- ASC Proceedings of the 40th Annual Conference
- Brigham Young University - Provo, Utah
- April 8 - 10, 2004
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Reverse Auctions in Construction
In the past few years, a new form of bidding on construction projects has developed. The process is known as reverse auction bidding. A reverse auction is an internet-based method of bidding for the supply of goods and services. In the construction industry, the intent of the reverse auction is to hold a live, online bidding competition where the successful bidder is determined by the lowest price submitted at the end of the auction. Owners will use this process to get a better price than they would be able to receive through the traditional bidding process. From the owner’s perspective, the process is seen as a tool to save money. In general, the construction contractors view the process in a negative light, stating that it is a form of bid shopping and that it also cuts profits on jobs even more in a competitive economy. The purpose of the research was to find out how popular and well received the reverse auction bidding process is from the viewpoint of general contractors in Georgia, North Carolina and South Carolina.
Key Words: Reverse Auctions, Bidding, Bid Shopping, Procurement
Introduction
In today’s uncertain economy, companies are looking for ways to cut costs. In addition to downsizing, firms are looking for ways to increase value on goods and services purchased. A new process that has recently caught on is procurement through a reverse auction bid. Companies began using this process to purchase office supplies, equipment, and materials. The process has proven beneficial for the purchase of commodities. In the past few years, the process has been introduced to organizations and companies to acquire the services of general contractors. Reverse auctions require prequalified contractors to electronically submit bids on a predetermined Internet website within a certain specified time frame. The bidders are able to see the bids submitted by competitors, but each competitor’s name is kept anonymous. The owner reveals the bids and the contractor has the opportunity to submit a lower price until the auction is closed and the contract is then awarded to the lowest bidder. When a lower price is given within a few minutes of the bid deadline, the deadline is extended for a few more minutes in order to allow other bidders an opportunity to resubmit another price. Time extensions continue until no more bids are submitted within the time extension. In contrast, by using the traditional bidding process, each bidding party submits their quote at a specified location, either in person, by facsimile, or via mail before a given time. Construction companies are given one chance at submitting their best price for the job.
Owners see this process as an opportunity to build a project at a lower price than would have been possible through traditional bidding. Many contractors view this as a form of bid shopping that unfairly plays the bidding parties against one another. In order to get the job, contractors are tempted to take the project for a lower price than they should if they are going to be profitable on the project as well as provide the owner with a product that meets their expectations.
Potential cost savings for the owner makes the reverse auction process very attractive to project owners. A non-construction example of the savings that can be realized by the use of this system is where United Technologies Corp. experimented with the system and saw the cost of the circuit board that it uses to install in its appliances plummet 43 percent, resulting in a savings of around $32 million (Matthews, 2002). Bechtel Corp., a $16 billion construction and engineering firm, is looking to cut its $7 billion annual spending by an average of 10 percent through the use of a reverse auction procurement system. According to Larry Ford, Bechtel’s e-procurement team leader, “reverse auctions ensure we’re getting a fair market price for what we’re paying” (Moozakis, 2001). Fedbid.com was first used on November 30, 2000 for the bidding of the installation of 24 automated restroom door operating systems. Three contractors submitted three bids and saved the government 17.6% off of its desired target price (PR Newswire, 2001). In a Purchasepro case study, Owens Corning realized a seven percent savings on a project when the bidding was switched to a reverse auction from a traditional paper bid process (Purchasepro, 2002). Purchasepro is an online auction service provider contracted by project owners to conduct the online bidding process.
Many online auction services are in place to assist owners with establishing an online auction bidding their project. Two of the largest of these are Buildpoint.com and Freemarkets Inc. Since it started online procurement auctions in 1995, Freemarkets boasts $25 billion in market volume and $5.2 billion in customer savings. According to Karen J. Kovatech of the Pittsburgh-based Freemarkets Inc., customers save an average of 17% when they use the reverse auction process (Angelo, 2002). Typically, these firms are paid a commission averaging 2.5% for their services.
Government organizations are using this process for the procurement of office supplies, equipment, and materials for manufacturing, but have used the reverse auction process sparingly in the procurement of construction services. Some states such as Georgia have begun to use the process for bidding highway work (Sawyer, 2001). Owners have used this process in private commercial construction projects such as new Home Depot stores and Exxon/Mobil remodels and upfits. Big-box retailers such as Target and Best Buy are using this bid process in the procurement of construction work. Also, the three major U.S. automakers and some pharmaceutical manufacturers are also using reverse auctions to obtain contractor services for their projects (Angelo, 2002). The types of projects being bid via reverse auctions will be explored further in the survey findings portion of this paper.
However, from the general contractor’s point of view, there are many risks associated when bidding a project via an online reverse auction. In the heat of the battle, people are tempted to cut their margins and cut corners to win the bid (Barner, 2003). The process pits contractors against each other in a race to the lowest bid, which could compromise quality and create a climate of animosity. This also leads to an increased potential for the contractor to submit change orders to the owner in order to help make up the lost profit (NECA Minneapolis, 2002).
The Minneapolis, MN chapter of the National Electrical Contractors Association (NECA) has produced a paper on their position regarding online reverse auction bids. According to the Minneapolis NECA, “reverse auction bidding is an electronic form of bid shopping and bid peddling. It has been demonstrated that bid shopping often results in poor quality of workmanship to the detriment of the public, customer, and contractors. In essence, reverse auction bidding is bid shopping, except that the harmful effects are exacerbated. At least when bid shopping is done, the contractor has the opportunity to negotiate the circumstances by which they lower their number” (NECA Minneapolis, 2002).
The Canadian Construction Association (CCA) strongly opposes the use of the reverse auction for the procurement of construction services. The CCA states that the reverse auction does not respect the prevailing industry practices for construction procurement. The reverse auction process is not designed for construction services procurement; thus it creates the greater likelihood of disputes, bad faith, and an increased risk of claims. Also, the extension of bid closing times and the ability to resubmit prices allowed by reverse auctions can be interpreted as a form of pre-closing negotiation or bid shopping. Finally, the CCA states that under traditional bidding practices, the owner is receiving the contractor’s absolute best ‘competitive’ price outright for providing the services required. The Internet auction encourages the contractors to initially submit an inflated price, knowing that there will be an opportunity to resubmit a more competitive price. As a result, the owner runs the risk of not receiving the contractor’s best competitive price (CCA, 2001). Owners will often point to the difference between the initial price and the final price as proof of the cost savings provided by the reverse auction bid process. However, as mentioned earlier, opponents of this argue that bidders are not going to submit their best number at the beginning of the auction, so these perceived savings are invalid (Thompson, 2002). The CAA goes further to say that reverse auctions are suitable for some procurement, such as supplies and material, but not when combined with construction services.
The Ontario Roofing News raises other concerns that those participating in the reverse auction process should be aware of such as the authenticity of the lower bid being submitted. Since bids are placed anonymously, how can it be guaranteed that one of the anonymous bidders isn’t the owner or owner’s representative submitting quotes to drive the price down (phantom bids)? Also, the National Roofing Contractors Association (NRCA) has issued a position paper stating that they believe that reverse auction bidding will encourage high quality contractors to look for ways to cut their cost by using lesser quality materials and less expensive and less qualified labor (Perks Publications, 2002). The Canadian Electrical Contractors Association (CECA) also raised these same concerns as well as the potential for bid shopping (CECA, 2002).
Other trade industry organizations are now investigating this process and are considering issuing policy statements. The Construction Users Roundtable of Cincinnati (CURT) have developed a core of essential elements of reverse auctions that include prequalifying bidders before the auction, clearly defining scope so that all bidders understand it, and clearly defining non-price items that affect performance such as safety, quality, training and schedule (Krizan, 2003). The AGC of Minnesota and the PHCC (Plumbing, Heating, and Cooling Contractors Association) are currently soliciting opinions from their membership (Turner, 2003). The Associated Building Contactors of America (ABC) is also soliciting feedback from its constituency on the use of reverse auctions. Michael Pearlstein, regulatory affairs manager for ABC, said that although his organization has not taken an official position on reverse auctions, some ABC members believe the process is not appropriate for purchasing construction services (Johnson, 2003).
At this time, the national AGC (Associated General Contractors) does not oppose electronic bidding, but feels that this form of bidding treats construction services as a commodity. AGC President Larry Gaskins was quoted in Engineering News Record (ENR) as saying that “construction is a service not to be treated as a commodity. If a reverse auction is going to be used, we need to preserve the integrity of the bid process and prevent the bid shopping aspects” (Angelo, 2002). According to AGC, reverse auctions do not guarantee the lowest price for owners and may encourage imprudent bidding practices. Price alone is not the sole criterion for construction procurement; schedule, safety, quality, responsiveness and past performance should also be considered (Wright, 2003).
In an industry briefing paper produced by a Minneapolis law firm, the issue of “best value” and reverse auction bidding was addressed. In this report, the author said that the reverse auction process pressures bidders to reduce their main price variable, labor and supervision. The paper also elaborates that proper site safety is one of the first items to be cut when costs are being reduced. Finally, the potential adversarial relations and loss of project partnering that reverse auctions may cause will potentially be more costly than any savings garnered through the auction process (Thompson, 2002).
ENR.com’s November 2002 website poll on reverse auctions solicited strong concern by contractors over a growing trend among owners to use reverse auctions for construction services. More than 1100 responses were received with 94% rejecting reverse auctions citing system integrity, anonymity and bid shopping aspects as major concerns (Angelo, 2002).
On the other side of the issue, proponents claim that reverse auctions are simply price-setting mechanisms similar to sealed bids (Tuchman, 2003). Major owners in the pharmaceutical, petroleum and “big-box” retail areas are pushing contractors to participate in reverse auctions. These owners feel that they are getting the best value and lowest prices. Suppliers can see what they’re up against and the open system enables them to see exactly how contracts are awarded (Warner, 2002).
The research conducted for this study shows that the reverse auction bid process saves the owner money. This study also shows that contractors do not see this process as attractive in acquiring work. The most important point discovered in this process is that the contractor must be able to accurately determine what their bottom line cost on a project is going to be and not be tempted to go below this line when the adrenaline starts flowing during the auction process.
Methodology
A twelve-question survey was developed to determine the popularity and the opinion of contractors in regard to the reverse auction online bidding process as well as how it compares to traditional bidding. 314 surveys were sent via the U.S. mail to AGC general contractors in Georgia, North Carolina, and South Carolina along with a letter explaining the reverse auction process and the anonymity of their participation. A breakdown of the percentage of the responses has been included in Appendix A.
Survey Results
Of the 314 surveys mailed out, 204 were returned, resulting in a 64.97% rate of response. Of these 204 responses, only 31 or 15.2%, had participated in a bid using reverse auctions. Interestingly, twenty-one of the returned surveys had noted in the margin of their survey that they never would bid a project via this process when responding to the question “has your firm bid a project using reverse auctions?”
The next three questions determined whether or not the types of projects being constructed were using the reverse auction process. Question two asked what segments of the industry had the contractor participated in reverse auctions and more than one answer was acceptable. Twenty respondents, or 64.5%, had used the process for bidding private commercial projects while eleven respondents (35.5%) had bid private industrial projects via reverse auction. None of the respondents checked any public projects. These responses validated the literature search finding that reverse auctions were used primarily in private commercial and industrial projects. These results also reflect that commercial contractors are more likely to participate in reverse auction bids, at a rate of almost 2 to 1, over industrial contractors. The results also reflect that reverse auction bidding is not used in residential construction, which validates the same information obtained in the literature search. However, it would be unwise to assume that there are no residential jobs being bid via reverse auction.
The third question was constructed to find out the size of the projects being bid by reverse auction. Only two respondents (6.4%) selected projects less than $1 million. No one selected projects greater than $10 million. The three remaining categories of price breakdown were evenly distributed among the respondents. Ten contractors (32.3%) each selected projects between $1 and $3 million as well as between $3 and $5 million. Nine (29%) had bid the majority of reverse auction projects in the $5 to $10 million range. This substantiates the results from the first question where 65% used the process for private commercial jobs.
The fourth question of the survey simply asked the contractors which sector of the industry had the firm bid more projects: the public or private sector. Thirty of the thirty-one (96.8%) respondents selected the private sector. The one respondent who selected the public sector failed to check a category for which segment of the industry it had bid the job, resulting in a margin of error of 3.2% for this question as well as question number two.
Questions five through eleven dealt with how the general contractor perceived reverse auctions and how reverse auctions compared to traditional bidding practices. Eighteen (58.1%) respondents replied negatively: the process is not fair to the contractor. The next question determined the impact of the reverse auction bidding system on profit margin as compared to the traditional bidding process. Twenty-nine of the thirty-one respondents said that reverse auctions decreased profit margin. Eleven (35.5%) said the process had greatly decreased profit margin while eighteen (58.1%) said that profit margin had decreased slightly. One contractor stated that the profit margin between the two did not change. One contractor said that the profit margin had actually increased slightly. No one said that using reverse auctions greatly increased the expected profit margin on a project. Twenty-one of the thirty-one (67.7%) respondents disfavored reverse auctions. Of these twenty-one, eleven (35.5%) strongly disliked reverse auctions while ten (32.3%) mildly disliked it. Seven (22.6%) said there was no difference between the two. Three (9.6%) actually favored reverse auctions over traditional bidding. No respondents strongly favored reverse auctions over the traditional bidding process.
Question eight asked the contractors how the bidding process affected value to the owner in comparison to the traditional bidding process. Value was meant to include other non-price aspects of completing the project such as quality, schedule, safety, and the relationship between the contractor and project owner. Eleven (35.5%) respondents selected there is no difference in value between the two. One contractor selected the ‘slightly increases value’ category. The remaining nineteen contractors said it had a negative affect on value, with ten (32.3%) stating that reverse auctions greatly decreased value and nine (29%) selecting the ‘slightly decreases value’ category.
Question number nine asked the contractors about their experience with reverse auctions, whether it was positive, negative, or no opinion. In contrast with the responses to question number seven, only seventeen (54.8%) responded negative, where twenty-one responses disliked the process when responding to question seven. Two responses were neutral and twelve (38.7%) stated that their experience with reverse auctions was positive.
The tenth question asked the contractors if they felt the construction industry was moving more toward using reverse auctions for the procurement of work. An overwhelming majority of the respondents said that it was not. Twenty-four of the thirty-one (77.4%) respondents stated no, while the remaining seven (22.6%) said the industry was moving more toward using reverse auctions.
Responses to the eleventh question reflected the pattern of questions six through eight. The contractors were asked what impact the use of reverse auctions had on their decision to bid a project. One contractor would be slightly encouraged to bid a job if the reverse auction bid process was used while ten (32.3%) would be slightly discouraged to bid a job using reverse auctions. Nine contractors (29%) said it had no impact on their decision to bid a project. The remaining eleven (35.5%) contractors were highly discouraged to bid a project using reverse auctions.
The final question was developed to find out how much work the contractors’ bid versus negotiate. All respondents were asked to answer this question, regardless of whether or not they have participated in a reverse auction bid. The ideology behind this question is that the more work a contractor bids versus negotiates, the more likely they may encounter reverse auctions. Appendix B shows the distribution of the results for question twelve, including the breakdown of all responses of those contractors who have bid projects via the reverse auction bid (RAB) process and those who have not. The distribution of responses for all surveys received is close to a bell-shaped distribution. As previously mentioned, the distribution shows that those who have bid a job via the reverse auction process negotiate less of their work.
Contractors’ Comments
At the end of the survey, contractors were asked to discuss their experiences and concerns with the reverse auction bidding process. Nine contractors surveyed included comments. Almost all who responded touched on the concerns that were covered in the literature search portion of this research effort. Most mentioned their concern with the reverse auction bid process treating construction as a commodity rather than as a service. Most also mentioned their concern about the process being a form of bid shopping. The majority also mentioned that the contractor might be tempted to cut corners to make up the lost profit that would be expected if the project had been awarded using traditional bidding methods. They further discussed that if this temptation to cut corners is put into practice, the owner will not be getting what he or she is expecting and the reputation of the contractors will obviously suffer.
Three contractors mentioned their concern that the decrease in profit margin required to obtain work through reverse auctions will result in more contractor failures and bankruptcies. Respondents also mentioned that the lowest bid contractor may be tempted to shop subcontractor bids, if awarded the project, at a much lower expected profit margin than was reasonably expected. Also, during the bidding process, the contractor may be tempted to use a low ball subcontractor’s price as a part of their bid without being able to fully qualify the subcontractor prior to using their price.
As discussed in the literature search, the reverse auction process focuses on price. The contractors mention that the best price is not always the best value. Safety, owner-contractor relationships, quality, responsiveness, past performance and schedule are also factors that should be considered when bidding a project. In one contractor’s opinion, the reverse auction process fails to address any of these factors.
Another concern mentioned was that the owner might submit “phantom” bids during the bidding process to drive the price of the project down. Since the bids are submitted anonymously, there is no guarantee to prevent this from happening, especially if the owner is not using an outside source to conduct the auction.
Conclusions and Recommendations
Reverse auctions are a valuable tool for project owners to procure contractor services at a much lower price than would be achieved through traditional bidding practices. However, project owners who choose to use reverse auctions must realize that there are other issues to take into consideration besides getting the lowest price possible from a general contractor. The project owner should also take into consideration the relationship with the awarded general contractor when using the reverse auction system. Does this system create a greater potential for change orders from the contractor to make up for perceived loss of profit, thus creating the potential for an adversarial relationship between the contractor and owner? Does this process encourage the contractor to cut corners and not provide the owner with the product and level of service specified in the contract documents? Will the low bidder provide the best value when taking other aspects into consideration such as quality, safety, and schedule? Owners must understand the full realm of potential circumstances, both positive and negative, before choosing to bid projects using reverse auctions. The owner must be aware of the contractor’s perception of reverse auctions. In traditional bidding, contractors are given one opportunity to submit their best price. With reverse auctions, contractors will most likely inflate their early quotes and submit their best price well after the bidding process starts. Owners should take this into consideration when determining how much they really saved when bidding a project via reverse auction. Owners should also work to educate their contractors on this bidding method and take into consideration contractors’ ethical concerns such as bid shopping.
Contractors must have complete understanding of a project when they are bidding by reverse auction. The contractor must have each cost associated with the project pinpointed. This is what makes the construction industry unique because the exact costs are not known until the project is complete. However, unless contractors can get a solid grasp of these costs before participating in the reverse auction, they will not know the ‘do not go below’ bid or when to stop submitting revised bids. Also, bidding parties in the reverse auction system must keep from getting caught up in the process and eliminate the gambling mindset of ‘we are going to get this job no matter what the price is’. The walk away price must be predetermined and the contractor must stay with this approach during the bid or there may be negative ramifications.
The contractor must also learn to be more open-minded regarding reverse auctions despite the process being labeled a form of high-tech bid shopping. Typically, bid shopping is done after the close of the bid where the owner will contact the other bidders, who were not low bidder, to find out if they are willing to lower their price to be awarded the project. Also, there is the issue of consent. Bid shopping occurs when someone’s price is used to get a better price without his or her consent. By participating in reverse auctions, the contractor has given the owner consent to attempt to get a lower price. General contractors are occasionally guilty of bid shopping subcontractors after the project has been awarded to them. Until the bid is closed, attempting to get the best price is not bid shopping as long as the anonymity is kept between the involved participants.
Finally, this pilot study and survey could be expanded to incorporate other geographical areas so that comparisons can be made among contractors operating in the northeast, south, southwest, midwest and western part of the United States. Research is also needed to compare cost, schedule and claims on completed projects that have used reverse auctions versus those that have used the traditional bid process.
References
Angelo, William J. (2002, September 30). Reverse auctions and mold risks are worrying AGC contractors. Engineering News Record, 249 (14), 12.
Angelo, William J. (2002, November 4). Reverse auctions raise new specter of bid shopping on industry projects. Engineering News Record, 249 (19), 34.
Angelo, William J. (2002, November 4). Reverse auction straight shots. Engineering News Record, 249 (20), 87.
Barner, Craig. (2003, January). Midwest market could face a modest decline [WWW document]. URL http://midwest.construction.com/MWCN/MW-Jan03/Mwcover.htm.
Canadian Construction Association. (2001, December). An owner’s guide to reverse auctions.
Canadian Electrical Contractors Association. (2002, October) CECA Action [WWW document]. URL http://www.ceca.org/english/CECAAction1002.pdf.
Harrell, Jeremy. (2002, May 9). Reverse auctions changing construction industry. The Daily Reporter.
Johnson, Brian. (2003, May 6). Construction officials aren’t sold on reverse auctions. Finance & Commerce (Minneapolis, MN).
Johnson, Brian. (2003, July 29). Some question whether reverse auctions work for construction. Finance & Commerce (Minneapolis, MN).
Krizan, William. (2003, November 24). New guidelines may take some pain out of reverse auctions. Engineering News Record 251 (20), 14-15.
Matthews, William. (2002, April 17). Bold new bid [WWW document]. URL http://www.fcw.com/fcw/articles/2000/0417/cover-04-17-00.asp.
Moozakis, Chuck. (2001, December 17). Tools give managers purchasing power [WWW document]. URL http://www.internetweek.com/suppliers/suppliers121701.htm.
NECA. (2002, December 13). NECA’s Minneapolis chapter explores “reverse auction bidding” [WWW document]. URL http://www.necanet.org/whats_new/report.cfm?ID=1659.
Olsztynski, Jim. (2003, August). Reverse auction bidding: the good, the bad, and the ugly of bid shopping. Plumbing & Mechanical 21 (6), 158-159.
Perks Publications. (2002). Ontario roofing news: reverse auction bidding [WWW document]. URL http://www.perkspub.com/archive/roofing_Fallo2/1.html.
PR Newswire Association. (2002, December 4). FedBid.com conducts first reverse auction for the procurement of professional services. PR Newswire.
Purchasepro e-Source. (2002, June 5). Case study: owens corning [WWW document]. URL http://www.purchasepro.com/docs/Support/PDFs/e-SourceCaseStudy_2002_06_05.pdf
Reverse auctions need time to clean up their act. (2002, November 4). Engineering News Record, [Editorial], 249 (19), 64.
Sawyer, Tom. 2001, February 26). States turn onto web for highway bidding. Engineering News Record v246 (8) 53-55.
Thompson, Dean B. and Knoll, Jocelyn L. (2002, September). Reverse auction bidding. The Construction Law Briefing Paper.
Tuchman, Janice L. (2003, November 3). Owners are pressuring industry for reverse auction bids. Engineering News Record 251 (18), 11.
Turner, Julie. (2003, January 6). PHCC online, an e-mail newsletter for PHCC members [WWW document] URL http://www.phccweb.org/files/newsletters/Online1603.pdf.
Warner, Brian. (2002, April 10). Online bidding comes under fire. Contract Journal.
Wright, Gordon. (2003, December 1). AGC cautions on use of ‘reverse auctioning’. Building Design and Construction.
Appendix A
Breakdown of responses to the survey questions
1. Has your firm bid a project using the reverse auction online bidding process?
(1) Yes = 31 - 15.2% (2) No = 183 - 84.8%
2. In what segment of the industry have you used the reverse auction online bidding process to bid a project? (Check all that apply)
(1) Public – Utility 0 – 0%
(2) Public – Institutional 0 – 0%
(3) Public – Civil/Highway 0 – 0%
(4) Public – Other 0 – 0%
(5) Private – Commercial 20 – 64.5%
(6) Private – Industrial 11 – 35.5%
(7) Private – Multifamily res. 0 – 0%
(8) Private – Other 0 – 0%
3. In your experience with the reverse auction bidding process, what size of projects use the process the most?
(1) Less than $1 Million 2 – 6.4%
(2) $1 Million to $3 Million 10 – 32.3%
(3) $3 Million to $5 Million 10 – 32.3%
(4) $5 Million to $10 Million 9 – 29%
(5) Greater than $10 Million 0 – 0%
4. In which sector of the industry to you bid more projects using the reverse auction process?
(1) Public = 1 – 3.2% (2) Private = 30 – 96.8%
5. Do you view the reverse auction bidding process as being fair to the general contractor?
(1) Yes = 13 – 41.9% (2) No = 18 – 58.1%
6. By using the reverse auction online bidding system, what is the impact on the percentage of profit as compared to the traditional bidding process?
(1) Greatly decreased profit margin 11 – 35.5%
(2) Slightly decreased profit margin 18 – 58.1%
(3) Profit margin did not change 1 – 3.2%
(4) Slightly increased profit margin 1 – 3.2%
(5) Greatly increased profit margin 0 – 0%
7. What is your opinion of the reverse auction online bidding process as compared to traditional bidding?
(1) Strongly dislike 11 – 35.5%
(2) Mildly dislike 10 – 32.3%
(3) No difference between the two 7 – 22.6%
(4) Mildly favor 3 – 9.6%
(5) Strongly favor 0 – 0%
8. How does the use of the online bidding process affect value to the owner in relation to the traditional bidding process?
(1) Greatly decreases value 10 – 32.3%
(2) Slightly decreases value 9 – 29%
(3) No difference 11 – 35.5%
(4) Slightly increases value 1 – 3.2%
(5) Greatly increases value 0 – 0%
9. How do you view your experience with the reverse auction online bidding process?
(1) Positive 12 – 38.7%
(2) No Opinion 2 – 6.5%
(3) Negative 17 – 54.8%
10. Do you feel that the industry trend is moving toward the reverse auction bidding process?
(1) Yes = 7 – 22.6% (2) No = 24 – 77.4%
11. How has the use of the reverse auction process by the owner impacted your decision to bid a project?
(1) Highly discouraged 11 – 35.5%
(2) Slightly discouraged 10 – 32.3%
(3) Has had no impact 9 – 29 %
(4) Slightly encouraged 1 – 3.2%
(5) Highly encouraged 0 – 0%
12. What percentage of work does your company bid versus negotiate?
(1) All work is bid. 4 – 1.96%
(2) 75 to 99% 40 – 19.61%
(3) 50 to 74% 45 – 22.06%
(4) 25 to 49% 49 – 24.02%
(5) 1 to 24% 50 – 24.51%
(6) All work is negotiated. 16 – 7.84%
Appendix B
Breakdown of Question Twelve Responses
Category All (%)Have used RAB* Have not used RAB
1 – All work bid 4 (1.96%) 1 (3.2%) 3 (1.7%)
2 – 75 to 99% 40 (19.61%) 13 (41.9%) 27 (15.6 %)
3 – 50 to 74% 45 (22.06%) 7 (22.6%) 38 (22.0%)
4 – 25 to 49% 49 (24.02%) 6 (19.4%) 43 (24.9%)
5 – 1 to 24% 50 (24.51%) 4 (12.9%) 46 (26.6%)
6 – All is negotiated 16 (7.84%) 0 (0.0%) 16 (9.2%)
Total 204 (100%) 31 (100%) 173 (100%)
* RAB – Reverse Auction Bid