Selecting Templates and Event Considerations

After completing this lesson, you will be able to:

After completing this lesson, you will be able to:

  • Understand Key Aspects of Different RFP and Auction Templates
  • Pick Out Key Characteristics and Use Benefits for Different RFP and Auction Templates

Event Considerations

"Before creating events, we must first think about our template selection and strategy. Do we need to screen supplier responses in an RFP before our auction? Is there enough competition to have a viable auction, and what format is best to drive that competition? There are considerations a project owner will need to determine before creating the event."

Multi-Stage Sourcing

Multi-stage sourcing is the act of combining multiple events into a continuous sourcing process.

  • This enables project owners to narrow down the list of suitable participants at each stage.
  • A multi-stage event can also help sourcing professionals gather information about market conditions and manage potentially large numbers of suppliers and large amounts of bid data.

Auctions can be run as standalone events or following an RFP. The RFP can be used to assess the market place.

A common use of a multi-stage event is to begin with an RFI which serves as a prequalification stage. Only suppliers who pass the RFI stage are allowed to view and bid in the following event, which often is an RFP or an auction.

"Tip: If you know from the beginning that you will be running multiple stages, it’s a good idea to communicate this to suppliers in the first event."

Benefits of Multi-Stage Sourcing

  1. There is no limit on the number of stages that can be included in a multi-stage event; additional events can be decided upon after one stage is complete.
  2. Mimics natural sourcing process: project owners can combine any number of different event types, to mimic their current sourcing processes.

Auction or RFP

If you need to include competitive pricing through line items or lots in the event, an RFP or Auction is recommended.

RFIs are helpful, but cannot be competitively formatted. When competitive pricing is required within an event, use an auction if price is the main factor when awarding the business opportunity. If price is not the bottom line, a closed RFP with event rules set to improve bids and allow suppliers to see ranks or bids can be used.

This grid may be used to determine the appropriate method of collecting bids based on the available information.

# of suppliersFew2 or more2 or more
CompetitionLowLow to HighModerate to High
Supplier RelationshipStrategic or PreferredPreferred or CompetitivePreferred or Competitive
Price VariancesHighHigh to ModerateLow

"The ideal auction situation has more than two suppliers, a high level of competition amongst the suppliers and a low price variance which will allow them to outbid each other easily during the auction."

When to Use Auctions?

Contractually Available

Contractual restrictions can severely lessen or eliminate an opportunity’s attractiveness.

Commercially Attractive

Business that is commercially attractive maximizes the suppliers' interest and drives the most competition.

Competitive Supply Base

Volume must be transferable between suppliers to spur competition. A minimum of two suppliers is needed.

Clearly Defined Requirements

The parameters of the scope of work must be clear for both the incumbents and new potential suppliers.


The entire organization must be committed to the strategic sourcing process or it will struggle.

Compressible Margins

The margins of the product or service must have compression in order to reduce pricing.

Auction Selection and Strategy

Considerations for Selecting the Appropriate Strategy

Market conditions and prior sourcing events drive auction selection & strategy.

The "right" auction is one that maximizes competition. The different auction formats and auction configuration options can maximize competition and potential for maximum savings.

Step 1: Buyer Considerations

Am I buying or selling?

  • If buying, choose a Reverse Auction

  • If selling, choose a Forward Auction

How will business be awarded?

  • By region
  • By business unit
  • By customer segment

What is the strategy for the event?

  • Consolidate supply base
  • Reduce price/enhance competition
  • Keep incumbent/award new supplier

Step 2: Supplier/Market Considerations

How long has it been since the last negotiation, and is there any historical data?

Attractiveness of the business, how many suppliers will be invited?

Will the price rise or fall?

How many participants will I have; is there enough competition to have a viable auction?

Supplier capabilities:

  • Geographical scope
  • Quality Certifications
  • Are there any new suppliers?

Step 3: Auction Format

Based on market conditions, do I want to run a standard Auction, a Dutch, or Japanese Auction?

Step 4: Timing and Bidding Rules

Should Pre-Bids be used?

Are Tie Bids permitted, or will it go into overtime?

Step 5: Market Feedback (Visibility)

Based on market conditions how much market information do I want to reveal to other suppliers in the event to drive competition?

Show Rank or Lead Bid or Both, etc.

Step 6: Pricing Terms

Do I need to collect pricing on terms such as shipping, taxes, import duties, and tooling costs?

Are the pricing terms equal across suppliers and do I want to reveal those terms to suppliers?

  • If yes, to equal pricing terms, select a Total Cost Auction template.

  • If no, to equal pricing terms, select a Bid Transformation Auction template.

Do I need to see how suppliers arrive at their pricing through term itemization?

If yes, select Price Breakdown.

Is the commodity I’m buying sold against a pricing index?

If yes, select an Index Auction by Price or Percentage.

Step 7: Market Pricing Strategy

Do I have ceiling, historic or reserve prices?

  • Ceiling price - the highest point at which goods and services can be sold
  • Historic price- what did we pay previously?
  • Reserve price-a minimum price that a seller would be willing to accept from a buyer
  • Individual starting prices - should suppliers have specified prebids so that they cannot stray from quotes used in an RFP or prior to the auction?


If buying, choose a Reverse Auction; If selling, choose a Forward Auction.

If pricing terms equal across suppliers and those terms should be visible to suppliers, Total Cost Auction template can be used.

  • If no to equal pricing terms, select a Bid Transformation Auction template.

  • Use Price Breakdown templates to itemize terms.

If the commodity being purchased is sold against a pricing index, use an Index Auction by Price or Percentage.

Reverse Auction is the most commonly used, standard template for buyer auctions.

"Now, let's talk about your auction you have been asked to create. Do you have an idea as to which template that we would need to select?"

"All things considered, I feel that the Reverse Auction is the most suitable template for my auction.

I know I need an auction, because I want my pricing to be competitive and the variances between bids are small between my three suppliers.

I do not have a need to alter the format to Dutch or Japanese, and my terms will be the same for all suppliers so I do not need bid transformation or have a need for alternative bids as I know my needs better than the suppliers. I will want to specify pre-bids, and modify pricing attributes like buffers and decrements, which is all available through the Reverse Auction template."

"That is the template that I was going to suggest, as well. We can still opt into setting up overtime, prebids, lotting structures, bid improvements, currencies and market feedback settings like showing responses and lead bids all within the Reverse Auction template if we choose."

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