What Is the Difference Between Tendering & Reverse Auction? | Negawatt

Whilst NEGAWATT ENERGY SOLUTIONS is of the firm belief that a Reverse Auction will not deliver the most favourable outcome for customers, due to demand, we have made this procurement process available.

In a Reverse Auction process, retailers commence submitting offers ABOVE their minimum sell price stipulated by their traders, reducing their offer if/when competing retailers submit offers.  On this basis, customers can never be assured that the offer submitted was the best the retailer could offer, only enough to beat the next best retailer.  The process also relies on Account Managers, who are resource constrained, following the auction and not being distracted by competing priorities, ie: was the next best actually the next best, or just where that retailer got to before they were distracted or lost interest.

NEGAWATT ENERGY SOLUTIONS’ experience as energy brokers in benchmarking offers and contracts secured as a result of a Reverse Auction consistently demonstrates a premium is paid to prevailing market rates.  Similarly, we see procurement decisions made on a comparison of Retail only charges, without considering the variable environmental, carbon and other charges from various retailers.

A Tender Process will conversely, not facilitate offers with a “buffer” for the auction process, and solicits the best rates available from the retailer as their initial offer, not an offer that will just beat the next “cheapest”.  Quite often, the best offer has a large margin to the second most favourable offer.

In our discussions with traders at the major retailers, they make it abundantly clear that they will not put their best pricing forward in a Reverse Auction situation for their competition to have visibility of their best pricing.

Every NEGAWATT ENERGY SOLUTIONS customer who has used a reverse auction process has opted to embrace our best practice tender process and obtained an improved result.

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