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.
Couplings Straight 20 Mm X 3/4" Male Polypropylen E For Hdpe Pipe 2018-12-21 11:00 SQ12181326
Clamps Centre Phase Pole For 22kv Single Pole Construction As Per Drawing A2/539 Available At Purchase Office, Harrower Road, P.E 2018-12-21 11:00 SQ12181326
Adaptors Flanged 100 Mm Iron Class "C" Drilled 4504 Table 16 F.B.E. Coated Blue. 2018-12-21 11:00 SQ12181327
Pipes Pvc 96 Mm Class 16 -Supplied In 6 Meter Lengths. 2018-12-21 11:00 SQ12181327
Toilet Seat Double Flap Complete With Bolts & Nuts Colour White National N I P Fs28b 2018-12-21 11:00 SQ12181327
Request for Proposal for Airport Economic, Social and Environmental Impact Study for five (5) years 2019-02-15 11:00 COR5649/2018/R
Tenders are invited from an international rating agency who is a registered CRA to perform Annual Credit Rating 2018-12-21 11:00 CSQ12181512
Ballcock 25 Mm Rough Brass 1090 Fi Sabs, Jaswic Approved. 2018-12-21 11:00 SQ12181329
Ballcock 20mm Rough Brass Cobra 1090 Fi Sabs . Jaswic Approved. 2018-12-21 11:00 SQ12181329
Ballcock 15 Mm Rough Brass 1090 Cobra S.A.B.S. (Jaswic Approved) 2018-12-21 11:00 SQ12181329
Supply & Delivery of Poles Steel Heavy Duty Galvanised Type H Straight No Bow Single Spigot 2018-12-21 11:00 SQ12181330
Supply & deliver Light Commercial Tyres 195/R15/C 2018-12-18 11:00 SQ12181331
Tenders are invited to Supply and Deliver Chemical Oxygen Demand (COD) for Spectrophotometer 2018-12-18 11:00 GQ12182009
Tenders are invited for Monthly Service to provide Data Services for 1200 Data Cards Registered on the MTN APN as per Account : A1387418 2018-12-18 11:00 CSQ12181510
Tenders are invited for Monthly Service for Providing a Private APN Service on the MTN Network as per Mtn Account Number 071441 2018-12-18 11:00 CSQ12181510
Tenders are invited to Supply and Deliver Wooden Boards 2018-12-18 11:00 GQ12182006
Tenders are invited to provide Stack Emissions Testing Training 2018-12-19 11:00 CSQ12181509
Tenders are invited to provide Electromagnetic Radiation Training 2018-12-19 11:00 CSQ12181509
Rental Of Photocopier Machines for a period of 36 months 2019-01-11 12:00 104/2018
Invitation for the provision of security services at Ngaka Modiri Molema District for the department of social development 2019-01-29 11:00 NW/DSD/04/2018

Pages

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
Free Keyword search

Search all tender notices for FREE!

No subscription or registration required!

You can also search by the reference of the the tender.

Advanced search

Search by Issuer, Region or Sector, individually, or using any combination of the three.