What is Dutch Auction?
An auction format where the price moves in one direction until someone accepts it - down to a buyer in a forward Dutch auction, up to a supplier in a reverse one.
Definition
A Dutch auction moves the price in one direction at set intervals until a participant accepts the level on display, and the first acceptance ends the event. The direction follows the direction of the transaction. In a forward Dutch auction one seller is selling to multiple buyers, so the price opens high and steps down until a buyer accepts. In a reverse Dutch auction - the procurement case - one buyer is purchasing from multiple suppliers, so the price opens low and steps up until a supplier accepts.
How it works in practice
Procuring a component, a buyer opens the event below any plausible market price and the displayed rate steps up on a timer - say 100, then 102, then 105 per unit - until the first supplier commits and the event closes. Selling surplus stock, the same mechanism runs the other way: the price opens well above what the seller expects to achieve and falls until a buyer takes the lot. Either way there is no second round.
Why it matters
Because the first acceptance closes the event, it favours urgency and decisiveness. It is used far less often than reverse English or Japanese formats and suits time-critical, single-award situations.
Put a number on it.
Five numbers you already know, and how much of your spend goes out without a competitive event.