Reverse auction

A reverse auction is an auction turned upside down: instead of buyers bidding a price up, sellers compete by bidding a price down in real time, and the buyer awards to the winning bid at the close of the event. In public procurement it is usually run online as an electronic reverse auction, with qualified suppliers submitting successively lower bids against a published starting point.

How it works

The buyer first pre-qualifies suppliers and defines exactly what is being bought — a commodity with clear specifications works best, since price is meant to be the deciding variable. The event then opens for a fixed window: suppliers see (depending on the rules) the ranking or the current lowest bid, submit improved (lower) bids, and the auction closes either at a set time or when bidding stops moving. The award follows whatever basis the solicitation stated — lowest final price, or a score combining price with rated criteria.

Canadian use: Ontario's ESRA

A Canadian government example that can be read in the source is Ontario's Building Broadband Faster guideline (Guideline 4.0, issued under the Building Broadband Faster Act, 2021). The guideline defines an Electronic Scoring Reverse Auction (ESRA) as an auction structure that lets the Province assign scores to internet service providers based on price and other well-defined non-price attributes in their proposals, with weights chosen to highlight specific policy objectives. In other words, Ontario's variant is not a pure price race: scored attributes are built into the auction itself, which is how reverse auctions are commonly adapted for public-sector use where quality and policy goals matter alongside price.

What it means for suppliers

A reverse auction compresses the bidding timeline: where a traditional tender gives days or weeks to prepare one sealed bid, an auction expects competitive positions to move in minutes. Suppliers who win in this format are usually those who know their true cost floor in advance and have pre-cleared internal pricing authority, because there is no time to escalate mid-event. Before entering, check the solicitation's rules on bid increments, whether bids are visible to rivals, tie-breaking, and whether the final bid creates an irrevocable offer — the same offer-formation rules that apply to sealed tenders apply to bids submitted in an auction event.

Common questions

Is a reverse auction the same as a tender?

No. A sealed tender is a one-shot, non-visible competition: everyone submits once and the buyer compares. A reverse auction is iterative and (typically) transparent among participants during the event. Canadian public buyers still sit inside the same legal framework either way — trade agreements such as the CFTA (Chapter Five, Government Procurement) govern how covered procurements must be conducted, so any auction process must still be open, fair, and run by the rules published in the solicitation.

When do governments choose reverse auctions?

Where the requirement is standardizable and price-competitive — commodities, utilities-style purchasing, and in Ontario's case broadband expansion lots under the Building Broadband Faster framework with a scored-auction twist. They are a poor fit for complex services where the difference between bids is capability rather than price, which is why most Canadian public-sector solicitations remain sealed RFP/tender competitions.

Related definitions

Progressive bidding · Proposal vs. tender · Evaluation criteria weighting · CFTA thresholds