GeM reverse auction strategy: set your floor price before it starts

Bid to RA or direct RA: which one are you in?

GeM runs reverse auctions two ways. In bid to RA, you submit technical and financial bids first; the buyer evaluates the technical side, and the auction then runs among qualified sellers under the rule the buyer picked when it created the bid. In a direct RA, which GeM announced as a "two step" process, there is no sealed price round: you make a technical offering, and after technical evaluation all qualified sellers are invited to the financial round.

In bid to RA, your sealed price already shapes the auction. GeM's seller FAQs say the L1 price of the bid is set as the reference price for the RA. Whoever was lowest in the sealed round decides where the auction starts, and everyone else has to beat that figure from the first move.

So quote the sealed bid as if no auction will follow, because sometimes none does, and sometimes you will not want to bid in it. Under the goods manual's tender cum reverse auction procedure, a bidder who stays out of the auction keeps its financial bid price as its valid offer, and its rank is set by the lower of the two prices. A careless sealed price can win you an order you never meant to take.

Who gets invited to a GeM reverse auction?

The two qualification rules, 50% elimination and H1 elimination, are set out in our GeM tenders explainer. For strategy, the finer print matters more:

• A minimum field. GeM's FAQs say offers of at least 3 sellers and 2 OEMs are kept without elimination.
• Split bids. If the buyer will divide the order among N sellers, at least N sellers go to the auction, and under H1 elimination the highest bidder stays in if it falls within those N.
• The MSE band only counts against a non-MSE L1. If L1 is itself an MSE, the 15% band brings no extra MSEs into the auction, and under H1 elimination the highest bidder is dropped whatever its MSE status. Make in India and its 20% band work the same way.
• A second OEM. If only one OEM's products would be left after elimination, GeM adds sellers until another OEM is in, where one is available.

Before the auction, work out who is likely to be in it with you. If you are an MSE sitting 10% above a non-MSE L1, you may get two chances: the auction itself, and a price match afterwards. That changes how hard you need to push during the round.

Start price and decrement: how each step works

GeM's general terms say the start or reference price and the step value of decrement are shown to bidders when the auction starts. Each new bid has to be one or more whole steps below the prevailing lowest bid. During the round you can see four things: the start price, the decrement value, the prevailing lowest bid and your own last bid. Competitor names are not on that list.

The goods manual, which sets defaults for reverse auctions on other government portals, suggests a decrement of 0.5% of the start price where the buyer sets none. On a ₹40 lakh start price, that is ₹20,000 a step. Whatever the size, count your steps in advance. The distance from the start price to your floor, divided by the decrement, is the number of moves you have.

How to set your floor price before a GeM reverse auction

Your floor is the lowest landed price at which you would still rather win than lose. Set it in a meeting before the auction, write it down, and have the person who can approve it sign it. This build-up works for most goods:

1. Direct cost per unit for this exact specification: material, conversion, packing and testing. Not your catalog average.
2. Delivery to every consignee: freight, insurance, unloading and any installation. GeM offer prices are all inclusive of taxes, duties, transport and loading-unloading charges.
3. GST at the applicable rate, because the auction price is a landed, tax-inclusive figure.
4. The cost of the contract terms: performance security of up to 5% of the contract value, held until two months after warranty obligations end, any GeM transaction charge that applies, the payment cycle, warranty service and exposure to liquidated damages.
5. The minimum contribution you need over direct cost. On idle capacity it can be thin; for a plant running full, it cannot.
6. Add it up. Then round to a figure you can actually reach in whole steps from the reference price.

Write down a target as well: the price you expect to win at, drawn from past results in the category. Our guide to tender results shows how to build that history. Target and floor are different numbers. A lot of bad orders come from treating the target as the floor once the auction gets heated.

How to bid during a GeM reverse auction

• Staff it. You need the person entering bids, the person who approved the floor and someone watching the clock. In a 24 hour window the real action usually comes near the end, so plan who is on duty then.
• Move one step at a time unless you have a reason to jump. A big jump signals urgency and gives away margin nobody asked you for.
• Ignore the urge to snipe. A lower bid in the final 15 minutes adds another 15, and the extensions have no cap. Late bids only restart the clock.
• Watch the pace. Quick single steps usually mean two sellers trading blows; a long pause may mean someone has reached its floor.
• Stop at the floor. Once the prevailing lowest bid passes it, stop. Your last valid bid stays binding, and a split award or preference band may still bring you some quantity.
• Keep a backup connection. GeM's terms say neither GeM nor the buyer is liable for interrupted access, whatever the cause.

What happens after the reverse auction closes?

• Preference rules apply. GeM's terms say the award follows the MSE and Make in India orders, so an eligible MSE or local supplier within the band can be offered quantity at the L1 price. See MSE purchase preference.
• Price breakup. The winner must give a complete breakup of the quoted price in the required format before the award.
• Price justification. If the final price looks unworkable, the buyer can ask for a justification, and GeM's FAQs allow 48 hours to answer. See abnormally low bids.
• Negotiation. The goods manual says there shall be no negotiation once an e-reverse auction closes. GeM's buyer FAQs separately describe an L1 negotiation feature at financial evaluation, with up to five requests and 72 hours to respond each time, so read your bid terms.
• Performance security. Where the bid asks for it, it is due within 15 days of the award on GeM.

If you lost, save the auction result. A record of how low each seller went with this buyer is the most honest pricing data you will get. Our explainer on the L1 bidder covers how ties and split quantities are settled after the ranking.

Illustrative example: hospital beds for a Raipur hospital

This example is invented. A central government hospital in Raipur runs a bid to RA for 120 manual hospital beds, delivered and installed. A Ludhiana bed maker is L2 in the sealed round. The sealed L1 price of ₹38,40,000 becomes the reference price, with a decrement of ₹20,000.

From ₹38,40,000, fourteen steps of ₹20,000 reach ₹35,60,000, the last step above the floor. The team agrees to bid one step at a time and stop at ₹35,60,000, and the managing director, not the sales manager, approves any change before the auction opens.

The lowest bid stalls at ₹35,80,000. The Ludhiana firm bids ₹35,60,000 with 10 minutes left, the clock extends by 15 minutes, and nobody answers. It wins at its floor, with the contribution it planned. Had a rival gone to ₹35,40,000, it would have stopped and kept its margin for the next tender.

How AI tools help before a reverse auction, and what you decide

Most of the floor price work happens in the bid document: consignees, delivery period, performance security, warranty, split ratio, preference clauses and the ATC. TenderGenie reads the bid pack and brings those clauses out with a reference to the source page, so costing starts from the actual terms. Competitor Intelligence adds award history and pricing signals from available award records, which helps you set a realistic target.

TenderGenie does not bid in the auction and cannot tell you what a rival will do. The floor, the target, the approver and the moment to stop belong to your team. Settle them in the bid/no-bid review, before the clock starts.

Questions and answers