Winning GSA Reverse Autions: A Vendor’s Strategy Guide

With the rate of GSA Reverse Auctions soaring by 1000% from the Q1 of 2015 to Q1 of 2015, there has never been a better time for businesses to participate in GSA sourcing programs.  In this guide we will answer:

  • What types of companies should participate

  • Differences Between GSA and B2B Reverse Auctions

  • How Winners Are Determined

  • Best Bidding Strategies for Vendors

 

What Types of Companies Should Participate?

Though GSA Reverse auctions are open to a wide range of participants, two categories of businesses win the vast majority of GSA Reverse Auctions:

SBA LOGO. (PRNewsFoto/U.S. Small Business Administration)

1) Registered "Small Businesses" -  US Governmental Agencies have goals/requirements set each year mandating a percentage of contracts that must be awarded to Small Businesses.  As a result 92% of the Reverse Auction Awards went to Small businesses last year.  Additionally some contracts are exclusively available to Small Businesses.  These are known as "set-asides," and 43% of total GSA reverse auctions fell into this category last year.  As a general rule, manufacturing companies under 500 employees or non-manufacturing companies with under $7 million in average annual receipts can qualify as Small Businesses, but the standard varies by industry and changes periodically.  For the complete schedule click here.  

1a) Special Business Concerns - There are also set-asides for three specific sub-categories of Small Businesses who meet the proper eligibility requirements:

(1) Service-Disabled Veteran-Owned Small Businesses

(2) Women-Owned Small Businesses

(3) Small Disadvantaged Businesses (Economically Disadvantaged and/or Socially Disadvantaged).

2) GSA Schedule Holders - these are holders of long-term, governmentwide supply contracts for specific categories of products.  Some GSA Reverse Auctions are held for Schedule Holders only, but in this case the Schedule Holders are given the opportunity to bid at prices below their contracted pricing.

Companies who cannot register as small businesses or be accepted as a GSA Schedule Holder have a very, very slim chance of winning GSA Reverse Auctions. 

 

Differences Between GSA and B2B Reverse Auctions

In many ways, GSA Reverse Auctions are more similar to eBay auctions than to traditional Reverse Auctions.  While both feature bidding in a downward direction, the process for finding participants, the live event duration, and the actual bidding procedures are all quite different.

GSA REVERSE AUCTIONS

B2B REVERSE AUCTIONS

Vendors discover Auction through online listing or via push notification based on the NAICS code under which vendors are registered.  Buyers typically like to see 3 or more participants to consider the Auction "competitive", but sometimes have only one or even zero bidders.

PARTICIPANTS

Receive invitations to auction from the auction holder.  Complete prequalification and acceptance process prior to the live event.

Varies by auction as set by buyer; typically 5-7 days.  Vendors can choose to enter and bid (or re-bid) at any time.

DURATION

Typically only 20 minutes per lot.  All appvoed suppliers must be logged in when the auction begins.

Bidder can see lowest bid offered and Schedule Holder pricing if applicable.  Vendor can enter live bids, as well as set Proxy bids that will be entered of the Vendor loses the lead to a competitor.

BIDDING

Vendors cannot see leading bid, only their current bid and rank in the process (e.g. 3rd Place).  Any bids submitted within 2-3 minutes of the auction's end will typically result in an automatic time extension, allowing time for additional competitive counter-bids.

How are the Winners Determined?

While the lowest bidder is awarded a contract from the GSA much more frequently than in a B2B Reverse Auction (in which the current supplier typically retains the business), the award does not automatically go to the lowest bidder for four reasons:

  1. Departmental Award Goals: As mentioned above, governmental offices have goals for awarding contracts to Small Businesses, which may give them an advantage even of the auction was open to all participants.
  2. Technical Supportability: if the winning bidder is determined to not meet the Auction's requirements, their bid may be thrown out in favor of a more qualified vendor.
  3. "Apparent Low": if the low-bidder's pricing is far below the estimated value of the contract (as determined by the buying department), that vendor's bid may deemed invalid under the belief the bid price cannot realistically be supported.
  4. Non-Competitive Auction: if an insufficient number of Vendors participate in the Auction, but buyer may invalidate the auction, resulting in no winner.

Possibly the most significant difference between GSA and B2B Reverse auctions is that post-auction pricing negotiations are almost never conducted following GSA Reverse Auctions.

"post-auction pricing negotiations are almost never conducted following GSA Reverse Auctions"

While the low-bidder doesn't always win, the incumbent supplier is not given an informal chance to match the low bid after the auction has been completed, as we see done so commonly in B2B Auctions.

 

Bidding Strategies

Now that we better understand the live auction mechanics and award selection process, a few key strategies come to the surface as best practices:

Be Online When Time Expires:  Because there are no automatic extensions, you MUST be online in the 15 minutes before the Auction ends.  This allows you to do two things:

(1) Undercut the Low Bidder at the Last Second (Sniping): catch other competitors unaware by taking the lead with only moments to spare.  Odds are they will not be online and able to counter in time.  Be cautious, however, as Vendors may have entered Proxy bids that will automatically re-bid for them.  Give yourself at least 10 minutes so you can respond as needed.

(2) Respond to Snipers: if you are the lowest bidder, you must also be online at the end to respond to any sniping from fellow competitors.

Don't Chase Absurdly Low Pricing: buying departments know the value of goods they are buying.  Never chase a bid that has a high probability of disqualification because it is not realistically supportable.

However........

NEVER Finish in a Close 2nd Place Position: While we strongly recommend 2nd place finishes in B2B Auctions, in GSA Events you will need to beat all other supportable prices to have the best overall chance at receiving an award.  

Conclusion

GSA Reverse Auctions are growing rapidly and offer an excellent opportunity for registered Small Businesses to grow.  Always keep in mind the difference between the GSA and B2B processes when bidding and you will have an excellent chance at developing a profitable supply position with the United States Government.

There's so much more to learn!  Please let us know if you have any specific questions using our Contact page.  We are always happy to help!

 

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