Why Specifications are so important!
Reverse auctions are oriented exclusively to the attainment of the lowest purchasing price of goods or services.
When suppliers are competing on a reverse auction trying to get a deal, following elements should be present:
- All suppliers should understand the same! .... specifications made by buyers have to be clear and concrete.
- Suppliers shouldn't have questions once the auction starts and they begin to place offers.
- Suppliers should have appropriate time to review specs and prepare financial calculations. Complex specs require more time.
- If Attachments and other files, documents, draw prints, etc... are necessary buyers must provide them and offer enough time for their review.
- Suppliers have to do precise financial calculation in order to determine the lowest offer they can make and commit to it. Offering below this value is risky and generally irresponsible.
Following two samples of specifications for reverse auctions
Description: New Ball bearing, manufacturer MTM, reference or part number XC4589 - 34, Quantity to supply per week: 8 Units, Packaging: Long term (min 12 month). Price to quote on auction: Unitary price (1 ea). Why is this spec OK .... Enough definition with part number and manufacturer (attention NEW element is described).
Description: Welding service for Steel structure construction.
Detail: Steel sections ready to be weld provided by buyer on site (XXX), blue prints, design details, loading test, are available in a .pdf document which will be attached with the auction invitation. Welding Material AWS A5.18, NTC 2632, ASME SFA5.18.
Welding seams of 7 – 8 mm, 100% dye penetrant testing, and 10% ultrasonic test on selected sections of welding seams. Price to be quoted on reverse auction: Full project finished and delivered on site. Why are these specs good ... Clear scope of work, also depending on attachments sent with invitation.
… And Terms & Conditions of auctions, what are they for ?
Adding Terms & Conditions to previous examples, these would be like :
Delivery date: 4 days, DDP Address XYZ - Santiago de Chile, Chile. , warranty requested two (2) Months, Payment: 30 days Net invoicing date.
Ts & Cs of a service are more complex to describe : ….. For instance .. Following insurance bond will be required: Stability for the 100% of the contracted value with coverage of 6 months after delivery, Extra-contractual civil liability bond of USD 100,000.
Delivery: 12 Months after contract signature or PO issuing.
Technicians / Welders need to have welder certification type XXXXYY and AWS.
Technicians / Welders need to have proof experience and certification of working on highs (local laws compliance).
Quality contractor certification ISO 9000 required.
Work order and/or Job assignment will be possible only if supplier is accepted in the Vendor data base of the company who runs the auction (Note: Suppliers invited to auctions need to obtain this if possible before auction start).
All technicians need to provide medical and life insurance in accordance to local law requirements.
Two references of similar jobs (scope / value) will be required before auction start.