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.
2000 Units - Shortlines With 0.2 Micron Clearfluid Filter Ref 011 Mc 33994 2018-11-28 11:00 ZNQ 640/ 18
To Provide Service for Thermometers Calibration Hygro Thermometers For Display Combined Clock/ Alarm, Temperature and Humidity Meter with a Temperaturerange From -20 To 50 Degree Celsius and Humidity Range From 10% to 95% Specification Attached 2018-11-23 11:00 ZNQ 25/ 06/ 2018
Endering of Eyecare Services to the Metro Health Services for a Three (3) Year Period: Western Cape Government: Department of Health 2018-12-14 11:00 WCGHCC029/ 2018
Suppy and Delivery Body Bags X 500units. 2018-11-23 11:00 ZNQ 210/ 18/ 19
Supply and Delivery of Sutures and Ligatures to all Hospitals/Institutions under the Control of the Department Of Health, Western Cape Government for a three year period 2018-12-14 11:00 WCDOH12/ 2018
Supply and Delivery of Mesh and Fixation Devices to all Hospitals/Institutions under the Control of the Department of Health, Western Cape Government for a three year period. 2018-12-14 11:00 WCGHC004/ 2018
Provision of Further Education and Training in Contact Centre Operations Articulating to the National Diploma In Contact Centre Management over a period of 36 months 2018-12-07 11:00 SCMU3- 18/ 19- 0371- HO
Gortex Suture Cv5 and Cv6 2018-11-27 11:00 PSH 983/ 1819
Platform Plinth. 2018-11-27 11:00 PSH 978/ 1819
Closed Suction System- Size 6 And 8fg 2018-11-27 11:00 PSH 1023/ 1819
Long Length Reusable Gloves 2018-11-27 11:00 PSH 1056/ 1819
Weighted Polyurethane Nasogastric Tube. 2018-11-27 11:00 PSH 1055/ 1819
Scrub Suits - Various Sizes 2018-11-27 11:00 PSH 1069/ 1819
Mankwe Trainning College(Mogwase) Installation & Connection to a Backup Generator Set to Academy and Provisioning of Lightning Conductor (Proffesional Servce Type: Electrical Engineering Works - Building) 2018-12-14 11:00 MMB 2019/ 027 EC
Combi Steam Industrail Oven 20 Trays Including Installation 2018-11-28 11:00 ZNQ: 469 / 2018/ 19
Electric Ring Cutter 2018-11-27 11:00 PSH 1046/ 1819
Supply, Delivery, Installation, Support, Maintenance, Commissioning and Training of Audio-Visual Equipment for all Classrooms, Lecture Halls and SImlab at the Western Cape College of Nursing, (WCCN) Metro West Campus (Athlone) for the Department of Health for a three (3) year period 2018-12-14 11:00 WCGHSC0179/ 2018
Appointment of a suitable service provider to Supply, Install and Configure eMail cleansing services to SITA and its clients for a period of two (2) years 2018-11-30 11:00 RFB 1846/ 2018
Data Storage Upgrade - Supply, Delivery, Installation and Configuration 2018-12-07 11:00 RFT- 2- 2018/ 19
The RAF hereby invites service provider for rental of document scanners for a period of five (5) years. 2018-12-14 11:00 RAF 2018/ 00052

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Advantages and disadvantages of Consortiums

Consortiums are often considered as entities to use when responding to tenders in South Africa. The question that arises is whether to use a Consortium or a Joint Venture when responding to a tender. To help you with this we have compiled a list of advantages and disadvantages for both Consortiums as well as Joint Ventures. In this article we list the advantages and disadvantages of Consortiums. Look out for the same article on Joint Ventures.

Consortiums Advantages:

  • Easy to establish as there are no formal procedures... Read More
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