Utility auctions volume through Pantellos exceeds $1 billion

THE WOODLANDS, Texas, June 18, 2003 — Pantellos announced that it has now conducted more than $1 billion in online reverse auctions for its utility customers, generating more than $190 million in customer-reported savings and an 18 percent average savings rate.

These significant milestones are the result of more than 650 online auctions managed by Pantellos for its utility customers since the company began providing its Dynamic Services auctions offering in January 2001. Pantellos has experienced tremendous growth in auctions activity over the past 18 months, with an even greater increase since Jan. 1, 2003.

“Utilities are increasingly using online auctions as they extend their use of e-commerce tools and technologies to create efficiencies, reduce costs, impact earnings and increase shareholder value,” said Jim Neikirk, president and CEO for Pantellos. “Our Premier Dynamic Services auction programs help identify and obtain the most current and competitive market prices when procuring goods and services, generating average reported savings of more than 18 percent. In addition, auctions cut the procurement cycle time from months to weeks to sometimes days when compared with traditional sealed bid methods, cementing them as an integral part of the procurement process.”

Pantellos conducted more than 300 auctions in 2002 with a total spend volume of almost $500 million, generating more than $88 million in customer reported savings. The company is currently on pace to conduct more than 600 auctions with $700 million in spend volume and $140 million in expected customer savings this year. Pantellos managed 102 auctions in May alone, with a total spend volume of $90 million, both monthly records for the company.

Utilities have used Pantellos auctions to source more than 100 product and service categories to date, including indirect goods such as envelopes, copiers, chemicals and steel products; and direct goods such as power transformers, boiler tubes and fuels. Pantellos has also helped customers electronically source capital projects and a wide variety of services, including vegetation management, security and janitorial services.

Pantellos’ Premier Dynamic Services helps customers achieve cost savings on an ongoing basis by instilling a disciplined, programmatic approach to using auctions. Through Premier Dynamic Services, Pantellos provides a multidisciplinary team who works on-site with customers to identify the best auction categories; research, recruit and manage supplier participation; create and implement internal or supplier training programs; structure and personally manage the auction events; and provide post-bid analysis and regular reporting. The team typically includes a Pantellos Dynamic Services manager, development manager, auction manager and an array of portfolio managers who provide expertise in the categories being sourced.

“There is no question that a programmatic approach to conducting auctions is the best way to generate significant results over both the short- and long-terms,” said Kevin Kupfer, director of Dynamic Services for Pantellos. “More than 65 percent of our active buying customers are participating in ongoing auction programs and are finding that a committed approach generates widespread use of the tool as a standard business practice, produces significant results across multiple spend categories and business units, and delivers significant impact to the company’s bottom line.”

Just as utility buyer customers are finding success by engaging online auctions as an electronic sourcing tool, suppliers are also realizing the benefits of participation. A 2003 CAPS Research report titled, “The Role of Reverse Auctions in Strategic Sourcing,” indicates that suppliers feel auctions are “…a fairer process of awarding business, because they ‘level the playing field’ through increased transparency.”

The report also notes an observation that …”incumbent suppliers are awarded the business sourced through an electronic auction about half the time.” This observation illustrates that auctions can help provide new business for participating suppliers. Other potential supplier benefits noted in the report include lower marketing/sales costs, quicker award/non-award cycle times, and constructive feedback from buyers as to why they won/lost the business. The report concludes that auctions are “here to stay and will continue to grow.”

About Pantellos

Pantellos is a supply chain services company for the utility and energy industries. Built by the industry, for the industry, Pantellos offers access to deep supply chain expertise, a broad suite of supply chain services, an active trading community and leading-edge technologies. Pantellos is based near Houston, Texas, USA. For more information visit http://www.pantellos.com.

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