Contractors attack rise of ‘eBay’ tendering

Fears have been raised by contractors over the resurgence of procurement methods such as “eBay tendering” that are intended to arrive at the lowest possible price.

This method, which is based on the auction website eBay, works by inviting companies to submit bids online and compare them with those of their competitors. The bids can then be revised downwards before a cut-off date.

Many have expressed concerns that clients increasingly favour such procurement routes as the recession forces them to cut costs.

This process, which is also called a “Dutch auction”, is common in bidding for the supply of commodities, but the rise of their use for services in the recession has angered many.

Paul Jessop, chief executive of the Federation of Plastering and Drywall Contractors, said: “Our members raised this at our annual meeting earlier this month. This is a dangerous route for clients to take. People will end up putting in stupid bids because of the pressure of the auction.”

Stephen Ratcliffe, director of the UK Contractors Group, agreed that the industry needed to be wary of such methods, which he said had pitfalls in terms of health and safety, an argument supported by pressure group Families Against Corporate Killers, which has also criticised the trend.

Bill Taylor, managing director of East Midlands Plastering, said he would avoid social housing contractor Keepmoat after it told him it would use this method more, and base 90% of each decision on price. He said: “We’re not a commodity but a service. With this we’re only as good as the next price.”

A spokesperson for Keepmoat said: “The Keepmoat E-Procurement system is transparent and provides best value procurement solutions to our customers. The process includes the evaluation of both cost and qualitative criteria to give a balanced selection. The response from our supply chain has been very positive and we have listened to their feedback when developing the system. We believe our system to be best practice, and in collaboration with our supply chain we aim to develop it even further."

Supermarket Asda is understood to be among the clients looking at eBay tendering, while Tesco has reportedly used it in the past.

Michael Tiplady, international director at Jones Lang LaSalle, said another new trend was three-round tendering, where bidders are told whether they offered the lowest price at the end of each round and given the chance to revise it. He said such methods left no margin for manoeuvre. “If extras are needed, firms will be forced to go to the client for money.”