By Elena Malykhina
Considering all these factors, e-bidding is worth the attention of cross-border B2B buyers, especially as they spend more time and company dollars online than ever before. Accenture reports that nearly 70 percent of B2B buyers now purchase goods online.1
E-bidding is described by a municipal agency in Nepal as one of three stages in e-procurement, or the process of buying B2B goods and services online.2 The other two are e-execution and e-payment. Similar to an online reverse auction, the goal of e-bidding is for suppliers to win business while buyers receive the best possible deal.
Nearly all large companies have significant international business activity, and the same applies to many smaller companies. In fact, 40 percent of companies with revenues in the range of $40 million to $500 million have global supply chains.3 Because e-bidding takes place online, there are more options for global business deals compared to traditional bidding processes. Indian commodity company Essar Group, for example, used a reverse online auction early in 2016 to purchase liquefied natural gas (LNG) from suppliers around the world.4
When participating in e-bidding, companies can submit their bid deposits or make payments using international wire transfer, which offers several benefits over other payment methods.5 International wire transfers rely on a central clearing body and are conducted over a scalable network that includes most existing financial institutions that have proven ability to manage large capital flows on a global scale.
A joint survey by Clearing House Payments Company and Federal Reserve Financial Services found that B2B international wire transfers are highly valued as a method of payment for many transactions.6 Businesses prefer international wire transfer payments because they can be made the same day and they are perceived to be a safe way to send and receive large sums of money with no risk of return. The survey found that both domestic and international wire use increased with a company’s revenue. That’s because larger firms are more likely to overcome the inefficiencies in the international wire transfer payment process by adding resources or investing in automation. They are also more likely to use international wires for a greater portion of payments.
Smaller firms often don’t have the flexibility that larger firms have and they are more likely to choose payment options other than international wire transfers. However, there are protections in place for companies using international wires in e-bidding – for example, the option of a refund of a wire-transferred deposit if a bidder is not successful.
Another survey from the Association of Finance Professionals (AFP) found that U.S. businesses still rely on paper checks – not wire transfers – as their primary method of payments.7 A typical organization makes 50 percent of its B2B payments by paper checks, while only one in five organizations make payments electronically and only 16 percent use international wire transfers. Businesses that participated in the survey named IT barriers and customer/supplier indecision to adopt the necessary technology as the main hindrances in switching to electronic payments. However, among organizations that make payments across country borders using multiple currencies, the most widely used payment method is wire transfer. It’s used in approximately 65 percent of such transactions.
The usage of checks in B2B payments has dropped significantly in recent years and continues to decline, according to the AFP survey. Just under half of survey respondents said they are likely to convert the majority of their B2B supplier payments from checks to electronic payments by 2016.
Those in the public sector are leading the way in e-bidding systems. In the U.S., examples include transportation authorities like the New York State Thruway Authority (NYSTA), the Texas Department of Transportation (TXDOT), the Arizona Department of Transportation (AZDOT) and the Colorado Department of Transportation (CODOT).
While some have come to accept only bids submitted online, others still rely on both electronic and paper bids. CODOT, for instance, does not accept paper bids for highway and bridge construction projects.8 All bids must be made through its online portal. NYSTA, on the other hand, states on its website that e-bidding neither replaces paper bids nor forces any contractor to bid electronically.9
Municipalities, too, are moving toward e-bidding. Sarasota County, Florida, created an e-bidding program to make it easier for vendors to bid on and win jobs.10 To safeguard the process, the municipality also established a procurement code, an ethics code and a compliance policy.
B2B procurement is experiencing a digital overhaul. As companies look to purchase goods and services online, e-bidding has become a viable option for buyers and suppliers to connect globally and to conduct business deals in real-time.
Elena Malykhina is professional writer who has covered science, technology and business for more than 10 years. Her work has appeared in InformationWeek, Scientific American, Newsday, The Wall Street Journal and Adweek, as well as through the Associated Press.
1. 2014 State of B2B Procurement Study, Accenture;https://www.accenture.com/t20150624T211502__w__/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Industries_15/Accenture-B2B-Procurement-Study.pdf.
2. “E-bidding: An Introduction”, Office of the Treasury and Accounts Control, Hetauda, Makawanpur, Nepal;http://www.slideshare.net/PrabinTandan/e-bidding-presentation.
3. “International Payments in the New Normal”, Bottomline Technologies, accessed 5 October 2016;https://www.bottomline.com/sites/default/files/payments-cash-management-intl-payments-new-normal-cpy-us-wtp-1311-015.pdf
4. "Essar Conducts World’s First Online LNG Auction", Global Trade Review, 29 June 2016; http://www.gtreview.com/news/asia/essar-conducts-first-online-lng-auction
5. The Future of Financial Services, World Economic Forum, June 2015;http://www3.weforum.org/docs/WEF_The_future__of_financial_services.pdf
6. Business-to-Business Wire Transfer Payments: Customer Preferences and Opportunities for Financial Institutions, Clearing House Payments Company; https://www.frbservices.org/files/communications/pdf/research/wire_transfer_research_final.pdf
7. 2013 AFP Electronic Payments Survey, Association for Financial Professionals, accessed 3 October 2016; https://www.afponline.org/docs/default-source/default-document-library/pub/2013-afp-electronic-payments-report-preview.pdf?sfvrsn=2
8. "Highway and Bridge Construction Bidding", Colorado Department of Transportation, accessed 3 October 2016; https://www.codot.gov/business/bidding
9. "Electronic Bidding Instructions", New York State Thruway Authority, accessed 3 October 2016; http://www.thruway.ny.gov/business/contractors/expedite
10. "Bounce Back", Business Observer, 15 April 2016; http://www.businessobserverfl.com/section/detail/bounce-back1