Forward Auction

A forward auction in procurement is a competitive bidding event where multiple buyers bid on goods or services offered by a single seller. The price typically increases as buyers compete, with the highest bidder winning. This is the traditional auction format, as opposed to a reverse auction where suppliers compete by lowering their prices.

Forward Auction vs. Reverse Auction

• Forward auction: one seller, multiple buyers. Price goes UP. Buyer with the highest bid wins. Used when supply is limited or the item is unique.
• Reverse auction: one buyer, multiple sellers. Price goes DOWN. Supplier with the lowest bid wins. Used in procurement to drive competitive pricing from multiple suppliers.

In procurement, reverse auctions are far more common because the buyer wants to minimize cost. Forward auctions are used when the buyer is selling (surplus inventory, used equipment) or when a scarce resource is being allocated.

When Forward Auctions Are Used in Procurement

• Surplus asset disposal: selling off excess inventory, used equipment, or scrap materials
• Allocation of scarce resources: when demand exceeds supply and the seller allocates to the highest bidder
• Government auctions: public sale of government surplus, seized goods, or spectrum licenses
• Commodity trading: agricultural products, raw materials sold at auction

Forward Auction Formats

• English auction: open ascending price. Bidders see competing bids and can raise. Most common format.
• Dutch auction: price starts high and decreases until a buyer accepts. Used for perishables and time-sensitive goods.
• Sealed bid auction: all bidders submit one sealed bid. Highest bid wins. Bidders don't see others' bids.
• Japanese auction: price increases in fixed increments. Bidders who can't meet the new price drop out. Last bidder standing wins.

Forward Auctions in Practice

For procurement teams, forward auctions are primarily relevant when the organization is the seller - disposing of surplus inventory or equipment. Standard procurement sourcing uses reverse auctions or RFQ processes where suppliers compete on price. RFQ software like AuraVMS supports the standard procurement flow: you invite suppliers to quote, they compete, and the best price wins (the reverse auction principle, without the real-time bidding complexity).