Reverse auction has traditionally been a procurement method favored by the public sector. In such an auction, a government agency creates a request for proposals (RFP) and vendors compete to provide the most attractive bid.

Since government agencies usually require that their service providers meet certain standards, the reverse-auction process streamlines procurement by allowing only pre-screened companies that meet these standards bid on agency RFPs.

This approach, however, is not limited to the public-sector domain and there are organizations that provide reverse-auction services to private firms. One well-known example is Ariba, an e-procurement service that mainly serves Fortune 500 companies.

On Tuesday, a new reverse-auction platform provider announced itself to the world. The operators are TelecomMarketPlace.net and Horizon Associates and the platform is called TelcoSource. The service enables buyers of IT and telecom equipment and services to solicit competitive offers from sellers and, via reverse auction, bring down the cost.

TelecomMarketPlace managing director James Martino said the idea was close to Ariba's. "TelcoSource is similar to that but it's geared specifically for the telecom and IT services sector".

TelcoSource is free for buyers and sellers can join for free but pay a fee to Telecom Market Place whenever they make a sale. Buyers and sellers contact each other directly.

There are two ways for buyers to use the platform as a procurement tool. One is to submit a complete RFP and invite bidders to participate in a reverse auction. The other is to submit a request for quotation (RFQ).

In their responses to an RFQ, vendors can help the buyer define the scope of work for their project and what it may cost.

According to Martino, 55 vendors are currently registered with TelcoSource as potential auction participants. Buyers can also invite vendors that are not part of the TelcoSource roster to compete with each other using the platform or with each other and with vendors that have been registered.