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.
The appointment of a service provider to provide medical surveillance program for 1225 (one thousand two hundred and twenty five) consisting of 72 landfill employees and 1153 general workers over four (4) months. 2019-03-18 11:00 PU058/ 2018
The appointment of panel of service providers for the removal, cleaning and rehabilitation and/or eradication of illegally dumped non-toxic, non-objectionable solid waste and rubble on as and when required basis for thirty six (36) months period. 2019-03-15 11:00 PU047/ 2017
Appointment of service providers for insurance and administration of the subsidized motor transport scheme and the VIP vehicle fleet of the state for the period 1 April 2019 to 31 March 2024 2019-03-08 11:00 RT58- 2019
Invitation to provide catering and canteen services at national health laboratory service head office and Braamfontein office for the period of three (3) years. 2019-03-08 11:00 RFB 156/ 18/ 19
Installation and servicing of Audio Visual and maintenance of Broadcasting Systems, TV Networks including Microwave Transmission Systems for a period of three (3) years. 2019-03-19 11:00 S114/ 18
Department of Public Works: 5 Garnet Road, Park Rynie, Port Shepstone: Provision of security services for a period on thirty (36) months 2019-03-13 11:00 ZNT 2857W
Department of Public Works: Pietermaritzburg: 1 Prince Alfred Street: Provision of security services for a period on thirty (36) months 2019-03-13 11:00 ZNT 2854W
Department of Public Works: 181 Mayors Walk Road, Pietermaritzburg: Provision of security services for a period on thirty (36) months 2019-03-13 11:00 ZNT 2855W
Department of Public Works: Port Shepstone: 35-37 Ridge Road: Provision of security services for a period on thirty (36) months 2019-03-13 11:00 ZNT 2858W
Department of Public Works: Main Road, New Hanover : Provision of security services for a period on thirty (36) months 2019-03-13 11:00 ZNT 2856W
Property for hiring: Interest parties are hereby invited to submit offers to hire the following property”voetstoots” for a two (2) year period, which is owned by the National Dept of Public Works : 2019-03-20 11:00 UCACT1- 10/ 2019
Appointment of a service provider to render maintenance of the electronic security systems at the Department of Public Service and Administration for a period of two (2) years. 2019-03-08 11:00 DPSA005/ 2018
Appointment of a service provider to store records off-site for the Department of Public Service and Administration for a period of 12 months. 2019-03-08 11:00 SCM002/ 2018
Rendering of a comprehensive laundry service to institutions in the Garden Route District, Department of Health, Western Cape Government for a three (3) year period 2019-03-15 11:00 WCGHSC0160/ 2018
Painting of Animal Hospital at Military Veterinary Hospital in Potchefstroom. 2019-03-11 11:00 CPSC- B- M- 031- 2018R
Appointment of a service provider to supply and deliver water tanks to juniorcare landcare projects 2019-03-01 11:00 4.4.12.2/ 37/ 18
Appointment of a service providers for Sage HR & payroll upgrade to Sage 300 people (including e-recruitment), SCM ACCETECH (BPM) for CCMA for a period of three (3) years. 2019-03-08 11:00 CCMA/ 2018/ 19- ICT
Request for information (RFI) appointment of a service provider to provide office space on lease agreement for Mthatha Office for a period of five (5) years. 2019-03-08 11:00 CCMA/ 2018/ 28- EL
The appointment of a supplier(s) for the supply and deliver stationery to the National Energy Regulator of South Africa (NERSA) for a period of thirty-six (36) months. 2019-03-07 11:00 NERSA/ 1819/ FAD/ SOS/ BID005
Removal of Existing Boundary Fence, Supply and Erect New Clearview (Or Equal – Must Be Approved), Anti-Climb Security Fence, Pedestrian and Drive Gates at Central Office and Main Campus 2019-03-15 10:00 CENT- FENCE- 2019

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10 things to remember when you tender

By Werner van Rooyen

31 January 2019

There are many things that you as a small business owner must remember when you respond to a tender and sometimes responding to a tender can be overwhelming. Experience has taught me that there are some important things to remember when responding to a Tender and there are some less important things to remember when responding to a Tender.

Here are ten of the important things to remember when responding to a Tender. Please remember that all ten of these items mention here are equal... Read More

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