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.
Professional Services for Panel of Land Surveyors for a period of 3 years. 2018-11-26 12:00 IHLM/72/10/2018-19/P&D
Extensions Hydrant 600mm Drilled to Fit London Type Hydrant Rillson Coated Blue Drilled Table 16 (Sabs) Drilled 4 Holes In Lieu of 8. 2018-10-29 11:00 SQ10181292
Supply and delivery of: Hellerman Tyton Power Analyser 3 phase and recorder T78 or equivalent (as per attached specifications) 2018-10-26 11:00 289168
3" Thomas Viking Johnson Joints Range Od88 - 103 2018-10-29 11:00 SQ10181292
4" Thomas Viking Johnson Joints Range Od108-129 2018-10-29 11:00 SQ10181292
Joints Short Collar 150mm Cast Iron Complete With Bolt, Nut And Rubber Rings Bitumen Dipped , Sanspar Only 2018-10-29 11:00 SQ10181292
Ward 8: 4 Leslie Road, Westriding: Stormwater pipeline extension (R100 non-refundable Tender Charge - Bank Cheques where the Drawer of the Cheque is the Bank OR cash only). 2018-11-09 11:00 1D-36071
Tyres 315/80/R22.5 Truck 2018-10-29 11:00 SQ10181291
Oil Transformer Bsi 72 Uninhibited. 2018-10-29 11:00 SQ10181291
Supply and delivery of water rescue personal protective wear 2018-10-26 11:00 290151
Blading of gravel roads in the West Region of eThekwini Municipality for 36 months (R1000 non-refundable tender charge - cash or bank guaranteed cheques only). 2018-11-16 11:00 1M-38624
Polythene 20 Mm High Density Pe 63 Pn 16 - Per 100 Metre Coils, Class 16 Only. 2018-10-29 11:00 SQ10181291
Pipes Polythene 25 Mm High Density - Per 100 Metre Coils Black , Class 16 Only. 2018-10-29 11:00 SQ10181291
Blading of gravel roads in the South Region of eThekwini Municipality for 36 months (R1000 non-refundable tender charge - cash or bank guaranteed cheques only). 2018-11-16 11:00 1M-38625
Scuff – sanding, seal and finish of wooden floor and stage of town hall. 2018-10-29 11:00 290918
Bolts/Nuts,M16 X 65mm H/Head Mild Steel (Fully Threaded) Must Be Delivered In Packets Of 50 Units 2018-10-29 11:00 SQ10181291
Blading of gravel roads in the North Region of eThekwini Municipality for 36 months (R1000 non-refundable tender charge - cash or bank guaranteed cheques only). 2018-11-16 11:00 1M-38626
Rivertown Precinct upgrade, Ward 26 (R1000 non-refundable tender charge - cash or bank guaranteed cheques only). 2018-11-16 11:00 3V-40053
Bolts M20 X 450mm Half Threaded Hex/Head With Nuts & 2 Washers (O/D 42mm X 22mm Hole 3mm Thick) 2 Curved Washers (M20 65mm X 65mm ,4 Mm 2018-10-26 11:00 SQ10181289
Insulators Line Post Insulator 22kv , 4kn , 150kv Billing , Capless Min Failing Load (Cantilever) 4kn Creepage Distance 550mm Type No. Ep 472/02 Or Approved Equivalent. 2018-10-26 11:00 SQ10181289

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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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