Subscribe

Eskom puts tenders online

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 02 Apr 2015
Online auctions can save Eskom between 10% and 30% on procurement costs.
Online auctions can save Eskom between 10% and 30% on procurement costs.

Beleaguered power utility Eskom has resorted to reverse online auctions in a bid to trim its expenses.

The power company, which recently saw several key executives - including its CEO - suspended, has awarded a contract to T Norris & Associates to run online auctions in which suppliers bid against each other to supply Eskom with items that could range from pens to computers.

T Norris & Associates MD Tim Norris explains the concept of reverse auctions allows for transparent tendering, and generally saves the purchasing company between 10% and 30% on its expected spend.

Norris says the concept results in a "race to the bottom" between suppliers, which can drop their bids during the auction, or pull out if betting gets too hot.

The Eskom deal, won through a "normal tender process", will run for six months and is renewable. Norris hopes it will help Eskom save "a lot of money".

T Norris & Associates, which has the sub-Saharan agency for UK-based Purchasing Auctions, has been running such auctions locally for three years. Last year, it handled 15 auctions for nine clients, with a total value of R106 million.

Norris explains the company does not charge for its services, but takes a fee of 10% of any savings. As a result, if the hiring company does not reap any benefits, T Norris & Associates does not get paid, he explains. "We take a gamble, but it's an informed gamble."

Eskom is T Norris & Associates' most "high profile" customer so far, says Norris. However, he notes the company, thanks to backup support from the UK, could handle as many as 10 such clients at the same time.

Norris adds it takes about 45 minutes to telephonically train suppliers to use the system, and bidders are also taught how to set up their bids on a spreadsheet. The company is currently staffed only by Norris, with two contracted sales staff, but Norris says he "would love" to hire more staff.

Each auction is monitored in real-time by Norris, who can pause the auction at any time should a bidder accidently enter an incorrect offer. He notes this intervention is explained to all the bidders, so they know what is going on.

Auctions can also be run using specific parameters, such as bidders' locations and price limits.

Share