Reverse Auction Program
Design & Prioritization Workshop
Department of Government Services
Bureau of Procurement
December 9, 2014 Reverse Auction Program Design & Prioritization workshop Agenda
Topics Start Time
Objectives 10:00
Project approach & status 10:05
BOP current state 10:10
Leading practices 10:30
Recommendations: Governance Initiatives 11:00
Recommendations: Category Roadmap 11:40
Wrap-up 12:25
2 Reverse Auction Program Design & Prioritization workshop Objectives
■ Share key findings from BOP’s current procedures and processes related to reverse auctions (RA) ■ Share leading practices and recommendations to implement a successful RA program Workshop ■ Gain further direction and insight from senior management to tailor recommendations to Objectives BOP’s environment: ■ Confirming multi-year strategy roadmap ■ Refining reverse auction category candidates analysis
3 Reverse Auction Program Design & Prioritization workshop Project approach & status
Phases Activities
Identify stakeholders Mobilize Gather BOP data Finalize project cadence 1 week
Data Capture Conduct spend analysis & contract review Interview BOP commodity manager & specialist & Analysis Assess the Commonwealth's T&C’s against industries leading practices 2 weeks
Conduct workshops to validate findings Design Identify areas of opportunity & risk in the RA Identify gap analysis between BOP & leading practice procedures 3 weeks Identify commodity candidates for RA
Technology Establish technology requirements Assess existing technology capabilities Review Conduct GAP assessment for SAP SRM 7.02 1 week
Conduct design & prioritization workshop Implement Provide leading practice for RA Planning Recommend multi-Year Strategy for RA 1 week Recommend RA implementation plan
4 Reverse Auction Program Design & Prioritization workshop: Current State Spend analysis overview
The BOP managed $1.9B in contract spend in CY2013, but none of this spend leveraged reverse auctions
. Initial spend analyzed Out-of-Scope: amounted $2.3B $2.3B • Exclude Per • Surplus $1.9B Contract database BOP’s Request • WC Claims Contract spend in scope . Out-of-Scope items were Total (1) • Master • Active Contracts managed by BOP removed after discussing Agreement Total (2) with Mike and Commodity Manager’s . *Surplus* was removed from the scope because it is misclassified spend
Initial Total (1): $2,259M Exclude Per BOP's Request $115M Master Agreement $50M Surplus $3M WC Claim $67M Expired Contracts $129M Total (2): $1,896M
5 Reverse Auction Program Design & Prioritization workshop: Current State Spend Analysis by sub-category (top 86%) breakdown
86% of BOP spend is represented in the top 26 sub-categories, 5 of which are IT (33%)
Hardware & Services $182.5M Validated by Software & Services Category Sub-Category $179.5M Comm Mgr Professional IT Staffing $175.0M Coal Knerr Work & Dump Trucks $84.6M Energy Print $84.1M Fuels Knerr Hardware $80.6M Construction Reinoehl Roadway Materials $78.4M Equipment Pharmaceutical $57.8M Mail Reinoehl Commercial - Furniture $51.2M Tree Trimming & Stump Cutting Svc. Kleeman Facilities Medical - Staffing $48.2M Materials - Other Myslewicz Truck, Tractors & Trailers $46.5M Financial Credit Card Services Gaul Fuels $44.6M Professional Services $30.1M Food Non-Perishable Gaul Construction $26.0M Furniture Commercial - Furniture Reinoehl Police & Specialty $23.6M Hardware & Services Teprovich IT Service $20.5M Non-Perishable $18.4M Software & Services Teprovich Mail $13.8M IT Professional IT Staffing Teprovich Mail Processing $13.5M Hardware Teprovich Tires $13.0M IT Service Tree Trimming & Stump… $12.0M Teprovich Materials - Other $11.9M Pharmaceutical Gaul Medical Media Planning Services $10.7M Staffing Gaul Lab Supplies $10.5M Professional Services Gaul Coal $10.0M NSA Vegetables &… $7.2M Operation Print Reinoehl Credit Card Services $7.2M Mail Processing Services Kleeman $.0M $50.0M $100.0M $150.0M $200.0M Road Roadway Materials Myslewicz Maintenance . $1.9B total spend in 149 sub-categories Work & Dump Trucks Reinoehl Truck, Tractors, and Trailers Reinoehl . $1.6B (86%) of total spend analyzed in the top 26 sub-categories Vehicles . Credit Card services spend reflects only fee(1) Police & Specialty Reinoehl Tires Reinoehl . Contracts where estimated spend is different than contract value Marketing Media Planning Services Kleeman were adjusted through the interview process Supplies Lab Supplies Knerr
Note: (1) Consider analyzing underlying credit card spend to determine if there are additional spend leverage opportunities
6 Reverse Auction Program Design & Prioritization workshop: Current State Contract review
. Contract review focus on 2015 to 2017 by quarters . 2,183 contracts are going to expire in 2015, 2016 & 2017 which accounts for $1.9B in spend . Before 2015, 336 contracts expired, accounting for $150M in spend . After 2017, 176 contracts will expire, accounting for $54M in spend . We received the original data dump from Janice on 10/27, and we applied updates based on interview feedback we received from Mike & the commodity managers during the week of 11/10
461 385 Contract Spend $/Year in $Millions # of Vendor's 306 # of Service Goods $574M 264
$436M 223 199
$222M 90 94 $136M $158M 60 67 $122M 60 52 $85M $86M $57M $17M $32M 26 28 20 21 7 13 $16M 6 6 12 7 138
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 Contract Expiration By Quarter:
7 Reverse Auction Program Design & Prioritization workshop: Current State SWOT analysis
Strengths Weaknesses
. High spend within sourcing categories . No established reverse auction policies or procedures . Strong supplier database . Lack of reverse auction skills or required training . Good relationship with suppliers . Lack of technical experience managing SAP SRM . SAP SRM reverse auction cockpit already in place reverse auction cockpit . No incentive to conduct reverse auction
Opportunities Threats
. Recognize DGS as a strategic and value generating . No commitment by high level stakeholders agency . No commitment across agencies . Optimize negotiation cycle time . Politically sensitive suppliers (relationships, voting . Provide transparency in the sourcing process blocks, economic impact, etc.) . Increase spend managed under BOP . In some cases, a reverse auction can harm the . Achieve savings supplier relationship . Optimize supplier database
8 Reverse Auction Program Design & Prioritization workshop: Current State Leading practice dimensions
Dimensions Description ■ Effectiveness and completeness of the documented or implied reverse auction strategy that supports Strategy & Change the organizational procurement strategy as well as the mechanisms for delivering change through the Management procurement function in the methods and processes used to purchase goods and services ■ Appropriate spend policies and guidelines for the appropriate use of reverse auctions, associated
Strategy Governance & approvals, terms and conditions and risk management processes exist to efficiently and effectively Controls operate reverse auctions as part of a broader set of category strategies
■ The organizational design includes specific roles and responsibilities, workflows, metrics and Structure incentives to drive appropriate adoption of reverse auctions
■ Personnel are trained in the appropriate use, applicability and adoption of reverse auction tools and People
Organization capabilities
Category ■ The procedures and activities of the reverse auction program will identify opportunities, develop Management Cycle strategies, and plan categories through the evaluation of market supply and demand drivers
■ Appropriate processes to conduct reverse auctions, aligned with the category management cycle, Operational
Processes including communication, event management, award completion and management of product and Processes service delivery based upon the terms, conditions and pricing of the award
Systems & ■ Appropriate IT application to support the operational process and category management cycle Technology focused on efficient reverse auction event management
■ Presence of clean and organized spend data that has the ability to provide visibility and track results Enablers Master Data & BI-PI for the reverse auction program
9 Reverse Auction Program Design & Prioritization workshop: Current State Qualitative interviews and workshop
Dimensions Quotes "I remember a reverse auction "Squeezing the margin "if I tell my vendors Reverse "Agency Strategy & Change done many years ago for Salt, could cause our bigger Auction - they aren't going support Management I don't think it went well" suppliers to drop out" to want to participate" is crucial" "multiple agencies "it is very difficult "T&C's are
Strategy Governance & requesting different ways to satisfy all the sometimes hard for Controls to procure same item" vendors” suppliers to agree to"
"PennDOT is the main "Each agency has different specs "PC's was one we really Structure driver on this, they would for their purchases which would considered for reverse auction have to be convinced" make it difficult for reverse auction" because they have the specs" “Good training will be key for “My category has a million items, I People suppliers and staff for can't see it being a good category Organization reverse auction to work” for reverse auction”
"A lot of vendor participation “Getting usage, volume "I would like to find Category is regionalized. They only commitments and prices from more suppliers for Management Cycle want to cover their area" Agencies (for fuel) has been difficult" my category” "this is going to "We did corrugated cartons with reverse Operational
Processes be really time auction years ago, but we never followed Processes consuming" through and awarded the contract”
"keeping up and updating Systems & "time management with my the current client database Technology contracts will help" continuously is difficult" “Target value is the estimated
Enablers Master Data & BI-PI value of the contract - it is not the TRUE value”
10 Reverse Auction Program Design & Prioritization workshop: Current State GAP assessment overview
Industry Overall Dimensions Comparison Gaps Gaps Current state ■ No reverse auction (RA) strategy in place Strategy & Change 2.0 3.0 ■ Lack of confidence in RA due to past Management experience
Strategy Governance & ■ No RA policy in place and no 3.0 3.0 Controls documentation about governance of RA
Structure 1.5 2.0 ■ No structure or incentive to conduct RA
■ Lack of RA knowledge and skills People 0.5 1.0 Organization ■ Limited RA experience
■ Category plan is restricted for some Category 0.5 1.0 categories and not involved with RA Management Cycle strategy
Operational ■ No formal RA process in place Processes Processes 1.0 2.0 ■ Supplier RA package exists, but lacks details
■ SAP SRM 7.02 with RA cockpit enabled, Systems & -0.5 0.5 Technology but no technical training
Enablers ■ S pend data is available, but not well Master Data & BI-PI 0.0 1.0 categorized 1 2 3 4 5 Laggard Foundation Established Leading Excellence © 2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms 11 affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. BOP assessment Industry-specific benchmark Overall benchmark Reverse Auction Program Design & Prioritization workshop: Leading Practices Market view on reverse auction
There are significant benefits resulting from the adoption of a reverse auction program:
Public Sector has In 2013 Cost Savings Sourcing Cycle Times achieved up to 100% 100% 68% 14% 50% of Best-in-Class 50% savings 86% organizations 50% Strong value proposition employ eSourcing on e-Sourcing with at least 59% of Best-in- Initial Savings Optimal Initial Decrease Optimal 10% average Class organizations Cost Cost Time Time establish sourcing Administration Costs Time To Market savings organization plans 100% 100% Usage of e- 2014: of companies 41% 15% Sourcing tools which apply e-Sourcing 60% 85% almost doubled methods, from 16% in dramatically increase usage 40% 2005 to 31% 80% e-Sourcing tool users run in 2006 Initial Savings Optimal Initial Decrease Optimal 50+ events per year Cost Cost Time Time
Sources: SpendMatters, AberdeenGroup, Scanmarket 2013 E-sourcing Survey Results, iAsta 2006, IBM Center for Business of Government
12 Reverse Auction Program Design & Prioritization workshop: Leading Practices Benefits of reverse auctions
Buyers as well as suppliers gain advantages through a reverse auction process...
Advantages for Buyers Advantages for Suppliers
. Build fair negotiation and award process . Build fair negotiation and award process . Create direct competition among suppliers . R eact immediately on competitors offers to achieve lowest possible price . Provide market transparency . Create transparency (depending on design) . Increase competitors awareness . Structure negotiation process . Gain knowledge of final negotiation . Game maker, not game player . Get real commitment . Define all relevant award criteria before final electronic price negotiation . Reduce sales expenses (travel, etc.) . Reduce price negotiation period . Document negotiation process . Develop a high degree of reusability (“plug & play”)
Creating transparency for all participants
13 Reverse Auction Program Design & Prioritization workshop: Leading Practices Draft program vision & objective
BOP should set forth a vision statement to guide the development and adoption of reverse auctions in driving cost savings, improved transparency and greater process efficiency in managing goods and services procured for the Commonwealth
Draft Vision: BOP drives value for DGS and participating Commonwealth agencies while achieving process efficiencies and reducing cycle times by leveraging reverse auction strategies for appropriate sourcing events. Specifically, BOP should outline: . 17%(1) spend under reverse auctions . 10% average savings through reverse auctions . 25% cycle time reductions through reverse auctions . 10-12 of reverse auction executed per year (1 per month)
(1) ISM database
14 Reverse Auction Program Design & Prioritization workshop: Leading Practices RA is embedded in standard Sourcing Process
Internal Supply Market Category Tender / Negotiate & Analysis Analysis Strategy eAuction Contract . .Analyze spend .Conduct Market .Analyse and Prepare eAuctions .Negotiation and .Define sourcing research develop category Rules of contract/ SLA scope .Identify suppliers portfolio Engagement (ROE) management .Conduct e-Auction Focus .Identify business .Evaluate supplier .Develop strategies .Implement . partners portfolio and action plan Define supplier initiative decision criteria Insight
. Transparency in . Supplier long list . Defined category . Supplier short list . Closed internal business is developed strategy and is created contract partners’ demand . Understanding strategic actions . RA is prepared . Enable benefit,
Benefit . Common agenda portfolio and . RA category . Criteria is defined deliver tangible and goals opportunities identified improvement Change Management
15 Reverse Auction Program Design & Prioritization workshop: Leading Practices RA is embedded in standard Sourcing Process
Internal Supply Market Category Tender / Negotiate & Analysis Analysis Strategy eAuction Contract
.Analyze spend and conduct category and market .Use portfolio techniques to evaluate category and opportunity assessment supplier portfolio .Identify business partners and category experts to .Define category strategies identify possible auction categories .Analyze portfolio findings for eAuction prioritization .Set common team, work plan, agenda and goals roadmap
Spend Category Sourcing Value Levers Analysis Evaluation Strategy Insight
16 Reverse Auction Program Design & Prioritization workshop: Leading Practices RA is embedded in standard Sourcing Process
Internal Supply Market Category Tender / Negotiate & Analysis Analysis Strategy eAuction Contract
Category Auction Prepare Event RFI/ RFP Detailing Strategy Auction Management .Leverage spend .Communicate .Define RA .Finalize opening .Invite suppliers & analysis objective and strategy price, bid internal staff for .Develop and timeline .Outline structure, timing training clarify with internal .Initiate RFI/ RFP negotiation type & privacy setting .Launch test event stakeholders for selected and structure .Share rules of .Launch event unambiguous supplier long list .Define LOT engagement .Monitor supplier specification and .Prepare supplier strategy and bid .Manage Q&A bidding, scorecard long list based on decrements .Request technology Insight .Ensure cross- market analysis .Term supplier commitment for reliability and functional and current evaluation criteria participation and bidding tactics commitment supplier portfolio (e.g. Supplier contact details . Intervene if .Get overview of Comparison .Setup event with problems occur starting prices Factor - SCF) eSourcing system .Close event and T&C of .Prepare rules of showing 1st in the suppliers engagement rank Supplier Management
17 Reverse Auction Program Design & Prioritization workshop: Leading Practices RA is embedded in standard Sourcing Process
Internal Supply Market Category Tender / Negotiate & Analysis Analysis Strategy eAuction Contract
Finalize Post Auction Implement Contract .Sourcing team and .Finalize contract .Implement .Conduct supplier .Communicate internal with awarded initiative survey/ interview success within stakeholders suppliers .Track spend to identify company conduct post (depending on RA savings for satisfaction, .Expand gained auction analysis setup) reporting & sustainability and experience on based on pre- .Finalize lessons lessons learned supplier benefits further more defined criteria learned .Identify possible (such as: market complex (depending on RA .Extract gained lower transparency, categories Insight setup) market administrative reduced sales .Award suppliers knowledge costs for business cycles, improved and communicate case business results opportunities) .Create reporting
Supplier Management
18 Reverse Auction Program Design & Prioritization workshop Agenda
Topics Start Time
Objectives 10:00
Project approach & status 10:05
BOP current state 10:10
Leading practices 10:30
Recommendations: Governance Initiatives 11:00
Recommendations: Category Roadmap 11:40
Wrap-up 12:25
19 Reverse Auction Program Design & Prioritization workshop: Governance Initiatives Strategy
Status quo – Strengths Recommendation based on leading practice
■ General procurement long term strategic vision ■ S1: Design and implement an annual reverse auction
Change clearly communicated and documented through strategy, incorporating operational process planning Strategy Strategy & Strategy
Management Procurement Handbook, Procurement Code, which includes objectives, communication plan and standards T&Cs executive leadership participation in establishing RA as a strategic priority ■ Clear ownership and accountability for category management ■ S2: Develop a change management plan where leadership must manage the change effort. BOP should ■ Alliance with other states or organizations to devote sufficient time, attention, and resources in order
Controls leverage buying power to make the transition to RA focusing Governance & Governance
Organization ■ S3: Create a communication plan to promote plans and benefits. BOP should communicate with stakeholders and policy-makers to ensure that benefits and Status quo – Weaknesses successes are communicated internally and externally through the media ■ General governance arrangements exist, but does not detail reverse auction strategy ■ S4: Roll out RA program - an “Auction First” strategy should be adopted. BOP should define a policy Processes ■ Limited information about strategic sourcing goals statement encouraging the use of RA first, when and strategy applicable. BOP should establish a timeline for full ■ Limited metrics in place to measure the contract implementation, outlining actions relative to the overall process effectiveness and efficiency volume of auctions and the potential savings achievable ■ S5: Conduct a Procurement Health Check to measure progress to Future State – executives should incentivize
Enablers RA in order to align the strategy and governance with the integrity of DGS
20 Reverse Auction Program Design & Prioritization workshop: Governance Initiatives Organization
Status quo – Strengths Recommendation based on leading practice
■ Experienced buyers with good understanding of ■ O1: Select and train team an executive team to enforce Commonwealth of PA sourcing challenges the structure and involvement in RA Structure Strategy ■ Good resources distribution by category ■ O2: Develop a talent management process that will hire, retain, and develop the required resources ■ Full resource dedication for sourcing process ■ O3: Create dashboards to monitor BOP’s progress - dashboard should include Key Performance Indicators (KPIs) and target goals that are crucial to RA program People success ■ O4: Evaluate reverse auctioning efforts - BOP must Organization evaluate the progress of their reverse auctioning efforts in both dollars saved and efficiencies achieved. The Status quo – Weaknesses target of continuous improvement should continually drive organizational effectiveness for the procurement ■ No crossing knowledge across segment process categories teams ■ O5: Training - continued training should be held (semi)
Processes ■ Lack of incentive system hinders the use of annually in order to share lessons learned from reverse auction previous years and encourage knowledge sharing ■ Lack of knowledge and experience conducting reverse auction Enablers
21 Reverse Auction Program Design & Prioritization workshop: Governance Initiatives Process – category management cycle
Status quo – Strengths Recommendation based on leading practice
■ The vast majority of Commonwealth of PA spend . C1: Review plan to select sub-category for RA pilot Cycle are not overly complex and are good candidates . Category Analysis review to discover the most suitable categ. Strategy
Management Management for a reverse auction . Understand the supply market and internal dynamics ■ Supplier management through contract lifecycle, ■ C2-4: Pilot sealed bid reverse auction - BOP should but not in all categories design a team to pilot the following reverse auctions: sealed bid, 2 round sealed bid, English auction. Enable ■ Active participation from BOP in sourcing from the procurement in specific categories with a limited small business suppliers number of vendors to gage results Processes
Operational . Prepare a project plan detailing all the activities, timelines, and owners Organization . Ensure project management . Ensure adequate number of qualified suppliers Status quo – Weaknesses . Conduct awareness sessions on the process . Communicate RA strategy, design, lots, and bidding ■ A formal strategy for contract life cycle rules to the suppliers to avoid ambiguity management is not in place ■ C5 : Review pilot auction feedback achieved and lessons Processes ■ No spend analysis application to analyse related learned - evaluate results of the auction from both BOP procurement data: spend volume or transactions and suppliers perspective. By doing so, participants will per category better comprehend the lifecycle of a reverse auction ■ No formal performance measurement process ■ C6: Select categories for RA regular basis - perform identified spend analysis on current procurement to gain insight into the nature of the mix of goods and services it is acquiring for its supplier. Pre-determine procurement Enablers goals and strategies for appropriate RA categories
22 Reverse Auction Program Design & Prioritization workshop: Governance Initiatives Process – operational process
Status quo – Strengths Recommendation based on leading practice
■ Current SAP SRM tool has the functionality to ■ P1: Design and implement reverse auction process – Cycle provide BOP with a leading practice operational
Category streamline, simplify and automate the reverse auction Strategy
Management Management process process including communication, event management, award completion and management of product and ■ Sourcing general process standards when issuing service delivery based upon the terms, conditions and RFP/IFB pricing of the award ■ P2: Update T&Cs to include appropriate reverse auction language - BOP should update their T&C’s in Processes
Operational order to prevent any legal issues with suppliers
Organization ■ P3: Pilot new procedures – design a pilot reverse auction. Sandbox the trial version with limited vendors in order to measure results Status quo – Weaknesses ■ P4: Design and Implement a process that identifies and ■ BOP does not own end-to-end sourcing and tracks realized reverse auction benefits – BOP should contracting process for all categories evaluate and record the immediate and long-term benefits from the reverse auction Processes ■ Demand and supply are not consistently profiled on an annual basis ■ P5: Update policies & procedures – BOP should administer internal compliance for reverse auctions ■ BOP does not have a systematic and organized within specific categories knowledge management system Enablers
23 Reverse Auction Program Design & Prioritization workshop: Governance Initiatives Enablers
Status quo – Strengths Recommendation based on leading practice
■ Reverse auction tool already in placed ■ E1: Train resources to operate SAP SRM reverse auction cockpit Strategy Systems & Systems
Technology ■ Reverse auction tool integrated with the ERP system ■ E2: Review SAP SRM RA capabilities - Develop metrics and automate the collection of relevant data for the reverse auction process. BOP should encourage data visibility in order to properly evaluate auction items PI
- on: the cost savings achieved and the aggregate results
BI of the organization’s bidding efforts
Master Data & ■ E3: Fully integrate SAP SRM with the reverse auction
Organization cockpit – BOP should homogenize the procurement process in order to optimize competition Status quo – Weaknesses
■ Limited visibility into expiring contracts ■ Few data standards in place to maintain Processes standardized data ■ A single, designated database does not exist – nobody is responsible for the maintenance and updating of a knowledge database ■ Decentralized effort of data collection, validation, and aggregation Enablers
24 Reverse Auction Program Design & Prioritization workshop Agenda
Topics Start Time
Objectives 10:00
Project approach & status 10:05
BOP current state 10:10
Vision & leading practices 10:30
Recommendations: Governance Initiatives 11:00
Recommendations: Category Roadmap 11:40
Wrap-up 12:25
25 Reverse Auction Program Design & Prioritization workshop: Category Roadmap Market complexity attributes
. Availability of excess supply capacity. If . Higher # of competitive suppliers and more rivalry excess capacity exists in the supply among them, provide more effective reverse auction base, there is incentive for the suppliers process to bid in order to get more business . While the required minimum number of suppliers . E.g. Road Salt – a heavy winter can depends on the specific product and market, studies cause uneven distribution between have provided a ballpark figure of 4 or 5 supply and demand . E.g. Tires – multiple tire vendors are capable . RA can provide an effective means for of providing the required product suppliers and buyers to efficiently allocate the spare capacity
. Bids difference with more than 10% Successful . Categories with low profit margins may be more suitable for sealed events will require higher volume to be a bids good candidate for reverse auction . Small bids difference among (Economy of Scale) suppliers can generate healthy . Higher profit margins allow suppliers competition in the process to increase bidding competition Product/Services complexity
. Item has clearly defined attributes that can be expressed by the buyer and interpreted by suppliers the same way . Quantity structure (at least an estimation) . When the product/services price is the dominant portion of the product value, then the value of the product can be easily expressed quantitatively . E.g. Fuel – low lever of product complexity required
26 Reverse Auction Program Design & Prioritization workshop: Category Roadmap Internal complexity attributes
. Abundant spend by BOP will attract suppliers to . Products/services with a low level of internal compete in a reverse auction customization are good candidates for reverse . E.g. Roadway materials auctions . Business and technical requirements are fairly simple and straight forward . E.g. Fuel
. BOP should generously plan ahead so . BOP’s management team should that suppliers can plan accordingly encourage the participation in reverse . BOP should clearly forecast contract auctions expiration to anticipate candidates for . Initiate an incentive program to reverse auction encourage the use or reverse auctions Successful . Encourage cross agency collaboration events while planning a reverse auction
. Low switching cost encourages the use . Suppliers with high risk do not yield of a reverse auction good candidates for reverse auction . High switching cost shouldn’t prevent the Supplier . E.g. Network Printers & PC’s – have use of a reverse auction, but the SCF Relationship low level of sourcing risk should be taken into consideration . E.g. the learning curve of a new ERP . Strategic relationships do not yield strong candidates for a reverse auction . E.g. Road Salt – BOP should maintain close relationships due to the importance of the service for the state and fluctuation of supply
27 Reverse Auction Program Design & Prioritization workshop: Category Roadmap Reverse English auction
Reverse English Characteristics ■ Reverse English auction is based on the process rules of the standard English Auction ■ Auctioneer opens session with suggested opening bid ■ Suppliers start to bid lower prices price ■ All prices are open/ visual to all participants Reserve price ■ Competing suppliers progressively lower their bids receiving instant feedback ■ Last (lowest) bid/ price wins t Potential Category Facts Benefits Risks ■ Commoditize product/ services ■ Benefit from strong supplier ■ Supplier might not participate due to competition transparent price information for ■ Low difference btw initial bids ■ Use if relatively large number of competitors mitigate with blind auction ■ Non-critical categories suppliers is participating ■ Suppliers might wait too long to start ■ Large supplier base ■ Use if bids differences are not bigger bidding > actual lowest price cannot be reached mitigate with extensions ■ Margin driven than 5% ■ Receive transparent market info ■ Chance of Winner’s curse Reverse English variation Main sub-categories candidates ■ PC’s ■ Tires ■ Small Network Printers ■ Show only rank for participants ■ Roadway Materials ■ Tree Trimming ■ Cleaning Material (blind auction) ■ Road Salt ■ Plow Maintenance ■ Translation ■ Limit minimum decrement ■ Fuels ■ Road Maintenance ■ NSA Vegetables st ■ Construction ■ Materials - Other ■ Law Enforcement ■ Define extension time when 1 ■ NP Foods ■ Coal ■ Waste Services nd or 2 rank changes ■ GPS ■ Agriculture ■ Tobacco 28 Reverse Auction Program Design & Prioritization workshop: Category Roadmap Reverse sealed bid (Vickery) auction
Sealed bid Characteristics ■ This auction follows the same rules as the Reverse English auction ■ Except the fact that participating suppliers have no insights about who is competing and their bids. In some cases after the event the organization can release some information about the bids such as: number of bidders and best price bid Reserve price ■ More strategic auction and bidders tend to bid their true value
t
Potential Category Facts Benefits Risks ■ Non-critical to strategic categ. ■ Can be used with relatively small to ■ Reduced awareness of competition - big number of suppliers Supplier A is willing to bid less when ■ Suppliers with risk aversion ■ Protect suppliers bids with privacy he or she learns that Supplier B is ■ High difference btw initial bids settings to increase participation and willing to bid less ■ Possibility of “winner’s curse” to avoid transparency along competitors
Sealed bid variation Main sub-categories candidates ■ Software & Services ■ Network/Servers ■ Sealed bid with more than 1 ■ Mail processing ■ Professional IT Staffing ■ Professional Services round, but with defined ■ Office Supplies ■ Work & Dump Trucks ■ Police Vehicles number of rounds ■ Media Planning Services ■ IT Hardware ■ IT Service ■ Rehabilitation ■ Sealed with supplier ■ Commercial Furniture ■ Hardware & Services ■ HVAC elimination rounds ■ Medical Staffing ■ Digital MFD’s ■ Advisory ■ Other Vehicles ■ Mail 29 Reverse Auction Program Design & Prioritization workshop: Category Roadmap Reverse Japanese auction
Japanese Auction Characteristics ■ Auction starts from a pre-defined starting price ■ Price decreases in defined time steps in pre-defined price steps ■ For each price step participating suppliers must accept to remain in auction
price ■ After not bidding a pre-defined number of price steps suppliers will be excluded immediately for further participation auto-accept level ■ Suppliers can be informed about how many supplier “survived” each step, or can be conducted without any transparency t
Potential Category Facts Benefits Risks ■ Non-critical to strategic categ. ■ Very attractive auction due to ■ It is hard to define the right price transparency about lowest prices steps. Actual lowest price cannot be ■ Prices based in catalog every supplier is willing to offer reached system ■ Can be carried out with only one ■ Other auctions might lead to higher ■ Low to med supplier base supplier savings ■ Leverage items
Japanese auction variation Main sub-categories candidates ■ Show number of suppliers ■ Print ■ Materials “survived” in each round ■ Pharmaceutical ■ MRO ■ Lab Supplies ■ Lighting ■ Award more than one supplier ■ Materials ■ Electrical/Safety ■ Medical Supplies
30 Reverse Auction Program Design & Prioritization workshop: Category Roadmap Reverse Dutch auction
Reverse Dutch Characteristics ■ This auction is characterized by a first come first served principle ceiling price ■ Auctioneer increases price in regular increments at regular time intervals starting below expected price
price ■ Usually suppliers only see current price and remaining time
accepted ■ Can be carried out with only one supplier due to privacy settings by supplier ■ It is a more psychological challenge for suppliers than other reverse auctions
t ■ 1st bid wins (a ceiling price can set a price limit)
Potential Category Facts Benefits Risks ■ Huge market competition ■ Set suppliers under pressure to react ■ Suppliers might wait too long to bid > earlier then competitors other auctions might lead to higher ■ Relatively small # of suppliers ■ Can be used with relatively small savings ■ Challenge known suppliers number of suppliers ■ Hard to define ceiling price what can ■ One supplier you know with better lead to unsuccessful auction costs structures than others that you want to tap into Reverse Dutch variation Sub-categories candidates ■ Award more than one supplier
■ No candidates identified for BOP’s 3 year reverse auction program
31 Reverse Auction Program Design & Prioritization workshop: Category Roadmap Reverse auction candidate analysis
Low Candidates Delivery Services Medium Software & Services + Candidates
Advisory Creative Advertising & Audio Visual Credit Card Services Media Planning Services
Water Treatment Dental Network/Servers Vocational Mid&Green Vehicles Disease Testing Law Enforcement High Mail Processing Professional IT Staffing Legal Services Media Audit Hardware & Services Candidates CI Supplies Lab Services Wheelchair Vehicles Plow Maintenance Rehabilitation Traffic Materials IT Coal Treatment Services Electrical/Safety Small Hardware IT Service Electronic Payment Sealed bid Forklift & Aerial Lift Network Printers Medical Staffing Road Salt Aerial Police vehicles Digital MFD's Market Complexity Japanese Auction Surveillance Drug Testing Logistics Professional Services Lighting Construction HVAC Commercial PC's Recruitment English Auction Incontinent Furniture Agriculture Fleet Car rentals Truck Parts PLCB Furniture Lab Supplies Call Center Systems Laundry Products & Chemicals Bubble area is Tuna Portable Toilets & Septic Removal Pharmaceutical Other Vehicles Mail proportional to the spend Translation Tree Trimming Roadway Materials - Evaporated Salt Cleaning Material GPS Work&Dump Trucks Work Apparel NP Food Facilities Maintenance Materials Road Maintenance NSA Vegetables Canned Fruit Tobacco MRO Materials - Other Fish Food Waste Services Plastic Liners Fuels Print Medical Supplies Carpet Truck Mounted Salt Commercial Elevators/Escalator LCB Poly Bags Office Supplies Tires Spreader Units Furniture Maintenance - Internal Complexity + 32 Reverse Auction Program Design & Prioritization workshop: Category Roadmap Top spend sub-category candidates for RA(1)
Market Complexity Wave 3 ITQ sub-categories Sub-categories under BOP management Software & . High competition Bubble area is proportional to the spend Services . High supply vs low demand . Low initial bids difference + Network/Servers . High market profit margins Hardware & Services . Low product/ service complexity (3) Wave 2 Mail… Professional IT Medical IT Staffing Hardware Staffing Internal Complexity Wave 1 Police IT Service . Strong purchasing power vehicles Professional MFDs Services . Low internal customization Construction Road Salt Mail PC's . Pharmaceutical High internal stakeholder commitment Market Complexity Other Print Vehicles . Early forecast category plan Work&Dump . Low switching cost NP Food Trucks Roadway - Fuels Commercial Tree Materials . Transactional supplier relationship Tires Furniture Trimming . Low risk - Internal Complexity(2) +
(1) RA sub-category candidates can evolve over time due to the shifting of market conditions and/or internal environment (2) The internal complexity rating was based on the data spend, interviews and value lever workshop (3) The market complexity rating was based on KPMG’s knowledge database and experience
33 Reverse Auction Program Design & Prioritization workshop Agenda
Topics Start Time
Objectives 10:00
Project approach & status 10:05
BOP current state 10:10
Vision & leading practices 10:30
Recommendations: Governance Initiatives 11:00
Recommendations: Category Roadmap 11:40
Wrap-up 12:25
34 Reverse Auction Program Design & Prioritization workshop: Leading Practice Key business initiatives
“Crawl” ~2015 “Walk” ~2016 “Run” ~2017 Procurement Future State: High Maturity • RA plans aligned with the business S1: Design and implement an annual reverse • “First-auction” policy in place • RA Policies & Procedures establish auction strategy and operational planning process • Efficient RA process in place • RA knowledge and trained resources
S2: Develop S5: Conduct a S3: Create a communication O9: Evaluate change S4: Roll out reverse Procurement Health C10: Review results plan to promote reverse reverse auctioning management auction program Check to measure achieved and auction plans and benefit efforts plan: savings progress to Future State lessons learned C C C O8: Training
Strategy O7: Evaluate reverse auctioning efforts C C9: Continue conduct RA for more complex categories O6:Training E4: Review SAP SRM O1: Select O3: Create a C8: Review results RA capabilities O4: Evaluate and train dashboard to achieved and C reverse auctioning team to monitor BOP’s lessons learned efforts C execute RA progress C P5: Update C7: Conduct RA for O2: Develop a talent Policies & Procedures more complex management process that O5: Training categories E3: Full integrate SAP will hire, retain, and develop P4: Design and SRM with RA cockpit the required resources Implement a process that C6: Select identifies and tracks categories for RA realized reverse auction regular basis benefits P3: Pilot new Procedures C5: Review pilot auction feedback E2: Review SAP SRM Organization Reverse Auction Current State: Low achieved and lessons learned RA capabilities Maturity level P2: Update T&Cs C C including RA C3: Pilot 2 • No defined RA process C2: Pilot C4: Pilot process shots • No policies related to RA sealed bid English sealed bid • No formal sourcing planning C1: Review plan reverse reverse • Not all spend categories are sourced by P1: Design and reverse to select auction auction E1: Train resources to BOP Implement RA process auction • No training to use SAP SRM RA cockpit category for RA operate SAP SRM RA C pilot cockpit Operation Process Category Management Cycle Enablers Process
Initiatives C Control Points
35 Reverse Auction Program Design & Prioritization workshop: Leading Practice Market issues and concerns
Issues & Concerns How to overcome . Most suppliers prefer not to . While these supplier prefer not to compete, they want to continue to receive reverse auction compete in a reverse auction opportunities . State your selection criteria upfront and don’t change it in the middle of the process
. Reverse auctions focus on . RFPs are used to bring suppliers to a level playing field and eliminate those unfit for the price and do not consider non- current requirement price factors . Bonus feature can be used to offset this disadvantage by giving appropriate consideration to non-price factors . Reverse auctions are limited . Reverse auctions can be applied to any category with a sound business case only to commodities and are . If you can translate the evaluation into a mathematical formula, you can setup a reverse not appropriate for services eAuction
. Reverse auctions are a one- . B oth private companies and government agencies have established track records of time shot to produce savings holding reverse auctions for goods and/or services over successive months, quarters and that cannot be replicated over years time
. Reverse auctions are merely a . Reverse auctions are a liberating force for suppliers. They represent a means to open-up way of exerting power over the competitive process and create a fair, open, and level playing field for all interested suppliers suppliers
. Suppliers increase their price . Reverse auctions don’t replace best sourcing practices after reverse auction, even . T&C’s must state price increase only for specific economic price adjustment and force where terms doesn’t allow majeure
36 Reverse Auction Program Design & Prioritization workshop: Leading Practice Key takeways
. Establish leading process, communications, policies, training and tools to support reverse auctions
. Selectt pilo categories for each type of auction, prioritize MRO items, generic supplies, renewing annual agreements, consolidating buys, purchasing capital equipment or one time buys, there is a high probability that a reverse auction can be applied
. Minimize the exceptions or changes to reverse auction strategy to avoid setting negative precedent
. Regularly evaluate supplier concerns and reinforce ethics and fairness in your RA program
. Leverage terms and conditions as a mechanism to state your selection criteria upfront
. Consider augmenting existing resource skills and capabilities to drive a successful pilot and program
37 Supporting Analysis Reverse Auction Program Design & Prioritization workshop: Supporting Analysis Appendix – GAP assessment & definitions
Laggard Foundation Established Leading Excellence
Strategy & No strategy or Reverse auction mission Reverse auction mission Reverse auction strategy Reverse auction viewed Change governance for the use of & strategic objectives & strategic objectives & objectives aligned with as a core tool to perform Management reverse auction defined but not aligned defined but not aligned business goals sourcing activities No leadership engaged with organization with organization Strategy and governance Reverse auction plays a in the reverse auction No strategy or Strategy and governance communicated and key role to support
Strategy Governance program governance documented documented practiced organizational goals & Controls Reverse auction strategy & objectives aligned with business goals
No skilled resource to Established resources to Established departments Established departments Established departments perform reverse auction manage the reverse and workflows for and workflows for and workflows for Structure reverse auction process No defined roles to auction program reverse auction process reverse auction process conduct reverse auction No experienced Experienced resource(s) Highly skilled and trained Highly skilled and trained in reverse auction Lacks designated resources to execute resource(s) in reverse resource(s) in RA reverse auction auction People representation to assist Clearly defined
Organization with reverse auction incentives for the use of program RA Category No process in place to Loose process in place to Standardized reverse Well defined reverse Well defined reverse identify or conduct a identify and conduct a auction process and auction process for auction process for Management reverse auction reverse auction process periodic category Cycle different categories and different categories and analysis; supplier market scenarios market scenarios segmentation & rationalization in major No key performance Reverse auction key Operational categories indicator established performance indicators Processes Processes established and monitored
No reverse auction Basic reverse auction Reverse auction tool Sophisticated reverse Sophisticated reverse Systems & capability or tool tool available – ability to available with basic auction tool with the auction tool with the Technology conduct simple sealed customization features ability to structure ability to structure bid complex auctions complex auctions Fully integrated reverse auction tool with ERP
Enablers Master Data & BI-PI system
39 Reverse Auction Program Design & Prioritization workshop: Supporting Analysis GAP assessment enablers – SAP SRM 7.02
. BOP’s current system is SAP SRM 7.02 which has a reverse auction cockpit ready to use . The business requirements were defined based on the category analysis and the best leading practice for reverse auction
Business Requirements Supported Customization GAP Analysis
BOP’s SAP SRM 7.02 has the functionality to conduct an English reverse Conduct English auction Auction For more details look at the English auction slide
BOP’s SAP SRM 7.02 has the functionality to conduct a Dutch reverse Conduct Dutch auction Auction For more details look at the Dutch auction slide
BOP’s SAP SRM 7.02 has the functionality to conduct a Japanese reverse Conduct Japanese auction Auction For more details look at the Japanese auction slide Reverse Auction Strategy Auction Reverse SRM supports "Blind Bidding Auction" in which each new bid submitted is Conduct Sealed Bid compared by the system to the current best bid by the submitting bidder (Vickery) Auction For more details look at the Dutch auction slide
40 Reverse Auction Program Design & Prioritization workshop: Supporting Analysis GAP assessment enablers – SAP SRM 7.02
Business Requirements Supported Customization GAP Analysis
SRM supports bid ranking based on supplier comparison factors out-of-the- Rank bid based on box. Additional customization may be required to address business requirements that call for complex ranking calculation including the use of custom fields custom fields
BOP’s SRM 7.02 supports customized bids in dollars, but bids in relative % Customize bids in require customization in the bid analysis formula absolute $US or relative %
Some features supported by the tool: Do not display company ranking; Do not Customize supplier display best company bid price; Hide ranking, display first place only; Do not visibility for bids and display bid price in bid history; Do not display number of participating bidders; ranks Do not display bids from other bidders in bid history
The tool supports factored-cost bidding, thus enabling the purchaser to assign Enable & customize a competitive advantage/disadvantage to bidders through the use of adders supplier comparison and multipliers defined at auction header level, item level, or both factor (SCF) E.g. Normalized price = (raw price * multiplier) + adder Reverse Auction Strategy Auction Reverse The tool supports "Start Price" feature. Defined during auction creation, it is Enable preliminary the upper limit for bid prices bids in absolute $US, Restrictions can be imposed using "Next Valid Bid" feature provided in the relative as % or Y/N tool The tool supports maximum and minimum bids, but customization may be Customize max/min necessary to enforce minimum bids. Restrictions can be imposed using "Next Valid Bid“ feature provided in the tool. The NVB is calculated by applying the bids by supplier decrement to one of the following: Overall best bid, Company best bid, Each bidder's own best bid 41 Reverse Auction Program Design & Prioritization workshop: Supporting Analysis GAP assessment enablers – SAP SRM 7.02
Business Requirements Supported Customization GAP Analysis
The tool supports bid decrements which is the absolute or percentage Customize bid value that each bid must be lower than the last – customization is done decrements through the decrement feature provided in the tool
The tool supports manual and automatic time extensions Customize rules for time extension
Lotting is supported by the SAP SRM system using outline mechanism. Enable negotiation by Bidders must bid on every item in a lot before they can submit their bid, lots bid ranking is based on the total bid value of the lot Reverse Auction Strategy Auction Reverse The tool allows for lots to open for bidding at the same time; however, the Conduct negotiation lot bidding closes in a cascading fashion, pre-determined by the for separate lots in purchaser, thus permitting bids only on open lots parallel The cascading feature is unavailable for Dutch auctions SAP SRM 7.02 provides an efficient way to manage and communicate Login and password login credentials management for suppliers
SAP SRM 7.02 system supports a real time chat system allowing for Communication: Q&A communication between auction participants and buyers. The buyer can RA ManagementRA management system choose to communicate a message to multiple participants at the same time.
42 Reverse Auction Program Design & Prioritization workshop: Supporting Analysis GAP assessment enablers – SAP SRM 7.02
Business Requirements Supported Customization GAP Analysis
The tool allows the bidder to contact the buyer using the chat feature. The Removal of buyer may then choose from several options to remedy the situation. erroneous bids Among them is that of pausing the auction while he deletes the erroneous during the auction bid
The tool allows proxy bidding, enabling the system to automatically bid on Surrogate (proxy) a bidder’s behalf, thus promoting competitive bidding by allowing bidders bidding to easily monitor the auction. Bidder’s submit a minimum bid to indicate the lowest they are willing to submit for a line item
SAP SRM 7.02 has a feature called the "Participants List" within the live Display vendor online auction cockpit that allows the buyer to see the list of invited bidders and status their connection status
Reverse Auction Management Auction Reverse The tool has a feature called "Charts" within the live auction cockpit Display live event interface to see bid history for the item currently selected – display and bids available charts for the item and do a side-by-side comparison of multiple line items. The charts are instantly updated with each new bid
SAP does not provide online training. Normally, clients/implementation Online trainning for partners create training material that can be shared with auction suppliers participants ahead of time. This allows clarifications to be provided as necessary
The tool allows the user to create a test event in the same fashion as the
RA Training RA Reverse auction test live auction by publishing the event as ‘test event’ event
43 Reverse Auction Program Design & Prioritization workshop: Supporting Analysis GAP assessment enablers – SAP SRM 7.02
Business Requirements Supported Customization GAP Analysis
The system allows multiple scenario analysis, calculating savings at the Award analysis & line item level and at the auction level, which are displayed to buyers in scenario analysis - the live auction cockpit multiple line items If factored-cost bidding settings have been defined for bidders, and the and multiple cockpit has been set to display Normalized Prices, the savings information RA Closing RA suppliers is based on the normalized value of the best bid for each item
SAP SRM 7.02 provides standard out-of-the box reports. These can be Report the # of bids, customized as necessary $ value of bids, and time to the vendors RA Other
44 Reverse Auction Program Design & Prioritization workshop: Supporting Analysis GAP Assessment strategy – BOP RA document analysis
. List of documents provided by BOP used their current T&C and ITQ process
Document Provided by Utilization Location Analysis General T&C that is issue to suppliers in Section: 8 Estimated BOP T&C's Janice Pastor No RA language the starting bid process Quantities General IT T&C that is usse to IT suppliers Section:10 Special IT T&C's Tom Teprovich No RA language in the starting bid process Requirements Document used by BOP to qualify Statement reserves the right to conduct BOP ITQ Janice Pastor Section I 22: BAFO suppliers reverse auction (1) Statement reserves the right to conduct IT ITQ Tom Teprovich Document used by IT to qualify suppliers Section I 22: BAFO reverse auction (1) Document shared with suppliers before Reverse Auction Package Mike Richart entire document See next slide reverse auction Cover used by suppliers to transmit BAFO BAFO Auction Fax Cover Mike Richart entire document See next slide form through fax Form used by suppliers to submit BAFO BAFO Auction Submittal Mike Richart entire document See next slide through email, fax or person Document to be filled out by supplier who Intent to participate Mike Richart entire document See next slide is willing to participate Mock Live Reverse Auction Supplier trainning for reverse auction Janice Pastor entire document not analysed (for suppliers) (ppt) mocks SRM Sourcing Live Auction Internal training for conducting reverse Janice Pastor entire document not analysed Cockpit (ppt) auction in SAP SRM olde version
(1) “A. While not required, the Issuing Office reserves the right to conduct discussions with Contractors for the purpose of obtaining “Best and Final Offers.” To obtain Best and Final Offers from Contractors, the Issuing Office may do one or more of the following, in combination and in any order: 1.Schedule oral presentations 2. Request revised proposals 3. Conduct a reverse online auction; and 4. Enter into pre-selection negotiations
45 Reverse Auction Program Design & Prioritization workshop: Supporting Analysis GAP Assessment strategy – Reverse Auction Package
. BOP’s current rules of engagement for a reverse auction were compared against the rules of engagement of a leading practice
. KPMG identified certain steps that BOP currently does not outline within their current rules of engagement
. KPMG provided insight within each step so that BOP may apply the leading practice to all steps within the reverse auction process
Index BOP RA Package Leading Practice A leading practice introduction outlines the rules and technical requirements for the reverse auction. In addition, it explains the contractual requirements Introduction involved in the bidding process
Participants should be provided the necessary means of communication, phone or email, in order to receive proper technical support if needed. In addition, Contact Details support should be provided for questions regarding any rules, commercials, or requirements
Technical It is each bidder’s responsibility to perform all technical configuration tasks or
Rules of Engagement of Rules tests on his/her PC, browser settings and internet access before the auction Connectivity & Hardware E.g. internet connectivity with Internet Explorer or Google Chrome
46 Reverse Auction Program Design & Prioritization workshop: Supporting Analysis GAP Assessment strategy – Reverse Auction Package
Index BOP RA Package Leading Practice A leading practice should all vendor’s a username and password before the Username & reverse auction. The reverse auction tool will generate an email to each vendor Password in order to provide login information
Detailed instructions on how to place bids during the reverse auction will be sent to the bidders. It is recommended host a mock reverse auction with Training & Support appropriate vendors so that all bidders understand the rules
The appropriate lot parameters should be provided with the detailed information about the specification and volume for each lot so that all bidders completely Lots understand the necessary lot restrictions
Only qualified bidders will participate in the reverse auction. Bidding Rules: Discretion between the requirements and/or terms communicated during the General process, the latest documentation shall always prevail Rules of Engagement of Rules Only bids submitted through the reverse auction tool will be considered and attempt to bid in any other manner will disqualify them Bidding Rules: Bids Define how to handle with tied bids +/- Define minimum decrements
The duration outlines the reverse auction time frame, including but not limited to Bidding Rules: the preview phase, active phase, and the number of extensions Duration
47 Reverse Auction Program Design & Prioritization workshop: Supporting Analysis GAP Assessment strategy – Reverse Auction Package
Index BOP RA Package Leading Practice The reverse price is the maximum price that BOP is willing to award the Bidding Rules: services for each lot - the reserve price will be indicated within the reverse Reserve Price auction system - BOP should be aware if they want to include ‘reserve price’ this should be stated clearly on the rules of engagement
The SCF enables reverse auctions for complex products and services – BOP Supplier should clearly state within the rules of engagement if SCF is going to be used Comparison Factor so that vendors understand - BOP must clarify that SCF is not the same for all (SCF) vendors, but is based on the initial scorecard
A leading practice will provide the mock/trial & live reverse auction time and date to all vendors - specifications of a reverse auction for individual lots should Dates & Times be provided as needed
The award should state the reverse auction is final and there is no opportunity for price negotiation – the award will be subject to BOP and the vendor Award agreeing and signing the contract Rules of Engagement of Rules The document should outline that all bids are recorded within the system log - if Confirmation of required, following the completion of the reverse auction, the vendor must Final Bids provide a price breakdown that coincides with the information in the log
BOP’s current T&C’s require vendors to mail a refusal letter if they do not wish Acceptance of to participate in a reverse auction – leading practice documentation will clearly These Rules communicate that all vendors understand and accept the rules and content +/- above
48 Reverse Auction Program Design & Prioritization workshop ROE Language
■ The final round RA will be run on a web-based system provided by BOP. To participate in the final round RA, bidders will require a PC with internet access ■ Minimum requirements are:
Technical ■ Internet connection: your connection speed determines your access speed so make Connectivity sure this will not be a handicap & Hardware ■ It is each bidder’s responsibility to perform all technical configuration tasks or tests on his/her PC, browser settings and internet access before the final round RA. BOP is not responsible for technical problems deriving from incorrect configuration of the bidder’s PC, internet connection problems, security configuration, or any other technical problems not directly related to the RA system
■ The username and password to access the RA will be sent by BOP to the contact person that we have for each company Username & ■ If a company wishes to nominate a different person as bidder for the RA, please inform Password Janice Pistor ([email protected]) by email as soon as you receive this document ■ The username can only be used by one user at a time
49 Reverse Auction Program Design & Prioritization workshop ROE Language
■ Only bidders who have been qualified by BOP will be able to participate in the final round RA. Only bids submitted during the live final round RA will be taken into account for the award decision ■ Bids must be based on the service requirements communicated in the T&Cs and its schedules plus any additional clarifications issued by BOP during the final round bidding Bidding process, the proposal evaluation phase, or included in the attached quoting template. Rules: Bids Where there is a discrepancy between the requirements and/ or terms communicated during the process, the latest document shall always prevail ■ Bids submitted in the live final round RA will be considered a formal offer from the bidder to BOP. The person designated as bidder by each company is assumed to have the appropriate authority for bidding in the company’s name
■ BOP will set a reserve price for each lot. This reserve price is the maximum price BOP is Bidding willing to award the services for each lot. Rules: ■ The reserve price will be indicated in the RA system. Reserve Price ■ If the reserve price is not achieved, BOP may choose not to award the service or continue negotiating with all or any of the bidders off line
50 Reverse Auction Program Design & Prioritization workshop ROE Language
■ After carefully reviewing all participating proposals, BOP has decided to give a monetary competitive advantage to some vendors during the final round. This benefit will be automatically taken into account once you enter your total bid ■ Please note that some bidders will have certain supplier comparison factor (SCF) based on Supplier criteria as determined by BOP (synergies with ongoing projects, etc) Comparison Factor (SCF) ■ This SCF will be factored into each bidder’s bids and the rank results will include all comparison factors calculations. An example of this SCF in practice: If you bid $1,000, the platform will consider $1,000 minus the SCF for the sole purpose of determining each bidder’s rank ■ The bidders will see just their own bid and rank, but will NOT see other bids
■ All figures submitted by a bidder during the RA are registered in the RA application log. These figures registered in the log will be considered by BOP as the valid bids Confirmation ■ Within one (1) hour of the end of the live RA, all bidders shall submit to BOP their final of Final Bids version of the Final Round Quoting Template, which will need to coincide with the information in the log ■ Failure to confirm the bid as required will lead to the disqualification of the supplier
51 Reverse Auction Program Design & Prioritization workshop ROE Language
■ Submitting a bid during the live RA implies the acceptance of these rules and contents of the quoting template sent with these rules Acceptance of These ■ If there is any inconsistency or discrepancy between the provisions of these rules and the Rules provisions of the RFQ, its schedule or any other document annexed or referred to in the RFQ, or otherwise provided to the bidder in relation to the bidding, then the provisions of these rules shall take precedence
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