making them comparable while preserving vendor design flexibility. The purchaser determines what each vendor's system would cost to meet standardized performance criteria before the bidding process begins.
2Productivity
If vendors are notified of proposal acceptance immediately after submission, then the procurement process is completed quickly, but vendors lose the opportunity to modify their proposals or reduce prices to obtain contracts
Solution Approach 1:
The system transitions from a static, one-shot proposal submission to a dynamic multi-round auction process. Vendors initially submit their proposals, receive feedback on their standing, and then have the opportunity to submit revised proposals with modified prices or configurations. This dynamic process allows vendors to adapt their proposals based on real-time information while maintaining procurement efficiency through structured timeframes and clear procedural rules.
3Loss of information
If vendors can see how their proposals compare to competitors during evaluation, then vendors can strategically adjust their bids, but proprietary information and competitive advantages are exposed
Solution Approach 1:
The purchaser acts as an intermediary who controls the flow of information between vendors. During the auction process, vendors receive normalized performance data and feedback about their relative standing without exposing their proprietary component configurations or pricing strategies. The purchaser mediates the comparison process by translating different vendor proposals into standardized metrics that can be shared anonymously, allowing vendors to strategize based on performance gaps without revealing sensitive information.
Data Source
AI summary
A reverse auction method and system are provided for non-commodity goods, services, and systems. A purchaser creates a description of goods, services and/or systems required by the purchaser and sends the description to a number of potential vendors. In response, the vendors prepare an offer template provided by the purchaser showing the components and services proposed by each vendor and prices associated therewith for supplying the required goods, services or systems. The proposal/offer from each vendor is adjusted to ensure that the offer from each vendor will produce a similar and acceptable result. A downward bidding increments session sets downward bidding that is allowed by the vendor during a subsequent auction process. Each vendor executes a contract that is binding on the vendor if the vendor's bid during a subsequent auction process is accepted as the lowest bid. An auction is held in which each vendor bids against other vendors using the pre-negotiated downward bidding increments.