A Dutch auction is the practice, during or after competitive tendering, of using one tenderer’s price to negotiate the others downwards, playing bidders against each other until only one is left willing to accept the lowest price on offer.
In UK construction the term is used critically. Dutch auctioning is widely regarded as unethical and contrary to recognised codes of practice for tendering, because it breaches the confidentiality of tenders and the fairness of the competition. It can happen between a client and main contractors, but is more often seen when a main contractor uses subcontract quotations to drive down prices after winning a project. For the QS, the risks are a winning price that is unsustainable, a contractor or subcontractor who looks to recover the shortfall through claims, and reputational damage. For public bodies it may also breach procurement rules on equal treatment of bidders.
Related terms: Competitive Tendering, Tender Evaluation, Post Tender Negotiation, Two Stage Tendering.
