Zerrin Lovett, Use of e-auctions

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Zerrin Lovett, Head of Strategic Stakeholder Management for Construction, Cabinet Office Using e-auctions as a resource for procuring high volume standard products; the possibility for combined contracts, aggregating demand and achieving substantial savings.

Business Technologie

E-Auctions

Zerrin Lovett

Head of Strategic Stakeholder Management for
Construction

UNCLASSIFIED

What is an E-Auction

• Good for high volume
standard products
• Think of Ebay where the
price reduces
– Prices can be adjusted
whilst auction is live
– Suppliers are measured on
both cost and quality
aspects

UNCLASSIFIED

Typical Savings Achieved from E-Auctions in IT

£m
60

eAuction value at pre-auction prices Savings
48.96
50

40

30

20.40
20
16.10
13.70 13.70
12.50
10.60 10.51
10 8.02
6.60 6.80 6.05
5.80 5.70 5.20 5.70
4.60
2.40 2.70 2.93
1.30 1.72

0
1 2 3 4 5 6 7 8 9 10 11

eAuction #
UNCLASSIFIED

Background to London’s Highways E-Auctions

• Capital Ambition used e-
auctions previously
• Essex achieved approx
10% savings for blacktop
• London Highways
transformation project –
changing the face of
highways contracts
• Aggregation with WMHA

UNCLASSIFIED

Traditional Route to Customers
Component Service Materials
Suppliers Suppliers Suppliers

Contractors Contractors Contractors

Highways Highways Highways Highways
Authorities Authorities Authorities Authorities

Highways Highways Highways Highways
Authorities Authorities Authorities Authorities

Highways Highways Highways Highways
Authorities Authorities Authorities Authorities

UNCLASSIFIED

Competitive Rivalry

High if: Low if:

High number of Street Low number of
Salt
competitors Lighting competitors
Lamps

Low number of Fragmented customer
customers base
London
Combined
Highways
Contracts
UNCLASSIFIED

Principals of E-Auction

Electrical Testing I

UNCLASSIFIED

Component
New Model Suppliers

Service Suppliers
Component Skills Materials
Suppliers Suppliers Suppliers Materials
Suppliers

Main Main
Contractors Contractors

Highways Highways Highways Highways
Authorities Authorities Authorities Authorities

Highways Highways Highways Highways
Authorities Authorities Authorities Authorities

Highways Highways Highways Highways
Authorities Authorities
UNCLASSIFIEDAuthorities Authorities

Pathfinder E-auction - Streetlighting Lamps

Indicative Savings SON T Master
60%

50%

40%
Saving

30%

Total
20%

10%

0%
B A A B A B A B A B
50 Watts 50 Watt 70 Watts 100 Watts 150 Watts 250 Watts

Suppliers/ Wattage

UNCLASSIFIED

Running an E-auction

• Identify new
opportunities
• Measure volumes/values
• Measure unit costs
• Liaise with potential
suppliers
• Run procurement
process
• Run e-auction
• Let contracts
UNCLASSIFIED

Moving forward

• Move to standardisation across
the Capital / Country
• Aggregate demand across
country
• Identify areas where e-auctions
can make most impact
• Continue to measure unit costs
• Greatest savings occur in first
round of auctions

UNCLASSIFIED

A Few E-Auction Factoids
1. GE used to run reverse auctions before the Internet, with bidders sitting
in a series of rooms in a hotel, with a GE person slipping the latest price
under the door.

2. Items sourced by e-auction include ejector seat components, missile
components.

3. Both BP and GlaxoSmithKline each run a over 1000 of e-auctions every
year.

UNCLASSIFIED

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