Reverse Auctions as a Way to Cut Costs and Boost Business in a Down Economy

Here you are, wondering how you're going to get the money together to have the gutters fixed in this difficult economy (or get the roof fixed, or whatever it is you need done). You don't want to spend more than you have to, but you need to get it done before the summer rains come (or whatever . . . ). And it really doesn't matter whether it's a down economy or a rip-roaring period of economic growth – we all like a bargain. It's just that, at present, we're more inclined to search out good value rather than just take the first thing that comes along.

As long as you're not in an immediate emergency, it's worth taking the time to get several bids on your project. The trouble with trying to do that yourself by phone is that each person you call is out to convince you that they're the best and that you should sign up with them right now. And each one has a good story to tell – or they wouldn't still be in business.

So how do you get qualified bids without being subject to the pressure of individual sales people? Reverse auctions are a good way to go. There are a number of competent reverse auction sites that you can find, each with its own individual characteristics, but each basically requiring you to:

• Register as a client;

• Describe your project in enough detail for a service provider to understand what's needed and be able to bid on it;

• Decide how long you'll keep the bidding open;

• Post the project on the reverse auction website;

• Sit back and wait for the service providers to bid.

Typically, each provider will provide a quote in dollars, and some description of their qualifications. The quote is the financial component. Their description of their resources, which can be enhanced by an internal website on some of the reverse auction websites, is their sales pitch as to why you should choose them. Most reverse auction websites also have a rating system that tells you about the experience others have had using a given contractor.

You observe the bidding and assess who is offering the best combination of factors – price, experience, qualifications, reputation, lead time, where located and so on. The system will close the bidding at the date and time you specified, or, generally, you can close it early if you want to.

A good reverse auction website will make sure you get several bids. First, the site will notify contractors who have registered in the field that you need work done in. Second, if there aren't enough contractors registered in that field, the website will search out providers in the community and invite them to bid on your project.

You won't know the identity of the bidders, since the rules of the reverse auction sites are that both the customer and the bidder or provider remain anonymous. This allows customers to review bids without being pressured into contacting the bidders. Generally there is a very successful outcome as long as you adequately describe what is needed.

Both customer and supplier need to recognize that there is a legal contract once the customer has accepted a bid, and both sides are obligated to live up to their end of the bargain. Reverse auction sites normally are not involved in that contract – they provide a market place for customers and suppliers to work together, but do not participate in the deal, and are not responsible for the outcome.

For service providers, it's a good idea to register with one or more reverse auction sites, particularly in these difficult times. By registering in all the areas of interest to you that are listed on the site, and in the location(s) that you cover, you will automatically be notified when something comes up that you could bid on. And by being able to see what others are offering, you can fine-tune your bid by emphasizing your special skills, experience etc. to get the best chance of winning the job.