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.
ZNTD 04776W: WIMS 066099: Kwazulu-Natal: Department of Education: Ndwedwe: Magudwini Junior Primary School: Replacement of doors, windows, chalkboards and painting *Contract Period: Three (03) months. 2019-06-10 11:00 ZNTD 04776W
Kwazulu-Natal: Department of Education: Kwamashu: J. G. Zuma High School: Water and Sanitation: Phase 3. 2019-06-21 11:00 ZNTD 03922W
ZNTD 03864W: WIMS 063948: Kwazulu-Natal: Department of Education: Stanger: Ikhusana Combined School: Water and Sanitation: Phase 3 2019-06-20 11:00 ZNTD 03864W
Kwazulu-Natal: Department of Education: Durban: Matabetulu Primary School: Water and Sanitation: Phase 3. 2019-06-20 11:00 ZNTD 03893W
Kwazulu-Natal: Department of Education: Maphumulo: Mankayiyna Primary School. Replacement of roof coverings to eight (08) classrooms 2019-06-24 11:00 ZNTD 03774W
ZNTD 03893W: WIMS 063666: Kwazulu-Natal: Department of Education: Ndwedwe: Magongolo Primary School: Water and Sanitation: Phase 3. 2019-06-20 11:00 ZNTD 03893W
Kwazulu-Natal: Department of Education: Hillcrest: Kwadinabakudo Combined School: Water and Sanitation: Phase 3. 2019-06-20 11:00 ZNTD 03829W
ZNTD 04062W: WIMS 064026: Kwazulu-Natal: Department of Education: Hillcrest: Khabazela High School: Water and Sanitation: Phase 3. 2019-06-21 11:00 ZNTD 04062W
Kwazulu-Natal: Department of Education: Esiphukwini Junior Primary School: Water and Sanitation: Phase 3. 2019-06-20 11:00 ZNTD 03844W
Kwazulu-Natal: Department of Education: Tongaat: Manaba Secondary School: Water and Sanitation: Phase 3. 2019-06-21 11:00 ZNTD 03939W
Kwazulu-Natal: Department of Education: Mandeni Primary School: Storm Damage Disaster programme: Phase 16 2019-06-24 11:00 ZNTD 04499W
ZNTD 03908W: WIMS 063648: Kwazulu-Natal: Department of Education: Shangase Village: Kwashangase Primary School: Water and Sanitation: Phase 3. 2019-06-20 11:00 ZNTD 03908W
ZNTD 03861W: WIMS 063906: Kwazulu-Natal: Department of Education: Stanger: Mazisi Ntuli Primary School: Water and Sanitation: Phase 3 2019-06-20 11:00 ZNTD 03861W
Tenders are hereby invited for the provision of Hygiene Services for a period of three(3) years. 2019-06-03 11:00 WCC- HYGIENE- 2019
ZNTD 03826W: WIMS 063740: Kwazulu-Natal: Department of Education: Inanda: Inanda Senior Primary School: Water and Sanitation: Phase 3. 2019-06-20 11:00 ZNTD 03826W
Tenders are hereby invited for the supply & delivery of electrical hand tools. 2019-06-03 11:00 WCC- ELECTRIC HAND TOOLS-2019
ZNTD 03865W: WIMS 063907: Kwazulu-Natal: Department of Education: Stanger: Ndleleni Primary School: Water and Sanitation: Phase 3 2019-06-21 11:00 ZNTD 03865W
Tenders are hereby invited for the supply and delivery of vehicles. 2019-05-27 11:00 WCC- NV- 2019
ZNTD 03866W: WIMS 063947: Kwazulu-Natal: Department of Education: Stanger: Mnawe Junior Primary School: Water and Sanitation: Phase 3. 2019-06-20 11:00 ZNTD 03866W
Tenders are hereby invited for the supply, delivery, installation & commission of fitting & turning machines 2019-06-03 11:00 WCC- FIT & TURN MACHINES- 2019

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Must my business be registered in order to tender?

By Werner van Rooyen

www.howtotender.co.za

31 January 2019

Once, a very anxious business owner phoned me and asked if I can supply him with a CK number. I was amused by this and first asked why he asked me for such a number and secondly for what did he need a CK number for? He said that because of my Tender Manual that he bought, he thought that maybe I can help him with a CK number. Also, at the briefing session of the tender that he was responding to, the person in... Read More

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