Reverse Auctions: Controversial Bidding Practice

Abstract

Although reverse auctions have been utilized in the procurement of goods for many years, the availability and widespread use of the Internet has recently lead to a dramatic increase in its employment. Reverse auctions have recently found their way to a new market: procurement of construction services. As business and commerce have moved toward e-business and e-commerce, construction is drawn into such new practices. There is an ongoing debate as to whether reverse auctions are suitable equally for the procurement of both goods and services. Some contractors are concerned that reverse auctions are just another form of bid shopping. It is necessary for the construction industry to understand and evaluate the pros and cons of reverse auctions. This article discusses the procedures involved in conducting online reverse auctions and describes reverse auction practices, their advantages, and disadvantages. It also examines the legal principles of reverse auctions, potential problems, and challenges to its use.