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.
Construction of Xurana Water Supply. 2018-10-05 12:00 ORTDM SCMU 11-18/19
Tenders are invited for the Waterproofing of Guttering of Office and Veranda Section of Roof of office area 2018-09-20 11:00 CSQ09181435
Appointment of a professional consulting engineer for the planning, design and project management: Upgrading of the eastern bulk outfall sewer line. 2018-10-05 14:00 TN033/2018
Tenders are invited to Supply an Tyre Repair/Break Down Service Equipment 2018-09-28 11:00 CSQ09181431
Tenders are invited to Clean, Cut all Grass. Trim Trees and Remove all Rubble in Diaz Road Depot at the Bottom Camp Area 2018-09-28 11:00 CSQ09181431
Printing Dannhauser Municipality newsletter 2018-09-26 12:00 RFQ / 460
Supply of Information Technology Hardware and Peripherals. 2018-10-05 11:00 SAMRC/ITHP-ITSD/2018/10
Tenders are invited for training per delegate for ( Renewal of Hydraulic platform truck Operation Certficate) per Delegate 2018-09-27 11:00 CSQ09181415
Short Term Insurance Broking. 2018-10-08 11:00 REF: NWPB/RFT/NWPBINS/003/2018
Tenders are invited for training per delegate. ( Hydraulic platform operation certificate) 2018-09-27 11:00 CSQ09181415
Tenders are invited for ( Renewal of Expired Crane Truck Operation certificate) per Delegate 2018-09-27 11:00 CSQ09181415
Tenders are invited for Training per Delegate (Crane truck Operation certficate) 2018-09-27 11:00 CSQ09181415
Provision of build environment professional services for The Independent Development Trust (IDT). 2018-10-08 12:00 IDT-MP/DOE/7SCHOOLS/2018
Supply and deliver display case with 30mm wood base 700x150x800mm. 2018-09-20 11:00 GQ09181938
Supply and deliver 400x400x100mm 6mm clear perspex box. 2018-09-20 11:00 GQ09181938
Supply and deliver 500x400x300mm 6mm clear perspex 2018-09-20 11:00 GQ09181938
Provision of Travel Management Services to Overberg Water for a period of 36 Months. 2018-10-08 12:00 RFQ OW-440/2018/19
Supply and deliver 600x400x300mm 6mm clear perspex box. 2018-09-20 11:00 GQ09181938
Supply and deliver 700x400x300mm 6mm clear perspex box. 2018-09-20 11:00 GQ09181938
Supply and deliver 800x400x300mm 6mm clear perspex box. 2018-09-20 11:00 GQ09181938

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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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