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You are here: Case Studies  / Services  / Public Procurement

Initial State

The local government near Budapest decided on long-term loan to improve its infrastructure.

Project

The competing criteria were based on the Euribor  margin and disbursement speed of the loan (in days). After submitting their bids, suppliers participating in the tender also took part in a reverse auction on Electool’s platform, a tool chosen by the Public Procurement and Supply Directorate General (KSZF). The benefits and gains of the reverse auction were significant to the local government because the margin dropped considerably compared to the last written offers of financing banks.

Result

  • The margin dropped more than 1 percent in the course of the reverse auction and resulted in a financial gain of over 150 million forints.
  • Apart from significant savings, disbursement time was reduced to three days from five. 
  • Using reverse auction in public procurement was not only beneficial to the local government (and ultimately to tax payers), but participating banks also welcomed the opportunity. 

    Further Lessons

    In current public procurement procedures, the last written offer submitted by suppliers is conclusive with no subsequent modifications allowed. This is frustrating and creates uncertainty for many suppliers. Reverse auction resolves this issue and allows suppliers to submit multiple proposals, even aiming for bottom market prices. This contributes to a more democratic competition and as a result there are more confident decisions and fewer cases before the Arbitration Board for Public Procurement.