Issue Date: 
Thursday, August 16, 2018

7 Disadvantages of Competitive Bidding

The bidding process can be very tedious sometimes. Here are some of the disadvantages of the bidding process.

1.    Leading suppliers may not tender

In Australia, for example, government procurement guidelines only allow suppliers who actually tender to be considered for a procurement decision. If the leading supplier or suppliers do not tender, the purchaser can only consider bids from suppliers who do tender. If leading suppliers are not considered, the purchaser may end up buying inferior product or service.

2.    Barriers to communication between supplier and customers

When making significant purchases, frank and open communication between potential supplier and customer is crucial.
Competitive bidding is not conducive to open communication; in fact, it often discourages deep dialogue because in many cases all discussions between a bidder and the purchaser must be made available to all other bidders. Hence, Bidder A may avoid asking certain questions because the questions or answers may help other bidders by revealing Bidder A's approaches, features, and the like.

3.    The cost-plus phenomenon

There is a bear-trap in the purchase of goods and services on the basis of price tag that people don't talk about. To run the game of cost plus in industry a supplier offers a bid so low that he is almost sure to get the business. He gets it. The customer discovers that a change is vital. The supplier is extremely obliging, but discovers that these changes will double the cost of the supply. The supplier runs the risk of making a loss on the contract.

4.    Use of cheaper, poor quality materials and/or labour

A supplier forced to play the competitive bidding game may come under pressure to keep costs down to ensure he gets a satisfactory profit margin. One way a supplier can lower costs is by using cheaper labour and/or materials. If the cheaper labour and materials are poor quality, the customer will often end up with inferior, poor quality goods or services.

5.    Safety shortcuts

Another area where suppliers may be tempted to lower costs is safety standards. Safety costs can ran away with a contract. Cutting down on safety costs is a sure way to keep the bidding price low.

6.    Competitive bidding can be extremely slow

When Organs of State, and indeed, private companies use competitive bidding it can take sometimes years to award the bid. The result is the customer can wait incredibly long periods for goods or services that may be required quickly.

7.    Insufficient profit margin to allow for investment in research and development, new technology or equipment

Competitive bidding can force a supplier to accept a very slim profit margin. These low margins can result in a supplier having little or no money to spend on research and development, new technology and equipment.

To learn more about this and many other tender conditions please attend one of our How-to-Tender workshops. For more information on the tender courses please email Werner at werner@how2tender.com.

This article was written by Werner van Rooyen, Director of HowToTender (Pty) Ltd. which specializes in tender consulting and tender training.

Title Closing Date Tender No.
Appointment of a service provider to implement an electronic document and records management system for Chief Directorate: Professional Ethics 2019-02-01 11:00 OPSC 006/ 18
Appointment of a service provider for garden maintenance at the National Research Foundation in Pretoria for a period of five years 2019-02-13 11:00 NRF/ RISA B&M/ 006/ 2018
Appointment of a service provider for the provision of security services for the National Lotteries Commission for Free State Office (Welkom) 2019-02-18 11:00 NLC/ 2018 - 22
Provision of physical security services at the South African Medical Research Council Sites 2019-02-15 11:00 SAMRC/ FMPPSG/ 2018/ 14
Artificial Intelligence: Machine Learning Project 2019-02-15 12:00 RFP_2019_RPS_00001
Consulting Services on the Management and Supervision of the implementation of the MNJTF Command, Control, Communication and Information System (C3IS) and Aerial Intelligence, Surveillance and Reconnaissance (A-ISR) Service Contracts. 2019-02-04 15:00 AUC/PSOD/EU/QCBS/C-01/2016
Production and Delivery Of The Annual Report of merSETA For Periods 2018/2019 and 2019/2020 2019-02-07 11:00 RFP 005/ 2018
Appointment of a service provider for the supply and delivery of a new network performance monitoring system for the quality of services monitoring (QoS) on an 80/20 PPPFA 2000, Preferential Procurement Regulation: 2017 2019-02-19 11:00 ICASA 19/ 2018
Provision of Accredited Training, Establish SMME’s and Cooperatives, Provide Readiness. 2019-02-08 11:00 GEP005/ YOUTHPMO/ 18
Physical verification of all spaza shops in the Gauteng Region 2019-02-08 11:00 GEP003/ SPAZASHOPSPROJECT/ 18
Supply and delivery of Cleaning Chemical [As and when required] to various EKZNW resorts for a period of 3 years. 2019-02-15 11:00 EKZNW 01/ 2019
Supply and Delivery of fencing materials at Hluhluwe Game Reserve. 2019-02-15 11:00 EKZNW 04/ 2019
Provision of cleaning services at the Gauteng Department of Economic Development and Gauteng Department of Agriculture and Rural Development including regional offices. 2019-02-08 11:00 GT/ GDED/ 004/ 2019
South African Social Security Agency: Verulam Local Office: Procurement of Office Accommodation and Parking: Office space required of 832.44m² and 27 Secured parking bays on site.The building should be located in the Verulam CBD. 2019-02-12 11:00 DBN18/ 11/ 11
SAPS VISS and TRT: Port Shepstone: Procurement of Alternative Office Accommodation and Parking for the period of 5 years. Office space required should be able to cater for 1868.75m², 432 parking bays and 02 wash bays. Building to be located within the Port Shepstone area. 2019-02-20 11:00 DBN19/ 01/ 01
Removal of Healthcare risk waste: Various Correctional Centres - KwaZulu Natal Region for a period of 12 months 2019-02-18 11:00 KZN 09/ 2018
Appointment of a company to provide a suitable marine survey vessel for the Council for Geoscience for a period of three (3) years. 2019-02-18 11:00 CGS- 2018- 39F
Appointment of service provider for a Deep Vertical Stratigraphic Research Core Borehole for the Karoo Deep Drilling Programme in T Beaufort West. 2019-02-18 11:00 CGS- 2018- 045A
The purpose of this Request for Quotation (RFQ) is to invite proposals for the provision of catering services to the Tribunal. It is the Tribunal’s intention to appoint three (3) service providers onto a Panel of Preferred Suppliers for catering services. Please read the RFQ Documents for all the requirements. 2019-02-15 11:00 ER- RFQ/ 2018- 2019/ 11/ Catering
Appointment of a service provider to provide office lease space on a lease agreement for the CCMA Tzaneen Office for a period of five (5) years. 80/20 Principle will apply. 2019-02-08 11:00 CCMA/ 2018/ 06ALIMP

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10 Features of a good Joint Venture Agreement

By W van Rooyen

www.howtotender.co.za

A Joint Ventures is a good business idea to compete for tenders if one does not have all the necessary expertise that are required from a specific tender. The thing to remember though is that you must have a solid Joint Venture Agreement in place for your Joint Venture. A good, rock solid Joint Venture Agreement will protect the participants to the Joint Venture.

 Here are 10 features that any good Joint Venture Agreement... Read More

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