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 RAF would like to appoint an experienced and suitably qualified service provider to provide office space for it’s Head Office for a period of 9 years and (11) months 2019-03-06 11:00 RAF/ 2019/ 00001
NC061 - Richtersveld Local Office Accommodation 2019-03-08 11:00 IEC/ NC- 01/ 2019
Terms Of Reference For The Lease Of Office Space For The ETDP Seta Western Cape Provincial Office Fro 01 April 2019 To 30 June 2020 2019-03-11 11:00 SCMU: 27 - 2018/ 19
Repair and Renovation storm damage school throughtout the Province of Kwazulu Natal at Mkhonjeni Primary School 2019-03-15 11:00 ZNTU 04394 W
Repair and Renovation storm damage school throughtout the Province of Kwazulu Natal at Mavana Primary School 2019-03-15 11:00 ZNTU 04103 W
SAPS: Procurement of alternative office accommodation comprising 820.0m² and 22 Parking Bays in Florida for a period of five (5) years 2019-03-12 11:00 JHB.18/ 55
Roof Structure and Roof Sheeting Repairs and Replacement, Where Necessary, Including Waterproofing at Bonamelo Campus 2019-03-15 10:00 BON- ROOF- 2019
Removal of Existing Boundary Fence, Supply and Erect New Clearview (Or Equal – Must Be Approved), Anti-Climb Security Fence, Pedestrian and Drive Gates at Harrismith Campus 2019-03-15 10:00 HAR- FENCE- 2019
Makopong McCarthy’s Rest & Middelputs Border Post: Appointment of a service provider for the maintenance and repairs of building,civil,mechanical, electrical infrastructure and installations for a period of 36 months he requirement of this project is the below: B-BB-EE Level 2019-03-12 11:00 H18/ 033 AI
Makopong McCarthy’s Rest & Middelputs Border Post: Appointment of a service provider for the maintenance and repairs of building,civil,mechanical, electrical infrastructure and installations for a period of 36 months he requirement of this project is the below: B-BB-EE Level 2019-03-12 11:00 H18/ 033 AI
Request for the Establishment of a two (2) Year Contract for Licensing, Maintenance And Support For Symantec Products For The South African Police Service (SAPS) 2019-03-01 11:00 RFB 1889/ 2018
Request for the Establishment of a Two (2) Year Contract for Licensing, Maintenance and Support for Veritas Products for the South African Police Service (SAPS) 2019-03-01 11:00 RFB 1888/ 2018
Procurement of Uniforms & Personal Protective clothing for SITA Facilities Management & Logistics Department for a period of two (2) years 2019-03-08 11:00 RFB 1891/ 2018
Supply and Delivery of Footwear and Leather Products to the State. 2019-03-15 11:00 RT59- 2019
Supply and Delivery of Clothing to the State 2019-03-15 11:00 RT64- 2019
Supply of Trend Micro Licenses for the Office of the Premier (North West Province) which includes maintenance and support for a period of thirty six (36) months 2019-03-08 11:00 RFB1791/ 2018
SAP System Support and Training for Magalies Water 2019-03-08 11:00 RFB 1796/ 2018
The South African National Roads Agency SOC Limited (SANRAL) invites tenders for the provision of Consulting Engineering Services for the Routine Road Maintenance of National Route N11 from Mookgopong municipal border through Marble Hall to Elias Motsoaledi municipal border, R573 from Dr JS Moroka municipal border to Marble Hall, R579 from Elias Motsoaledi municipal border through Nebo to Lepelle-Nkumpi municipal border 2019-03-07 14:00 NRA X.002- 100- 2019/ 1F
The South African National Roads Agency SOC Limited (SANRAL) invites tenders for the provision of Consulting Engineering Services for the Routine Road Maintenance of National Road R33 from Modimolle Municipal border to Lephalale, R520 from the R510 intersection to Modimolle Municipal Border and R510 from Lephalale to Thabazimbi Municipal border. 2019-03-07 14:00 NRA X.002- 084- 2019/ 1F
The South African National Roads Agency SOC Limited (SANRAL) invites tenders for the provision of Consulting Engineering Services for the Routine Road Maintenance of National Route R81 from Polokwane Municipal boundary to Molemole Municipal boundary R521 from Polokwane Municipal boundary to Molemole Municipal boundary R36 from Greater Letaba Municipal boundary to Molemole Municipal boundary and N1-28X from Polokwane Municipal boundary to Molemole Municipal boundary 2019-03-14 14:00 NRA X.002- 079- 2019/ 1F (NONTOLL) &

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Tender Knowledge

By Werner van Rooyen

www.howtotender.co.za

31 January 2019

Sometimes I am surprised at how little business people in South Africa know about Tenders and the Tender Process. Simple things like terminology and general tender information are difficult for people to comprehend not to mention the Standard Bidding Documents and Tender Pricing.

Unbelievably there are still Entrepreneurs that thinks to respond to tenders are an actual business? You will find that these Entrepreneurs would... Read More

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