Does a reverse auction always save money?

Not when bidders don't compete. GAO found 2016 federal auctions with back-and-forth bidding about 12% below estimates, those without it about 6% below — and one bidder in 20% of auctions.

Can bidders see each other in a reverse auction?

They see the competing prices, not the names. US federal rules and the EU directive both keep bidders' identities hidden during the auction.

When can an EU public buyer use an e-auction?

Only when the procurement documents, in particular the technical specifications, can be established with precision. The auction may not start sooner than two working days after invitations go out.

Term

Reverse auction

A reverse auction is an auction in which sellers compete for a buyer's business by bidding prices down, seeing competing prices but not who offered them, until it closes. In freight, carriers bid for lanes or loads. The US GAO found federal auctions with real back-and-forth bidding came in about 12% below cost estimates.

Also called e-auction, electronic reverse auction, freight auction, e-reverse auction, eRAUpdated 13 October 2026

How it works

The US Federal Acquisition Regulation describes offerors who see competing offerors' prices, without the competitors' identities, and can submit lower offers until the auction closes; agencies must let them keep revising their prices downward, and may not use reverse auctions in sealed bidding. The EU directive's electronic auction works on new prices revised downwards. India's 2024 procurement manual has the buyer announce the starting price, minimum bid decrement, duration and maximum number of automatic extensions before it begins, and Saudi Arabia's 2019 procurement law defines it as bids submitted successively within a set period to select the lowest offer.

What the GAO found

	Fiscal 2012	Fiscal 2016
Auctions with one bidder	27%, plus 8% where each bidder bid only once	20%, against 14% for all competitive buys
Savings reported	More than $98 million, $24 million of it without bidding against each other	About 12% below estimates with iterative bidding; about 6% without

US federal reverse auctions — GAO-14-108 (December 2013) and GAO-18-446 (July 2018)

Worked example: one auction GAO described

Night-vision goggles, about $4.3 million · 110 bids from 16 vendors · the winner bid 17 times, cutting its price by roughly 30% · a typical 3% provider fee ≈ $129,000, built into the winning price

GAO's example from the State Department; the fee arithmetic is ours, on the 3% the provider FedBid told GAO it typically charges. A freight auction works the same way, lane by lane.

Who pays the fee

In US federal auctions the provider adds its fee to the price of the successful offer, so the buyer pays it inside the winning bid. The five agencies GAO reviewed indirectly paid about $13 million in fees for auctions run in 2016.

The mistake people make

Running an auction nobody competes in. With one bidder there is no auction, only a quote: the FAR lets the officer cancel or accept the offer only if the price is fair and reasonable. India's manual asks for a competitive market — say more than five bidders, and at least N+3 when an order is split N ways — and warns that e-reverse auctions should not be used indiscriminately.

FAQ

Reverse auction: common questions

Does a reverse auction always save money?: Not when bidders don't compete. GAO found 2016 federal auctions with back-and-forth bidding about 12% below estimates, those without it about 6% below — and one bidder in 20% of auctions.
Can bidders see each other in a reverse auction?: They see the competing prices, not the names. US federal rules and the EU directive both keep bidders' identities hidden during the auction.
When can an EU public buyer use an e-auction?: Only when the procurement documents, in particular the technical specifications, can be established with precision. The auction may not start sooner than two working days after invitations go out.