Auction Types
English Auction
MVB Multi Variable Bidding Auction
NPV – Net Present Value Auction
Weighted Auction
Comparative Auction
Dynamic Auction
Yankee Auction
Dutch Auction
English Auction
The English auction is the most common type of auction as, in most cases, price plays the primary role. In cases where companies prefer pass-or-fail procedures for technical evaluation and drive candidate suppliers to compete with a sole ultimate evaluation criterion: the price.
This way, evaluation criteria such as delivery time, quality of technical features, after-sales service etc., which are required and non-negotiable, are evaluated before the financial offer is submitted, whereas the price remains the ultimate evaluation criterion.
MVB Multi Variable Bidding Auction
In many auctions, bids are compared based on the best total price, calculated by adding together the prices of the individual items included in the auction.
This can be achieved by creating an auction with multiple items and specifying the quantity, starting price, bidding increment and other parameters for each item. Participants submit a separate unit price bid for each item, and the system calculates the total price, taking the quantities into account, and ranks each participant accordingly.
This approach also provides visibility into the individual prices of each item—information that would not be available if participants submitted a single price for all items combined.
This type of electronic auction is called a multi-variable auction, or MVB (Multi Variable Bidding).
NPV – Net Present Value Auction
In a number of auctions, apart from the purchase price, the total price is influenced by two more factors:
- the current maintenance and usage costs of the procured goods
- the payment method of the individual costs, both for the purchase and for the current usage costs of the goods.
It is obviously pointless for the organizer to go forward with procurement relying only on low prices and not taking future expenses into account.
It is also obvious that the organizer’s maximum and minimum annual cash flow can be a restriction, if not the main criterion when choosing a bidder.
Weighted Auction
Price-weighing
The weighted auction brings offered prices to the same comparison level when that cannot be done by the suppliers themselves. For example, a procurement with a different delivery location. In cases where the purchase price is not the only criterion, but the features of the material or the procurement in general, also need to be taken into account, both features and score are weighted.
Comparative Auction
It is common practice, when comparing two products, to compare their features and prices separately. This way, results are along the lines of “this is much better than that one, but more expensive by X%”, and the purchase decision depends on whether the price (i.e. price differences are decisive) or the features (i.e. quality is of interest) are prioritized.
Respectively, in a comparative auction, features and prices are evaluated separately. The result is formed by their combination, after setting appropriate weight factors.
Dynamic Auction
The dynamic auction is a variation of the English auction, sharing the same features, except for the rule of offer validity.
In a dynamic auction, in order to be validated by the system, each offer must meet the following two key criteria:
- its processing must start within the auction’s time limit.
- the offered price must be better than the starting price, the current best price on the system, or the bidder’s previous bid.
Dynamic auctions also allow for two winners for the same procurement.
Yankee Auction
The American auction is a popular auction type that is used when the organizer wants to purchase large quantities of the same goods, material or services from more than one sellers. Before the auction, the buyer states the minimum quantity they wish to purchase from each seller, whereas the maximum quantity remains unspecified. Before the auction, the buyer states the minimum quantity they wish to purchase from each seller, whereas the maximum quantity remains unspecified.
Dutch Auction
The Dutch auction is usually used when the purchase involves large quantities of one item from more than one seller, at different quantities and prices for each.
In this case, the starting prices are disadvantageously low for the participants before gradually reaching the average market prices. When the price reaches their preferred level, each participant submits their bid, stating the quantity they wish to offer at the current price.
If the quantity is sufficient, it is promptly secured and subtracted from the rest of the quantity to be negotiated and purchased. In the end, the buyer has purchased the total quantity at great prices, as the suppliers are pressured into submitting their bid early, before others secure it.
