March 30, 2006

Associations

Study looks at online reverse auctions

PATRICIA WILLIAMS

staff writer

The Canadian Construction Association (CCA) is waiting with bated breath for publication of the final phase of a landmark study of online reverse auctions.

Doug Hotston, secretary of the e-construction committee, told Daily Commercial News that a report is expected to be released imminently.

“They (the authors) have been going through some minor editorial reviews with the Associated General Contractors of America and the American Subcontractors Association — the primary sponsors.”

The two-phase study is being carried out by the Construction Management Department of Louisiana State University with funding from a number of organizations, including CCA.

The initial phase entailed a review of existing materials and data related to use of online auctions. However, analysis exposed a scarcity of information supporting purported cost-savings claims.

The second phase is to gauge the actual impact of online reverse auctions on the construction industry, in terms of such matters as bidding processes, project relationships and work quality.

Reverse auctions, also commonly referred to as competitive bidding events, are an Internet-based method of bidding for the supply of goods and services.

The intent is to hold a live online competition, whereby the successful bidder is determined by the lowest price submitted to the tendering authority at the conclusion of the auction.

The CCA, as well as many local construction associations across Canada, have expressed grave concerns with respect to the use of this mechanism for procurement of construction services.

However, no cases have been reported to CCA in the last six months, Hotston said.

Also on this front, professor Bob Emiliani of Central Connecticut State University, a reverse auction expert, has requested CCA’s assistance in a new study to determine levels of coercion used in reverse auction processes.

The association has forwarded the survey component to Canadian contractors and suppliers who have participated in reverse auctions.

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