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 the National Energy Regulator of South Africa (NERSA) with Online Legal Publications for a period of three (3) years. 2019-06-06 11:00 NERSA/ 1920/ IRM/ OLP/ BID/ 003
Service provider to provide comprehensive travel management service 2019-06-03 11:00 ZNT19/ 20KZNSB01
Appointment of a Panel of Service Providers to Provide Quality Learning for MHSC Employees for a Period of One Year (01) 2019-06-19 11:00 MHSC009/ 2019- 20
ZNTD 03966W: WIMS 064110: Kwazulu-Natal: Department of Education: Hillcrest: Thabela High School: Water and Sanitation: Phase 3. 2019-06-21 11:00 ZNTD 03966W
Provision of Support and Maintenance of the electronic Legal Aid Administration System at Legal Aid South Africa National Office for a period of twelve (12) months. 2019-06-18 11:00 06/ 2019
iSimangaliso Wetland Park Authority invites suitable, qualified and competent legal firms to send requests for proposal to be considered as part of a panel of attorneys to provide legal services to iSimangaliso Wetland Park Authority 2019-06-07 16:00 RFP NUMBER: 03/ 2019
ZNTD 03878W: WIMS 063900: Kwazulu-Natal: Department of Education: Stanger: Tshelabantu Primary School: Water and Sanitation: Phase 3 2019-06-20 11:00 ZNTD 03878W
Re- Advertisement: Appointment of a Professional Service Providers for the Supply, Installation and Connection of Heat Pumps for 112 Units at Delville Ext 9 2019-06-19 11:00 EHCHPD/05/19
Provision of office accommodation for the ECRDA 2019-06-07 11:00 SCMU 02 – 2019/20:
Request for Proposals for the Provision of Ad Hoc Engineering Services for Dube Tradeport Corporation for a Period of 3 years 2019-06-10 11:00 DTP/ RFP/ 32/ IFR/ 11/ 2018
Appointment of a Service Provider for the Provision of Technical Support and Monitoring of Integrated Public Transport Network in 13 Municipalities over a Period of 36 Months 2019-06-07 11:00 DOT/ 01/ 2019/ PT
Conducting research on pharmaceutical pricing policies 2019-06-07 12:00 DPME 09/ 2019- 20
Fly-Trhough / Visual Rendering In Support of the Ndp 5 Year Implementation Plan 2019-05-31 12:00 DPME 08/ 2019- 20
The Department of Local Government (DLG) requires a Service Provider to provide the Municipal Minimum Competency (MMC) Training programme to identified officials. 2019-06-18 11:00 LG 02/ 2019/ 2020
Appointment of a service provider to provide employee wellness services to the Department of Home Affairs officials across all provinces, including Head Office for a period of two (2) years and eight (8) months 2019-06-07 11:00 DHA04- 2019
Terms of Reference for the Appointment of a Suitable Service Provider to Develop Monitoring and Evaluation Framework, and Evaluation Plan and Conduct The Mid-Term and Summative Evaluation for National Open Learning Project (Nols) by the Department of Higher Education and Training 2019-06-21 11:00 DHET124
The Appointment of a Service Provider to Provide an E-Legislation Portal on the Department’s Website for a period of 3 (three) years 2019-06-07 11:00 E 1513
Request To Bid for ANSYS Technical Support (TECS) Contract for ANSYS Commercial Software on Behalf of Department of Defence (Dod) SA Navy Engineering Services (NES) for a period of three (3) years. 2019-06-05 11:00 RFB 1939/ 2019
Request for Proposals for appointment of an service provider for short term insurance for a period of five (5) years 2019-06-10 11:00 CMS/ 022019/ 2020
Request for Proposals for appointment of an Editorial Consultant for a period of three (3) years 2019-06-18 11:00 CMS/ 032019/ 2020

Pages

Extension of validity period

By Werner van Rooyen

www.howtotender.co.za

31 January 2019

Those of you who are familiar with responding to tenders will know that it is common practice for procuring entities to extend the bid price validity period. We received the undermentioned queries regarding the extension of the validity period of the bid price.

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