Dynamic purchasing systems and electronic auctions: how buyers run repeat purchases

Not every public purchase is a one-off contract with a single deadline. For goods and services a buyer needs again and again - office supplies, IT equipment, temporary staff, routine maintenance - the directive offers two electronic tools that change the rhythm of bidding. A dynamic purchasing system is a list of qualified suppliers that stays open for years; an electronic auction is a live round in which admitted bidders lower their prices in real time. Both reward suppliers who understand the mechanics and punish those who treat them like an ordinary tender.

Dynamic purchasing systems

A dynamic purchasing system Dynamic purchasing system An open electronic list of approved suppliers that a buyer orders from; companies can join at any time. Full entry , or DPS, is set up under Article 34 of Directive 2014/24/EU for purchases that are commonly used and generally available on the market. Think of it as a framework agreement with the door left open.

How it works:

1. The buyer publishes a contract notice Contract notice The announcement that a buyer is now accepting bids: the notice you can act on. Full entry announcing the DPS, its scope, its duration and the selection criteria, often divided into categories of products or services.
2. Any company that meets the selection criteria may ask to join, at any time during the life of the system. The buyer must evaluate a request within ten working days, extendable to fifteen in individual cases, and may take longer only until the first invitation to tender is sent. No company may be refused entry for reasons other than the published criteria, and no fee may be charged.
3. For each specific purchase, the buyer invites all admitted suppliers in the relevant category to tender, with at least ten days to respond. The award goes to the best tender under the published award criteria Award criteria How bids are scored: price alone, or price and quality weighed together (the best price-quality ratio). Full entry .

The differences from a framework agreement Framework agreement An umbrella deal with one or several suppliers, under which orders are placed later without a new tender. Full entry are the ones that matter to a supplier who missed the original notice. A framework closes at award: if you were not in when it was signed, you wait years. A DPS never closes: you can qualify next month and receive the next invitation. The whole procedure is electronic, and the initial time limit for requests to participate is at least thirty days, after which there is no fixed timetable at all.

Two cautions. Being admitted to a DPS is not a contract; it is the right to be invited. Some systems admit hundreds of suppliers and award dozens of small contracts a year, so the work is in responding well and quickly to each invitation. And the buyer may set subcategories with their own criteria; ask to join the ones you can actually serve.

Electronic auctions

An electronic auction, Article 35, is a repetitive process in which bidders submit new prices, or new values for quantifiable elements of their tender, and see their ranking change in real time. It is not a procedure of its own: it is a final stage a buyer may add to an open, restricted or competitive procedure, to a framework mini-competition or to a DPS contract.

The rules that protect bidders:

• The notice must state that an auction will be held.
• The auction may only be based on prices, or on prices and values of elements that can be expressed in figures and evaluated automatically. Anything requiring human judgement is scored before the auction and does not move.
• The auction can only start after a full initial evaluation of the tenders. Every admitted bidder is invited simultaneously, electronically, with at least two working days' notice.
• The invitation must state the mathematical formula that will re-rank tenders as new values arrive, including the weighting of every criterion.
• During the auction, each bidder sees at least its own ranking; the buyer may disclose more, but never the identity of other bidders.
• The auction closes at a stated time, after a period without new bids, or after a stated number of rounds, as announced in advance.

Auctions are excluded for contracts involving intellectual performance, such as the design of works, where the price cannot be compared without judging the content.

How to compete in an auction

An auction turns pricing from a single sealed number into a game with rules you can prepare for:

• Know your floor before you log in. The pricing guide explains how to build a cost you can defend. In the heat of a live round, the floor is the only defence against winning a loss-making contract.
• Understand the formula. If quality was scored before the auction and carries 40 percent, a bidder with a higher quality score needs a smaller price cut to lead. Compute, before the auction, the price at which you overtake the current leader for each plausible quality gap.
• Do not chase the last bid. Auctions with automatic extensions reward patience; a bid in the closing seconds simply triggers another extension.
• Remember the abnormal-tender rule. A price that falls below what the work can cost will be questioned after the auction, exactly as in a sealed tender. The abnormally low tenders guide applies in full.

A worked example of an auction

A buyer runs an open procedure Open procedure Anyone may submit a bid, in one step, with no pre-selection. Full entry for 500 laptops with price weighted at 70 and technical quality at 30, followed by an electronic auction on price. After the initial evaluation, three bidders are admitted with quality scores of 24, 27 and 21 and prices of 420,000, 445,000 and 400,000 euros. The formula gives the lowest price 70 points and the others 70 times lowest over price.

Before the auction, bidder B, with the best quality score, computes its position. At current prices it scores 27 plus 62.9, or 89.9, against A's 24 plus 66.7, or 90.7, and C's 21 plus 70, or 91. To lead, B needs its price points to reach about 64.1, which means a price of roughly 437,000: an 1.8 percent cut. A, to overtake C, needs to reach 67 price points, or a price around 418,000. C, with the weakest quality, must stay lowest by a margin.

B's floor, from its cost model, is 425,000. It enters the auction knowing it can go to 437,000 comfortably and to 425,000 at most, and that anything below is a loss. When C drops to 385,000 in the second round, B calculates again rather than reacting: at 425,000 it would score 27 plus 63.4, or 90.4, against C's 91. B stops. C wins, and a week later receives a request to justify a price 12 percent below its own first tender.

Electronic catalogues

Article 36 lets buyers require tenders in the form of an electronic catalogue: a structured price list in a format the buyer specifies. Under a framework or a DPS, the buyer may even award specific contracts by collecting updated catalogue data from admitted suppliers, after notifying them, rather than asking for a tender each time. For suppliers this means that keeping a catalogue accurate and current is itself a bidding activity.

Finding them

A DPS is announced by an ordinary contract notice, so it appears in the tender search like any other; look for "dynamic purchasing system" in the procedure field, and note that the deadline shown is for the first round, not the last. Individual contracts awarded through a DPS appear in the award archive and tell you, over time, how much business the system actually generates and for whom. A system that awards fifty contracts a year to a spread of suppliers is worth joining; one that awards two a year to the same company is not.