Using electronic reverse auctions in project procurement: Perceptions of construction contractors

This paper reports results of ongoing research which aims to evaluate the effects of using electronic reverse auctions in construction procurement on client contractor relationships. Various types of auctions are firstly described. Origins and optimal bidding strategies under each type of auction are discussed. The principles and procedures for construction procurement using reverse auctions are evaluated. The advantages of using electronic reverse auctions in construction procurement are given. The criticisms which electronic reverse auctions have attracted are evaluated. Results of research data collected using self completion questionnaires from large UK construction contractors is analysed and discussed. The research reveals that using electronic reverse auctions in construction procurement has potentially a detrimental effect on client contractor relationships. Most UK construction contractors in the sample believe that construction procurement using electronic reverse auctions undercuts best practice. They also believe that if a client utilises this approach to construction procurement, they should expect retaliation from construction contractors in future business relationships in the form of higher prices. The results show that the uptake of electronic reverse auctions in construction procurement is actually low. Most construction contractors view electronic reverse auctions as a zero sum game which is used by client organisations to drive down bid prices.