26 May 2005 | David Arminas
British Airways has cut its European public relations spend by 25 per cent after holding an e-auction.
Previously, the airline's PR work for 28 European countries was shared between three agencies - GCI, which covered 10 countries, Action Global with operations in 16, and Fleischer Communications.
The auction lasted two hours with the three incumbents and agencies Porter Novelli and Weber Shandwick taking part.
Action Global and GCI retained the business, on three-year contracts, a departure from the previous annual rolling basis.
"There was some concern by PR people at first about using an e-auction," said Guy Elliott, procurement manager for sales and marketing.
"The fear was that an e-auction would take that human contact aspect out of dealing with suppliers, an antithesis to PR and marketing people."
But the results won over PR, according to Becky Thornton, BA communications manager for Europe.
"The process made us extremely focused on our specifications. We had to be, because PR services are not like cleaning or catering where the job is tangible and can be clearly defined.
"It also saved me probably four to five days work that would have been meeting suppliers to negotiate deals."
A mock e-auction was run two days before to get people used to it, she added.
BA also ran an e-auction with five potential suppliers for editorial services including its corporate newspaper, BA News, on a two-year contract, said Elliott.
"Because it was an outsource contract our actual costs were not well defined.
"We believed it to be worth £300 million in the market but this eventually settled down at around £250 million."
Both auctions were conducted by Ariba.
Silla Maizey, BA's procurement director, said the e-auctions are part of the airline's purchasing strategy, established in 2003, to save £300 million from its £4 billion procurement budget.
"Procurement has shown it's a key element of BA's return to profitability," she said.
"We've met the target for reduction in suppliers to 2,000, which is about right for a company like ours with an £8 billion turnover.
"Three years ago, we had around 14,000 suppliers."