Reverse Auction

A reverse auction is a sourcing event where one buyer takes competitive bids from multiple qualified suppliers, with price moving down as suppliers compete to win the business — the opposite of a standard auction, where price rises.

Reverse auctions work best for well-specified, comparable purchases with several qualified suppliers able to compete on price. They typically follow supplier qualification and an initial RFQ, rather than replacing them.

Auction rules matter as much as the software: a start price or reference price, minimum bid decrement, duration, and whether bids are visible to other suppliers. Many events include an automatic time extension when a bid arrives near the close, so the result is not decided in the last seconds.

Reverse auctions are one of several formats. Forward, Dutch, and Yankee auctions follow different rules and suit different situations.