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 and Laying of Pavement at Clanwilliam Fire Station 2018-10-30 12:00 6/5/2/310
Laboratory Services Needed For SANAS Accredited Testing Of Roads Materials 2018-10-29 12:00 6/5/2/386
National Security Refurbishment - Apollo, Minerva, Taunus, Westgate and Esselen - Package 2. 2018-11-19 10:00 PSCED0159
Training Course: Hygine and Cleaning Services at Moorreesburg 2018-10-30 12:00 6/5/2/111
Appointment of Service Provider to Supply, Install, Commission and Monitoring of CCTV Cameras at Polokwane Municipal Electricity Substations for period of three (03) years. 2018-11-19 10:00 PM78/2018
Provision of firefighter medical surveillance programme from September 2018 - June 2019. (As per attached specifications) 2018-10-25 11:00 288450
Supply and Delivery of Musical Instuments 2018-10-30 11:00 GQ10181966
Provision of Security Services at RTI Mkondeni DLTC. 2018-11-21 11:00 ZNB1432/17T (Bid Document R330.00)
Supply and deliver boat registration decals and numbers 2018-10-30 11:00 GQ10181967
Investigation and report on options for provision of tourism function in terms of section 7 & 78 of the municipal systems act. 2018-11-21 12:00 T32/2018/19
Tenders are invited to prepare Documentation For Principal & Subcontract Or Procurements for the construction of additional offices at the Disaster Management Despatch Depot 2018-10-30 11:00 CSQ10181463
Tenders are invited to prepare Preliminary And Elemental Estimates for the construction of additional offices at the Disaster Management Despatch Depot 2018-10-30 11:00 CSQ10181463
The supply and fitment of prescription lenses and frames for safety spectacles and the vision testing and certification of heavy duty drivers and driven machinery operators. 2018-11-22 10:00 KBG1871
Tenders are invited to provide Professional Quantity Surveying Services for the construction of additional offices at the Disaster Management Despatch Depot 2018-10-30 11:00 CSQ10181463
Tenders are invited for Reviewing the Existing Draft Economic Growth and Development Strategy 2018-10-30 11:00 CSQ10181462
Installation of eleven burglar alarms system at Worcester WWTW (as per attached specifications) 2018-10-31 11:00 289333
Supply and Delivery of Stationery. 2018-11-23 11:00 FIN-SCM28/2018/2019
Boxes Valve Fitted With Blue Round 250mm Lid Complete With Lockin Device - Sans 1/10525 Approved 2018-10-29 11:00 SQ10181292
Professional Services for Panel Town Planners. 2018-11-26 12:00 IHLM/73/10/2018-19/P&D
Boxes Fire Hydrant Fitted With Round 250mm Yellow Lid. Complete With Locking Bolts 2018-10-29 11:00 SQ10181292

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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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