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.
Term Contract: 24 Months : Repairs and Maintenance to Refrigeration Plant and Associated Equipment: Area 1-7. 2019-10-04 11:00 CPTYT 23/ 19
To appoint an implementing agent to undertake Green Economy Ecosystem Support work, which entails working closely with industry, investors and government in a number of sectors - including: waste economy, water, renewable energy and energy services; to identify economically viable green economy business opportunities and to unlock barriers that prevent them from being realised ; and to help businesses to green their operations, value chains and product lines, thereby enabling businesses to improve their own resource resilience and stimulating demand for green technologies, products and services. 2019-10-15 11:00 EDT 018- 19
Procurement of a service provider with relevant expertise and experience to undertake phase 2 of the exploration and development of financial mechanisms and models toward improving economic water resilience in the Western Cape. 2019-10-15 11:00 EDT 014- 19
Request for Proposals for appointment of a service provider for provision of Managed Voice and Data Services for a period of three (3) years 2019-10-07 11:00 CMS/ 052019/ 2020
Appointment of a Service Provider to Provide Printing Services for a period of three (3) years for the CCMA as and when required. 2019-10-04 11:00 CCMA/ 2018/ 11(A)- COPS
Appointment of a service provider to provide office space on a lease agreement for the CCMA in the Port Elizabeth office for period of five (5) years. 2019-10-04 11:00 CCMA/ 2019/ 29- PE
Appointment of a service provider to provide office space on a lease agreement for the CCMA in the Kimberly office for period of five (5) years. 2019-10-04 11:00 CCMA/ 2019/ 28- NC
Request For Proposal For Provision Of Training Services – Three (3) Learnerships 2019-10-07 12:00 CDC/ 432/ 19 (A- C)
Supply of Periodicals Subscriptions ( South African Magazines and Journals) to All Public Libraries in KZN Under Arts and Culture. 2019-10-11 12:00 DAC005/ 1920
Water and sanitation programme phase 3A at Sinothile PS (Kuneningi PS), Pongola 2019-10-14 11:00 ZNTU 03972 W
Water and sanitation programme phase 3A at Ntsonyane P School, Ulundi 2019-10-15 11:00 ZNTU 02409 W
Water and sanitation programme phase 3A at Manqwashu P School, Nongoma 2019-10-14 11:00 ZNTU 03978 W
Renovations to Mtuba camp roof, floors and painting at Department of Transport, Mtuba camp 2019-10-14 11:00 ZNQ UM 3089 U
Karee Military Base: Junior Mess, Officer’s mess,Signal Unit Mess, and Upgrading of kitchen Equipment 2019-10-07 11:00 H19/ 013 AI
Saldanha: Military Base: Construction of new sickbay facility 2019-10-04 11:00 CPT1005/ 19
Appointment of contractor to perform general maintenance work at Bitou Campus 2019-10-02 12:00 SCC 82/ 2019
Supply of periodicals subscriptions (international magazines and journals) to all public libraries in KZN under arts and culture. 2019-10-11 12:00 DAC006/ 1920
Appointment of contractor to perform general maintenance work at Beaufort West Campus 2019-10-02 12:00 SCC 80/ 2019
Appointment of contractor to perform general maintenance work at Oudtshoorn Campus (Huis Sommers) 2019-10-02 12:00 SCC 79/ 2019
Elliotdale Police Station: Condition Based Maintenance of Station and Official Quarters on all Elements 2019-10-10 12:00 CDC/ 132/ 19

Pages

2 items that determine tender pricing

Article by Werner van Rooyen

www.howtotender.co.za

31 January 2019

Many bidders that respond to tenders struggle when it comes to calculating a price for a specific tender. One of the reasons for this is that a large number of Small Business Owners are usually new to the tender process and therefore they lack the necessary experience to price their bids correctly.

Without getting into the fundamentals of accounting there are two basic items that determine your... Read More

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