Electronic bidding - how does a competition differ from an auction

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The end of the 20th century was marked by the revolutionary introduction of Internet technologies into the sphere of economic activity. Virtual trading has become an element of everyday life. With the development of the digital economy, the regulation of public procurement relations is becoming more and more formal. The sphere of preparation and conclusion of contracts is shifting to electronic platforms.

Peculiarities of legislative regulation

Starting from 2011, state regulation of relations on procurement from organizations with state participation, as well as natural monopolies with commercial organizations, is regulated by the law: FZ-223 of 2011-08-07 "On the procurement of goods, works, services by certain types of legal entities ".

The procedure for competitive procurement is being formalized. The basic concepts of the forms of relationship between the customer and the contractor are introduced. From Article 3.2 of this law, the basic concepts of what“competition” differs from “auction”, what is a “request for quotation”, how does it differ from “request for proposals”. The activities of electronic platforms that operate on the Internet and provide competitive procurement services are regulated.

In 2013, the relevant law was adopted - FZ-44 dated 2013-22-03 "On the contract system in the field of procurement of goods, works, services to meet state and municipal needs".

It regulates purchases if the customers are state or municipal authorities. The concepts of "open competition", as well as "competition with limited participation" are introduced. The clarification of the difference between an electronic auction and an open tender has been further formalized.

Using the concepts of two fundamental laws, electronic platforms develop their own regulations, which describe in detail the technology of interaction between the customer and the contractor.

Electronic Marketplaces

The current legislation provides for a gradual transition in the field of public procurement from paper documents to electronic procedures, which are carried out through specialized platforms developed for the Internet.

In fact, any resource that provides intermediary services for document flow between the customer and the contractor can be defined as an electronic platform. All documents are certified using an electronic signature. In this case, two classes of sites can be distinguished:

• B2G when customer canstate structures to speak.
• B2B governing the interaction of commercial organizations.

Some major customers have their own specialized marketplaces. These include Gazprom or Russian Railways.

Currently there are 5 such online resources:

1. CJSC Sberbank, a subsidiary of Sberbank of Russia.
2. JSC EETP, the largest trading platform established by the Government of Moscow.
3. FSUE "SET", started as an operator serving the government structures of the Republic of Tatarstan.
4. RTS-Tender LLC, among other things, works to service property auctions.
5. ETP "MICEX-IT", specializing in work with the Federal Treasury and defense orders.

Regulations of all sites contain similar concepts describing general procurement procedures and formalizing the difference between an auction and a tender.

Procedure types

All types of procurement procedures are formally described by the concepts:

• Request for quotations, when the customer fully formalizes the requirements for the terms of the contract, and the contractor is selected only according to the criterion of the proposed price. The opportunity to offer a price to the contractor is provided only once.
• Request for proposals.
• The competition provides several criteria for choosing the winner. At the same time, according to the price criterion, the customer can go through a multi-stage procedure. Pluralitycriteria - this is the main difference between a competition and an auction.
• Auction (for the purposes of FZ-44) - under this concept, a price reduction procedure is carried out, which is somewhat different from the generally accepted trading practice. As a rule, auctions by commercial structures were held to increase supply at prices. For the price reduction procedure, the concept of reductions was used. And how auctions differ from competitions is well spelled out in the law itself. For the auction, only one indicator is taken as the basis - the price.
• Competitive negotiations are used when an urgent order is required or a tender did not lead to a contract.
• Purchasing from a single source.
• Preselection.
• Bulk purchase.
• Collecting commercial offers.
• Competitive selection.

E-Competition

One of the most popular types of bidding is a competition. The customer conducts it when it is necessary to choose the most worthy among the applicants according to several criteria. For example, the experience of performing similar work by the contractor or the availability of appropriate resources to carry out the required work. For the implementation of the defense order and some other types of work, the legislation provides for the holding of closed tenders. Otherwise, only the presence of several criteria for selecting the winner is what distinguishes an open competition from an auction.

Auction

As already mentioned, an auction is a form of bidding when the only evaluation criterionthe winner is the proposed bidding price. For the purposes of FZ-44, trading is conducted only for a decrease, and for FZ-223, prices can also be raised. The remaining bidding criteria are used only for the admission of the participant to the bidding and do not affect the further decision-making. And this answers the question of how an electronic auction differs from a contest.

Reduction

When working with trading platforms, it is worth considering that FZ-44 and FZ-223 interpret the concept of an auction differently. For the purposes of public procurement, only price reduction for bidding is allowed. At the same time, FZ-223 provides for working with such types of proposals when an increase in the initial price is required. For example, conducting an offer for the sale of goods and services by the customer. For the reduction, as well as for the auction, the requirements for the qualification of the contractor are put forward only at the stage of determining the possibility of participating in the procurement procedure. For the purchase of goods and services, the reduction procedure is used. This is the main difference between a competition and an auction and a reduction in terms of FZ-44 and FZ-223.