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.
Supply, Delivery and Installation Of Bulk Filers 2018-10-31 12:00 Q22.10.18
Supply Tools and equipment 2018-10-30 12:00 GD11900474
Training: Health and Safety Representative Unit Standard 116518 Level Two (2) 2018-10-26 12:00 Q18.10.18
Supply and delivery of sound equipment. 2018-10-25 11:00 GK11900187
Supply: Cartridge 2018-10-25 11:00 GM11900312
Training: First Aid Training Unit Standard 1119567 NQF Level One (1) 2018-10-26 12:00 Q17.10.18
Supply and delivery of Laserjet Cartridges 2018-10-26 12:00 Q21.10.18
Supply and delivery of Forms 2018-10-26 12:00 Q20.10.18
Supply and Delivery of Material for Upgrading of Roads and Stormwater in Rietbron. 2018-11-07 12:00 31/2018
Overnight Delivery Services for a Period of Twelve (12) Months and when required 2018-10-26 12:00 Q19.10.18
Supply and install relay protection, Port of Cape Town. 2018-11-08 10:00 BLE RME 5097/2018
Service, repair and maintain all kitchen equipment for 24 months. 2018-11-09 11:00 KIM-0718-107087
KURUMAN STATISTICS SOUTH AFRICA: Alternate office accommodation 461.36m² and 15 parking bays for a period of 3 or 5 years. 2018-11-09 11:00 LS14/2018
Supply, delivery and installation of access control equipment 2018-10-31 11:00 FQ/SM: 47/19
Repairs/ maintenance of pilot & work boat Tristan tern during dry docking. 2018-11-13 12:00 PAC 264
Mhlathuze Water is calling for interested and suitably qualified and accredited training service providers to submit proposals for inclusion in the panel of training service providers for the period of three years. 2018-11-16 12:00 MW/3/7/2018
Design and construction of a new polymer tank bund wall at Nsezi WTW 2018-11-12 16:00 MW/18/10/2018
Appointment of One Service Provider to Supply, Print and delivery of sport Apparels/Promotional materials of all sport and Recreation events for a period of three (03) years (Re-advert). 2018-11-19 10:00 PM151/2018
Operational Due Diligence: Alleyroads. 2018-11-19 11:00 AC/10/2018
Provision of Maintenance and Calibration Services for Some or All of the following Laboratory Equipment: Climatic, Photometry and Electrical Test Instrument, an Electrical Energy Reference Standard and an Environmental Test Chamber as and when required for the period of three years. 2018-12-05 10:00 ERIC1041

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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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