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Dutch auction policy 'disgraceful'

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The government's chief procurement adviser is promoting the use of online auctions for whole building projects, in a move that has sparked dire warnings from construction chiefs.

The Office of Government Commerce has set an end-of-year deadline for all departments to produce a policy on the controversial method. It is recommending auctions be considered for buying everything from bags of cement to buildings.

The Strategic Forum for Construction - the industry-led task force - this week warned against the 'very dangerous' practice. Chair Peter Rogers told the AJ he was demanding a clear policy statement from the OGC.

The issue first came to public attention in March 2002 when the Royal Bank of Scotland adopted the practice (AJ 28.3.02), condemned by critics as a form of Dutch auction. Participants compete in real time by bidding lower as the auction unfolds.

Other private companies believed to have adopted online auctions for building products and services include supermarket chain Tesco.

The OGC, charged with increasing government efficiency, has been pushing for online auctions for some time in the procurement of simple products, claiming they increase transparency. This latest move to extend their use coincides with the development of more sophisticated software systems.

'We are suggesting reverse auctions should be considered on a case-by-case basis in all procurement activity, ' said a spokeswoman from the OGC.

'As of the end of 2004, we expect all departments to consider the use of e-auctions.

We would imagine they would readily take it up, ' she added.

And she insisted the practice was consistent with the pursuit of best value rather than lower cost. Issues of quality would be established as part of the pre-qualification before the e-auction begins, she said. 'The e-auction is the very final piece of the puzzle.'

However, Rogers said he was extremely worried by the practice, and called for greater clarity from the OGC.

'I would be very nervous of anyone using it for anything more sophisticated than a filing cabinet, ' he said.

Rogers rubbished the idea that at any stage complex, evolving building projects could be assessed simply on price. And he condemned the abitrary cost cutting that follows real-time bidding, as opposed to savings resulting from considered design changes.

'This is a hugely important for everyone, not just architects, ' he warned. 'For the whole ethos of the way we build things and the quality of the built environment for all of us.'

Chair of Rethinking Construction, Alan Crane, also condemned online auctions as 'disgraceful' and regressive. 'We have spent five years trying to get away from Dutch auctions to make sure that procurement is on quality and value, and not price.'

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