Reverse e-auctions an invitation to cut standards
The chief executive, who wished to remain anonymous, said he thought that the company had completed the procurement process after submitting a 206 point questionnaire, with 9 attachments, followed by a 122 question tendering document with 18 attachments in February.
“We heard nothing for a month, which was odd given the contracts were to start on April 1. Suddenly we were told, ‘Congratulations. You have been selected to take part in a reverse e-auction’.”
On May 19 the chief executive sat down with his finance director, logged into the LPP website and waited for the bidding to start.
The company had submitted tenders to provide palliative care and care for physical frailty and dementia. It had made bids of more than £1,000 a week for places in its homes. To take part in the e-auction it had to drop its price by at least £8 at a time. When bidding began the company was told its price was in the bottom five in the shortlist of 20.
“We wanted to test the system so we gingerly put in a bid of £10 below what we had tendered. Our position didn’t change,” he said.
“After a few more bids our position had not changed at all. By then we had reached the point where we could not cut the price further without undermining the quality of care so we stopped.”
In all, the company took part in three e-auctions. “In the end we really pushed it and cut our price by over £100 really just to see what would happen. I think we moved up a few places to 15th. It was a very depressing experience.
“You are filled with dread about what you are going to have to cut back on to get within the winning price. It is devoid of any human consideration. It’s fine if you are supplying stationery, but we are talking about human beings. This is an open invitation to companies to cut standards.”
Health Direct points out that reverse auctions are the result of the desire to get something for nothing.
They very rarely work as the winning company often has to come back for more money when they find they cannot provide the service to the standard required for the winning bid. It is a fallacy that it saves money!!