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In light of the limited recognition of electronic reverse auctions (e-RA) in the acquisition field, the purpose of this research paper is to further examine the use of e-RAs throughout the federal government and the Department of Defense (DoD). By exploring a multitude of auction types and designs that have been or are currently being used in the private sector, these practices set a basis for researching the auction types being used in the public sector. This paper further explores the regulations guiding the use of e-RAs and investigates the federal government's application of reverse auctions through studies, reports, and interviews with users of e-RAs. Details as to what attributes are prevalent in these e-RAs, what features are best suited for e-RAs, and what benefits have been derived from the use of e-RAs in the federal government are also included. Finally, the researchers found that e-RAs have increased transparency, cost savings, and efficiencies in the acquisition process. Although reverse auctions are being used effectively, the researchers found that there are still opportunities for improvement including incorporating a fully functional best-value tool into e-RA technology and developing more thorough federal guidance on e-RAs as an alternative pricing method. ; http://archive.org/details/electronicrevers10945422 ; Outstanding Thesis ; Approved for public release; distribution is unlimited.

Elektronische Beschaffungsauktionen sind das wohl am intensivsten diskutierte Einkaufsinstrument des vergangenen Jahrzehnts. Befürworter sehen den Grund dafür primär in den zu erzielenden Preisreduktionen im Vergleich zu Face-to-Face-Verhandlungen oder Ausschreibungen. Bei Durchführung einer so genannten electronic reverse auction ist eine Vielzahl an Parametern wie der Auktionstyp, die Dauer des Verfahrens oder der Transparenzgrad zu bestimmen. Dieser Artikel stellt die zur Verfügung stehenden Parameter bei einer Einkaufsauktion vor und zeigt auf, in welcher Beschaffungssituation welches Verfahren zu wählen ist. Electronic reverse auctions (eRAs) are one of the central tools in e-procurement. They enable significant price reductions in comparison to former negotiation methods. When conducting an eRA purchasers have to decide on a variety of parameters such as the auction type, the time limit or the transparency degree. This article introduces these parameters and connects them to specific purchasing situations. Keywords: reversed auction

ABSTRACTReverse auctions in business‐to‐business (B2B) exchanges provide numerous benefits to participants. Arguably the most notable benefit is that of lowered prices driven by increased competition in such auctions. The competition between sellers in reverse auctions has been analyzed using a game‐theoretic framework and equilibria have been established for several scenarios. One finding of note is that, in a setting in which sellers can meet total demand with the highest‐bidding seller being able to sell only a fraction of the total capacity, the sellers resort to a mixed‐strategy equilibrium. Although price randomization in industrial bidding is an accepted norm, one might argue that in reality managers do not utilize advanced game theory calculations in placing bids. More likely, managers adopt simple learning strategies. In this situation, it remains an open question as to whether the bid prices converge to the theoretical equilibrium over time. To address this question, we model reverse‐auction bidding behavior by artificial agents as both two‐player and n‐player games in a simulation environment. The agents begin the game with a minimal understanding of the environment but over time analyze wins and losses for use in determining future bids. To test for convergence, the agents explore the price space and exploit prices where profits are higher, given varying cost and capacity scenarios. In the two‐player case, the agents do indeed converge toward the theoretical equilibrium. The n‐player case provides results that reinforce our understanding of the theoretical equilibria. These results are promising enough to further consider the use of artificial learning mechanisms in reverse auctions and other electronic market transactions, especially as more sophisticated mechanisms are developed to tackle real‐life complexities. We also develop the analytical results when one agent does not behave strategically while the other agent does and show that our simulations for this environment also result in convergence toward the theoretical equilibrium. Because the nature of the best response in the new setting is very different (pure strategy as opposed to mixed), it indicates the robustness of the devised algorithm. The use of artificial agents can also overcome the limitations in rationality demonstrated by human managers. The results thus have interesting implications for designing artificial agents in automating bid responses for large numbers of bids where human intervention might not always be possible.

This article investigates a hybrid procurement mechanism that combines a reverse auction with flexible noncompetitive contracts. A buyer adopts such mechanism to procure multiple units of a product from a group of potential suppliers. Specifically, the buyer first offers contracts to some suppliers who, if accepting the contract, do not participate in the auction while committing to selling a unit to the buyer at the price of the subsequent auction. For the suppliers rejecting the offers, they can join the subsequent auction with the other suppliers to compete on the remaining units. When the buyer offers only one flexible noncompetitive contract, we find that the selected supplier may accept the offer regardless of whether he knows his exact cost information. Meanwhile, the buyer can benefit from offering such a contract, as opposed to solely conducting a regular reverse auction or offering a noncompetitive contract that does not allow suppliers declining offers to join the subsequent auction. Moreover, we find that the suppliers' information about their own costs has a significant impact on the buyer's decision. When the buyer makes multiple offers, we analyze the resulting game behavior of the selected suppliers and demonstrate that the buyer can benefit more than just offering one such contract. Therefore, the hybrid procurement mechanism can be mutually beneficial for both the buyer and the selected suppliers.

PurposeThis paper attempts to provide an empirical cross‐industrial study on critical success factors impacting on "price" and "process" performance in business‐to‐business (B2B) e‐reverse auction design.Design/methodology/approachBased on an online survey to a panel of academic experts and practitioners, the paper presents the empirical validation of a previous conceptual model using a confirmatory factor analysis (CFA) approach.FindingsResults demonstrate that a multi facet construct consisting of six main dimensions impacts on e‐auction performance. Moreover, these dimensions differently impact on price and process performance.Research limitations/implicationsBecause of the complexity of the framework, the sample size and the qualitative nature of experts' observations, results should be seen as more indicative than conclusive and therefore generalization should be additionally tested.Practical implicationsFindings provide useful information for the formulation of managerial decisions in designing the auction event/process and supporting the definition of different negotiation strategies.Originality/valueThis article is a first attempt to test a conceptual framework on critical factors impacting on e‐reverse auction performance in a B2B context. A lot of conceptual papers try to systematize the numerous variables affecting e‐auction success and their complex relationships into a single comprehensive framework; nevertheless there is a lack of empirical evidence supporting these models especially in the B2B context.

PurposeTo investigate the diffusion of online reverse auctions by exploring differences between their early, late and lagging adopters. More specifically, adopter categories are compared against organizational characteristics and auction behavior as a result of learning. Organizational characteristics include number of employees and purchasing authority structure (PAS). Differences in learning are investigated by behavioral manifestations, consisting of the savings achieved, as well as the use of bundles in reverse auctions.Design/methodology/approachFour hypotheses were developed based on academic and trade literature. Data were collected with a large‐scale online survey among members of the Institute for Supply Management, receiving 363 complete and useable responses. Records were split into three adopter categories based on whether the respondent's firm adopted reverse auctions early (before April 2002) or late (after April 2002), or whether the adoption was merely planned. Differences related to the time of adoption were explored via nonparametric χ2 contingency table analyses. The χ2 statistic was used to determine whether a hypothesis is supported or rejected.FindingsAdopter categories differ in regards to number of employees, the savings achieved, and their use of bundles. No differences were detected in terms of PAS. Explanations for these findings are provided.Practical implicationsThe results support the diffusion of online reverse auctions, provide encouragement for their adoption especially also by smaller firms, and suggest that late adopters are not disadvantaged when compared to their early‐adopting counterparts.Originality/valueNo published studies have investigated the diffusion of online reverse auctions for business‐to‐business procurement, or explored potential differences between early adopters, late adopters and laggards.

PurposeThe purpose of this paper is to investigate e‐reverse auctions (eRA) implementation experiences across a diverse group of firms and sectors in the Indian context, to derive useful insights for theory and practice.Design/methodology/approachThe paper takes the form of a qualitative multiple case study following direct observation of object reality. The data analysed include written documentation, archival records, physical artifacts and unstructured interviews with key eRA personnel.FindingseRA work best in a competitive, high capacity marketplace and are the dominant strategy when the focus is on low search cost per supplier, when the percent reduction over time in the price offered by the current supplier is low and when the product is standardized. The optimum number of bidders is five to ten. Most of the findings are in line with literature but some of them differ too. These will add to academic discourse.Research limitations/implicationsThe small sample size and case method approach limits the ability to generalize the findings. The firms were selected as a convenience sample and so may not be truly cross‐sectional. Only analytical generalisation is claimed rather than any statistical generalisation.Practical implicationseRA improve effectiveness of the sourcing process and facilitate access to new suppliers. They also lead to standardization of sourcing procedures, reduced order cycle, reduced prices and generally higher service levels. This paper will help firms in India and other countries to develop policies, strategies and procedures while implementing eRA.Originality/valueThe paper is perhaps the first on eRA practices in India. The author describes the practices in detail and based on this develops a framework for eRA process and provides detailed and concise guidelines for managers.

Government e-procurement initiatives have the potential to transform local institutions, but few studies have been published of strategies for implementing specific e-procurement tools, particularly involving procurement by a foreign government adapting to local culture in the Middle East/North Africa (MENA). This case describes procurement at a forward operating base (FOB) in Kuwait in support of operations in Iraq. The government procurers had to deal with a phenomenon unique to the MENA region: wasta. Wasta is a form of social capital that bestows power, influence, and connection to those who possess it, similar to guanxi in China. This study explores the value proposition and limitations of electronic reverse auctions (eRA) with the purpose of sharing best practices and lessons learned for government procurement in a MENA country. The public value framework provides valuable theoretical insights for the implementation of a new government e-procurement tool in a foreign country. In a culture dominated by wasta, the suppliers enjoyed the transparency and merit-based virtues of eRA's that transferred successfully into the new cultural milieu: potential to increase transparency, competition, efficiency, and taxpayer savings. The practices provided herein are designed specifically to help buyers overcome structural barriers including training, organizational inertia, and a lack of eRA policy and guidance while implementing a new e-procurement tool in a foreign country.