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.
Information on Water Treatment System 2019-03-01 10:00 CORP 4647
Consulting engineering services for the routine road maintenance of national route N2 section 10 km 73.40 to section 11 km 71.74 and national route R75 section 1 km 0 to section 2 km 25.93 and national route R335 section 1 km 0 to km 30.12 2019-02-04 10:00 X.003-031-2019/1F
Panel of professional services (civil, building, mechanical, electrical and environmental) for a period of three (03) years 2019-02-08 12:00 T32/2018
The Replacement and Maintenance of Signages at O R Tambo International Airport (ORTIA) for A Period Of 60 Months 2019-01-31 11:00 COR5652/2018/RFP
Supply and Delivery of Stationery for SABC Offices at Auckland Park on an “as and when” Requiredd Basis, for a Period of Three (3) Years 2019-01-11 12:00 RFP/LOG/2018/19
Maintenance of Electricals and HVAC Controls Systems 2019-02-01 11:00 ORT5749/2018/RFP
Replacement of TVOB camera equipment. 2018-12-18 12:00 RFP/TVO/2018/76
Supply and Delivery of 10 X 290 2wd Sunroof 60 Kw Tractors for Zululand District Municipality 2018-12-19 12:00 ZDM 111/2018
An Enabling Agreement (EA) for Design, Supply, Delivery, Installation, Commissioning, Training, Support and Repairs of Operational Technology (OT) Voice and Regional Operational Voice Control System on an "as and when required" basis for a period of 5 (Five) years. 2019-02-07 10:00 CORP4640
Refurbish Fit and Install Lime Feeder Machine at Withoogte Purification Plant 2018-12-19 12:00 6/5/2/387
Eskom to conduct tests at the supplier's laboratory for determination of the current withstand of medium voltage overhead line hardware over period of three (3) years on an "as and when required" basis 2019-02-08 10:00 CORP 4609
Appointment of service provider to upgrade and installation of a security systems at Council for Geoscience Head Office. 2019-02-08 11:00 CGS-2018-041A
Request for proposal for pilot project for leak detection on Rand Water pipelines using satellite technology 2019-02-08 12:00 RFP00552/18
Compilation of the 2017/2018 MIG Annual Report 2018-12-20 12:00 RFQ/501
Request for proposal for development of economically viable solutions for the handling, disposal and reuse of water treatment residue at Rand Water 2019-02-08 12:00 RFP00553/18
Copper Tube 28mm Class 2, Sabs 460 2018-12-21 11:00 SQ12181326
Couplings 15 Mm X 20 Mm Reducing Male I.T.C. Cobra Or Q D-2rxs - Sans 10525/1 Approved. 2018-12-21 11:00 SQ12181326
Elbow 3/4" X 22mm X 90 Deg. Male I.T.C. D8xs (Sabs Approval Required On Coupling) 2018-12-21 11:00 SQ12181326
Developing, hosting and managing Black Umbrellas virtual incubation platform 2019-01-21 17:00 No reference supplied
Coupling 15 Mm Straight C.T.C. D-1xs (Sabs Approval Required On Coupling) -Sans 10525/1 Approved 2018-12-21 11:00 SQ12181326

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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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