Electronic auctions have become commonly used tools in utility sourcing and procurement. The auction process provides quick insight into current market conditions and prices, decreased procurement cycle time and significant cost savings.
To enhance decision making during the auction process, Pantellos offers an option called bidder weighting that ensures consideration of criteria other than price. Here’s how it works. The buyer first identifies evaluation criteria that influence the buying decision—such as quality, delivery capabilities, the supplier company’s financial strength and the supplier’s history with the buyer. These criteria are then assigned a “weight,” a numerical value. The weighted value is applied as a discount to the bid price, which means that each bidder’s price reflects the buyer’s evaluation criteria and is represented to the buyer as an evaluated price. Bidders are aware that the buyer is evaluating criteria other than price, but weighting factors are not revealed to bidders before, during or after the auction.
Bidder weighting helps to ensure clear auction results, enabling suppliers to bid their most competitive price. Instead of collecting bid prices before considering other evaluation criteria, buyers can factor in the criteria that are most important in the decision to buy.
“Bidder weighting offers an objective way to include factors other than price in the award decision,” said Pantellos Dynamic Solutions Manager Ricardo Castaneda. “Suppliers know how competitive they can be, which results in the most competitive price for the buyer.”
Pantellos has used bidder weighting in many auctions. “So far, we’ve used bidder weighting when it was appropriate,” said Castaneda. “Buyers are responsible for assigning the weight, so they need a clear understanding of how to use it. In addition, the buyer needs to be familiar enough with the supply base to identify the proper evaluation criteria.”
Would bidder weighting enhance the results of your next online auction? To learn more about this option, contact Ricardo Castaneda or Kevin Kupfer at Pantellos.
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