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Reverse Auction Bidding

ASCC Position Statement #22

In reverse auction bidding (RAB), buyers continue to solicit bids from sellers until they are satisfied they have received an acceptably low price. Construction RAB is usually done at a dedicated Internet website where, at a scheduled time, the bidding for a project opens and all bidders submit their prices to the website. The host website then posts the prices on the site for all bidders to see. The bidders’ identities usually remain anonymous. Bidders are then given a
chance to submit a lower price, with the auction proceeding in the reverse of a typical auction where bids go up. The auction is closed once
no further bids are received after a stated period following the receipt and posting of the last bid. Award is then made to the lowest bidder.

A study by the Army Corps of Engineers found “no factual, significant or marginal savings in the use of reverse auctioning methodology over the standard sealed bid processes” when used for construction services. The report indicates that “bid gaming,” in which contractors do not offer the best bid initially so they can see the relative cards of all the other players, is partly to blame for the lack of savings. The objective of bid
gaming is to consider how low to go to get the contract–not necessarily how low the contractor
can afford to go.

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