FINAL REPORT

FINAL REPORT 2013 Reverse Auction Survey

Conducted by

E&I Consulting Group: 2013 Reverse Auction Survey

Executive Summary October 2013 The 2013 E&I Consulting Group Reverse Auction Survey was conducted in a controlled timeframe in Summer 2013. There were 23 questions in total – in addition to some general fields to capture demographics and respondent profile. The survey was sent to senior business leadership at educational institutions nationwide, both private and public. These include universities, community colleges, K-12 schools and districts, charter schools, post-graduate medical and dental schools, and related institutions. Approximately 175 individuals completed the survey, from departments that included Finance, the Business Office, Procurement, Facilities and Administration. Business titles included Chief Executive Officer, Senior Vice President, Vice President, Executive Director, Vice Provost, Director, and Associate Director. All institutions who participated were members of either E&I Cooperative Purchasing or APPA (in many cases both).

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AWARENESS

Survey findings indicate that approximately a quarter of all respondents have a strong familiarity with reverse auctions. Almost half of those surveyed had little or no familiarity with the concept. Interestingly, Procurement professionals had a much higher awareness (83% were somewhat or very familiar) of reverse auctions than their counterparts in Facilities (22%).

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PARTICIPATION

Among respondents expressing familiarity with reverse auctions, approximately half have participated in one or more reverse auction events. Mirroring awareness levels, Procurement staff were five times more likely to have participated in a reverse auction than Facilities staff.

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INTEREST

85% of all respondents said they found the concept of reverse auctions appealing, while 1 in 5 of all respondents said they found them very appealing. This skewed slightly when mapped to likely future participation. Only 69% of respondents said they would definitely or probably participate in a reverse auction in the future.

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© 2013 – E&I Consulting Group, a division of E&I. All rights reserved.

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E&I Consulting Group: 2013 Reverse Auction Survey 

DRIVERS

An overwhelming majority of survey respondents (86%) saw cost savings as the main benefit of participating in a reverse auction. Process improvement and buyer empowerment were other important perceived factors.

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BARRIERS

About 1 in 4 survey respondents cite regulatory compliance restrictions as a key barrier to participation. Almost half felt that desired suppliers were unlikely to participate while a third believed participation in reverse auctions would have a negative impact on buyer/supplier relationships. More than a third were simply not familiar enough with reverse auctions to assess the potential benefit to their institution.

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SATISFACTION

45% of all respondents who have participated in a reverse auction were very satisfied with the outcome. A further 43% were somewhat satisfied. Only 2% said they were very dissatisfied with their experience with reverse auctions.

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The following pages contain survey responses and key findings.


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Survey Responses & Key Findings

Q1 - Please indicate what type of institution you work for. Response Percent 39.4% 30.1% 13.0% 1.4% 7.4% 8.8%

Answer Options 4 Year Institution (Public) 4 Year Institution (Private) 2 Year Institution (Public) 2 Year Institution (Private) K-12 School or District Other (please specify)

Please indicate what type of institution you work for.

4 Year Institution (Public) 4 Year Institution (Private) 2 Year Institution (Public) 2 Year Institution (Private) K-12 School or District Other (please specify)

Figure 1

 The survey went out to a wide range of educational institutions.  Approximately 52% were public institutions.  Higher education (colleges and universities) accounted for approximately 84% of all respondents.


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Q2 - Which of the following organizations do you work with within your institution? Response Percent 49.5% 44.4% 6.0%

Answer Options Procurement Services Facilities (including energy) Other (please specify)

Which of the following organizations do you work with within your institution?

Procurement Services

Facilities (including energy) Other (please specify)

Figure 2

 Survey respondents were split fairly evenly between Procurement and Facilities.  ‘Other’ defined themselves, predominantly, as being from the Finance or Business Office, with a scattering from Ancillary Services, Auxiliary Services, Office of the Provost, and similar designations.


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E&I Consulting Group: 2013 Reverse Auction Survey Q3 - How familiar are you with the concept of reverse auctions? Answer Options

Response Percent 22.8% 27.4% 31.6% 18.1%

Very familiar Somewhat familiar Heard of it but not familiar Never heard of it / not at all familiar

How familiar are you with the concept of reverse auctions?

Very familiar Somewhat familiar Heard of it but not familiar Never heard of it / not at all familiar

Figure 3

 Half of all survey respondents were not familiar with reverse auctions or how they worked.  Approximately a quarter of all survey respondents said they were very familiar with reverse auctions.  When Procurement and Facilities are looked at separately, it revealed some interesting statistics. Among Procurement staff, 83% were somewhat or very familiar with reverse auctions. Among Facilities staff, only 22% were somewhat or very familiar.


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E&I Consulting Group: 2013 Reverse Auction Survey Q4 - Have you ever participated in a reverse auction? Response Percent 49.1% 50.9%

Answer Options Yes No

Have you ever participated in a reverse auction?

Yes No

Figure 4

 This question was only asked of the 50% of total respondents who indicated in Q3 that they were very or somewhat familiar with reverse auctions.  Virtually half of all Q4 respondents had participated in at least one reverse auction. This equates to 1 in 4 – or 25% of the overall group.  Approximately 15% of all Facilities staff had participated in one or more reverse auctions. This figure rose to approximately 76% among Procurement staff.


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E&I Consulting Group: 2013 Reverse Auction Survey Q5 - In total, how many reverse auctions have you participated in? Response Percent 25.5% 56.9% 5.9% 11.8%

Answer Options 1 2-5 6-10 11+

In total, how many reverse auctions have you participated in?

1 2-5 6-10 11+

Figure 5

 Of those who have participated in a reverse auction, more than half (57%) have participated in more than one but less than five.  Approximately 18% of people who have participated in reverse auctions could be considered as active users having participated in 6-11 or more reverse auctions.


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E&I Consulting Group: 2013 Reverse Auction Survey Q6 - What specific commodities or services have you sourced via reverse auction? (list all that apply)

Most Popular by Cloud

Figure 6

 While responses were clearly varied, paper was far and away the most popular sourced commodity among reverse auction users.


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E&I Consulting Group: 2013 Reverse Auction Survey Q7 - Overall, how satisfied have you been with the reverse auction(s) you have participated in? Answer Options


Very satisfied Somewhat satisfied Somewhat dissatisfied Very dissatisfied

Overall, how satisfied have you been with the reverse auction(s) you have participated in?

Very satisfied Somewhat satisfied Somewhat dissatisfied Very dissatisfied

Figure 7

 More than 88% of respondents who have used reverse auctions expressed some level of satisfaction with the results. 45% said they were very satisfied.  Almost 5 times as many Procurement staff responded to this question vs. Facilities staff. When cross-tabbed, satisfaction rates were significantly higher among Procurement staff. Less than 8% of Procurement staff said they were somewhat or very dissatisfied with reverse auctions they had participated in. This number jumped to 38% among Facilities staff when asked the same question.


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E&I Consulting Group: 2013 Reverse Auction Survey Q8 - What are the main reasons why you have been satisfied/unsatisfied with your reverse auction(s)?

SAMPLE RESPONSES

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Very Satisfied

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“Efficiency of process; pricing based on leverage of multiple institutions.” “Prices were significantly better.” “Ease of use, satisfactory return, minimal expense.” “The prices were very competitive and it gave us price stability at a very low price. Since it was done as a regional auction, it was convenient for us.” “Yielded the best price.”

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Somewhat Satisfied/Dissatisfied

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“Overall, the pricing that resulted from the process was very good - however - some of the more service oriented commodities suffered on the deliverable side when the vendors had "bidder's remorse." “Good results if you have multiple vendors. Incumbents hold an advantage.” “The paper auction was very good... the other one raised several complications.” “I don't necessarily buy-in that the cheapest is the best gauge for overall cost effectiveness.” “Two of three that we conducted were closed without participation.” “While it takes a similar amount of time upfront to prepare correctly, the event is over very quickly once bidding starts.”

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Very Dissatisfied

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“Awarded vendor cut costs and was not able to provide on a timely basis.”


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E&I Consulting Group: 2013 Reverse Auction Survey Q9 - How appealing do you find the concept of a reverse auction? Answer Options


Very appealing Somewhat appealing Somewhat unappealing Very unappealing

How appealing do you find the concept of a reverse auction?

Very appealing Somewhat appealing Somewhat unappealing Very unappealing

Figure 9

 85% of survey respondents indicated that there was some level of appeal to using reverse auctions for sourcing. Almost 1 in 5 respondents said they were very appealing. 

Approximately 15% of respondents said they found the concept of a reverse auction either somewhat or very unappealing.


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E&I Consulting Group: 2013 Reverse Auction Survey Q10 - What aspects, in particular, of reverse auctions do you find appealing/unappealing?

SAMPLE RESPONSES

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Very Appealing

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“Concept that sellers will bid against one another for lowest cost.” “Intense competitive pressures on vendors.” “The efficiency of the process as well as the drive for the lowest cost.” “If the right commodity is used it yields very competitive pricing.” “Competition is viewed live by vendors - maintains a level playing field and keeps everyone honest!”

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Somewhat Appealing/Unappealing

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“The control of the process is in the hands of the buyer.“ “I do not see significant savings from the traditional model particularly for small Colleges like mine.” “Seems like a nice way to gather bid data without a formal bid process.” “Seems clumsy and appears to shoot in the dark.” “As companies cut their prices, inevitably they will cut the qualities of goods and services provided.” “Most things these days have a service component to them that reverse auctions do not address well in my opinion.”

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Very Unappealing

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“There is an appearance of "unethical" practice, or the illusion that the buyer wishes to beat-up on the supplier. Further, the process sets up a strong incentive for the supplier to reduce the quality of the product as much as possible.” “Just do not like the basic process of it.” “From what I hear it does not work for the kinds of bids that I do.” “Loss of service, impact on small business procurement efforts, lack of quality control.”


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E&I Consulting Group: 2013 Reverse Auction Survey Q11 - Based on your understanding of reverse auctions, how likely are you to participate in a reverse auction in the future? Answer Options


Definitely would Probably would Probably would not Definitely would not

Based on your understanding of reverse auctions, how likely are you to participate in a reverse auction in the future?

Definitely would Probably would Probably would not Definitely would not

Figure 11

 70% of all respondents said they were likely to participate in a reverse auction in the future. Approximately 15% gave a resounding thumbs-up by saying that they definitely would.  Although only 15% of users who answered Q9 said they found the concept of a reverse auction somewhat or very unappealing, 31% answered Q11 by saying they probably or definitely would not participate in a reverse auction in the future.


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E&I Consulting Group: 2013 Reverse Auction Survey Q12 - Regardless of your current level of interest or experience, what do you view as the main benefits of a reverse auction? (select ALL applicable benefits) Answer Options

Response Percent 85.5% 40.3% 32.8% 38.7% 22.0% 19.9% 34.4% 4.8% 8.1%

Cost savings Streamlines the RFP process Reduces administrative effort and paperwork Empowers the buyer Ease of use Enhances the decision-making process Attracts a higher volume of quality suppliers Strengthens buyer-seller relationship Other (please specify)

Regardless of your current level of interest or experience, what do you view as the main benefits of a reverse auction? (select ALL applicable benefits)

Other (please specify)

Strengthens buyerseller relationship

Attracts a higher volume of quality suppliers

Enhances the decision-making process

Ease of use

Empowers the buyer

Reduces administrative effort and…

Streamlines the RFP process

Cost savings

90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

Figure 12

 Cost savings were the number one key benefit among respondents – voted for by an overwhelming 86%. Other popular perceived benefits included buyer empowerment, reduced administrative effort, higher volume/quality of suppliers, and a streamlined RFP process.


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E&I Consulting Group: 2013 Reverse Auction Survey Q13 - Regardless of your current level of interest or experience, what do you view as the No. 1 benefit of a reverse auction? (select only one) Answer Options


Cost savings Streamlines the RFP process Reduces administrative effort and paperwork Empowers the buyer Ease of use Enhances the decision-making process Attracts a higher volume of quality suppliers Strengthens buyer-seller relationship Other (please specify)

Regardless of your current level of interest or experience, what do you view as the No. 1 benefit of a reverse auction? (select only one) Cost savings Streamlines the RFP process Reduces administrative effort and paperwork Empowers the buyer Ease of use Enhances the decision-making process Attracts a higher volume of quality suppliers Strengthens buyer-seller relationship Other (please specify)

Figure 13

 Unsurprisingly, when asked to vote for just one key benefit, 62% of survey respondents chose cost savings.


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Q14 - Regardless of your current level of interest or experience, what do you view as the main barriers to participating in a reverse auction? (select ALL applicable barriers) Answer Options


Unlikely to generate the desired cost savings Prior negative experience Unsure of benefit to my institution Complicated bidding and evaluation process Desired suppliers unlikely to participate Unable to switch from current suppliers Negative impact on buyer-supplier relationships Regulatory compliance restrictions Other (please specify)

Other (please specify)

Negative impact on buyer-supplier…

Unable to switch from current…

Desired suppliers unlikely to…

Complicated bidding and evaluation…

Unsure of benefit to my institution

Prior negative experience

Unlikely to generate the desired cost…

50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%

Regulatory compliance…

Regardless of your current level of interest or experience, what do you view as the main barriers to participating in a reverse auction? (select ALL applicable barriers)

Figure 14


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E&I Consulting Group: 2013 Reverse Auction Survey  While the previous benefits questions (Q12 and Q13) produced clear indication of cost saving as the number 1 perceived benefit, respondents were much less clear or unanimous when asked about the barriers.  A key concern among survey respondents (45%) was that desired suppliers may not participate in a reverse auction. 37% were unsure how it would benefit their institution.  Interestingly, less than 9% of respondents cited prior negative experience as a barrier to future participation.  When cross-tabbed against Q5 (level of experience with reverse auctions), only 15% of respondents who had participated in 11 or more reverse auction events cited “Negative impact on buyer-supplier relationships” as a key barrier. This figure rose to 70% for those who had participated in 2 to 5 reverse auction events.


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Q15 - Regardless of your current level of interest or experience, what do you view as the No. 1 barrier to participating in a reverse auction? (select only one) Answer Options

Response Percent


8.0% 4.0% 15.5% 16.1% 14.4% 4.0% 10.9% 16.1% 10.9%

Regardless of your current level of interest or experience, what do you view as the No. 1 barrier to participating in a reverse auction? (select only one)


Figure 15


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E&I Consulting Group: 2013 Reverse Auction Survey  Echoing Q14, responses regarding the No. 1 barrier were inconclusive. No single reason stood out clearly as a barrier to participating in a reverse auction.  Perceived barriers included uncertainty of benefits to institution, complicated bidding and evaluation process, regulatory restrictions, and supplier non-participation. Only 4% expressed prior negative experience with the process.


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E&I Consulting Group: 2013 Reverse Auction Survey Q16 - For which commodities or services would you like to participate in a reverse auction? (list one or more if applicable)

Commodity or Service Energy Technology MRO Vehicles Paper Furniture Rock Salt Office Supplies Plumbing/HVAC/Elevator Audio/Video Lab Supplies Other TOTAL

% 12 12 10.8 9.6 8.4 7.2 4.8 4.7 4.7 2.4 2.4 21 100

Commodity or Service by Percentage Energy Technology MRO Vehicles Paper Furniture Rock Salt Office Supplies Plumbing/HVAC/Elevator Audio/Video Lab Supplies Other

Figure 16


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E&I Consulting Group: 2013 Reverse Auction Survey  No one commodity was a clear leader in terms of respondent’s desire to source via reverse auction.  Energy and technology were in joint first place at 12% apiece, with MRO and vehicles following very closely.


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E&I Consulting Group: 2013 Reverse Auction Survey Q17 - Please indicate which of the following categories you believe lend themselves to reverse auctions.(selection required on each line) Answer Options

Yes

No

Energy (utilities and fuel) Mattresses Office supplies Rock salt Fleet Athletics Technology MRO Medical equipment Uniforms Facility services Food services Network services Other (please specify)

53% 70% 50% 70% 54% 28% 52% 49% 43% 60% 39% 24% 25%

47% 30% 50% 30% 46% 72% 48% 51% 57% 40% 61% 76% 75%

Other

1%

Please indicate which of the following categories you believe lend themselves to reverse auctions.(selection required on each line) 200 180 160 140 120 100 80 60 40 20 0

Yes No

Figure 17


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E&I Consulting Group: 2013 Reverse Auction Survey  Respondents indicate that a range of commodities and services are conducive to success in a reverse auction. The most popular categories include mattresses, rock salt, and uniforms.  Interestingly, a high number of respondents believe that reverse auctions are not a good way to source services (Facility, Food, Network Services).  Other was a freeform response; responses included “furniture, fixtures and equipment,” furniture, custodial supplies, and equipment.


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E&I Consulting Group: 2013 Reverse Auction Survey Q18 - Are you subject to regulatory restrictions (state or institutional) which may prevent you from utilizing reverse auction technology? Response Percent 23.6% 40.8% 35.6%

Answer Options Yes No Don’t know

Are you subject to regulatory restrictions (state or institutional) which may prevent you from utilizing reverse auction technology?

Yes No Don’t know

Figure 18

 Almost 25% of all respondents were aware of regulatory restrictions which would preclude them from participating in a reverse auction. 36% were unsure.


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E&I Consulting Group: 2013 Reverse Auction Survey Q19 - Please describe the regulation or compliance restrictions that might prevent you from utilizing a reverse auction.

SAMPLE RESPONSES “Currently only the state can utilize a reverse auction.” “Requirements for sealed bids and associated documentation at $8500 and above.” “State Procurement laws.” “At this time, I do not know if there are any state laws regarding the use of reverse auctions. I have not looked into it.” “Not sure how the competitive bidding process, specifications, and supplier requirements are met. Supplier could fail to qualify as a supplier to the University at which the point of the auction would be moot.” “Our state would need to buy into this at the state level for all state higher ed to participate.”


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E&I Consulting Group: 2013 Reverse Auction Survey Q20 - Are you authorized to shift the current spend in a category from an incumbent supplier to a new supplier when favorable pricing/terms are available? Response Percent 81.3% 18.7%

Answer Options Yes No

Are you authorized to shift the current spend in a category from an incumbent supplier to a new supplier when favorable pricing/terms are available?

Yes No

Figure 20

 Greater than 80% of all respondents indicated that they would be authorized to shift spend to a new supplier if favorable pricing and/or terms became available via reverse auction.


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E&I Consulting Group: 2013 Reverse Auction Survey Q21 - What are the reasons you are not authorized to shift current spend in a category from an incumbent supplier to a new supplier when favorable pricing/terms are available? SAMPLE RESPONSES “We provide pricing and options to other departments who along with the VP of Finance have the final say.” “Current contract may prohibit utilizing a new supplier.” “Authority rests in a different department.” “I would need to seek approval to void out a contract.” “Supplier relationships are often with the individual departments.” “We could only shift the spend by conducting a solicitation process or by leveraging an existing contract through E&I, NJPA, or WSCA. Montana State Law is fairly rigid...open, fair, competition rules the day here.” “We have decentralized purchasing.”


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E&I Consulting Group: 2013 Reverse Auction Survey Q22 - Are you willing to act as a “lead agency” for a specific reverse auction event? Response Percent 12.3% 50.3% 37.4%

Answer Options Yes No Not sure

Are you willing to act as a “lead agency” for a specific reverse auction event?

Yes No Not sure

Figure 22

 12% of respondents said they would be willing to act as a "lead agency" for a specific reverse auction event.


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E&I Consulting Group: 2013 Reverse Auction Survey Q23 - Based on your age, which category do you fall into? Response Percent 0.0% 4.7% 20.7% 52.0% 18.0% 4.7%

Answer Options 30 or under 31-40 41-50 51-60 61 or over I prefer not to say

Based on your age, which category do you fall into?

30 or under 31-40 41-50 51-60 61 or over I prefer not to say

Figure 23

 70% of the survey demographic indicated that they were aged 50 or older. Less than 5% were under the age of 40.

(End of Survey Responses)


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E&I Consulting Group: 2013 Reverse Auction Survey About Us E&I Consulting Group is a consulting and professional services firm focused on procurement transformation in the educational marketplace. We help schools and universities drive enterprise value across their entire supply chain, becoming more strategic so that they can accomplish more for less, drive down costs, and maximize operational efficiencies. To learn more about this survey, or to find out more about our services, please contact Paul O. Harris at [email protected] or (615) 419-8695.

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E&I Consulting Group a division of E&I Cooperative Services 2 Jericho Plaza, Suite 309 Jericho, New York 11753 (631) 630-8374 [email protected] www.eandiconsulting.org


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