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.
Provision of Office Accommodation: Beaufort West Satellite Office for a leased period of 5 years.(Leases ranging from seven to ten years will also be considered). 2018-10-26 11:00 38/ 2018
Provision of Office Accommodation: Vredendal Local Office for a leased period of 5 years.(Leases ranging from seven to ten years will also be considered). 2018-10-26 11:00 37/ 2018
Provision of Office Accommodation: Carletonville Satellite Office for a leased period of 5 years. 2018-10-26 11:00 46/ 2018
Provision of Office Accommodation: Wolmaranstad Satellite Office for a leased period of 5 years. 2018-10-26 11:00 50/ 2018
Provision of Office Accommodation: Pretoria Local Office for a leased period of 5 years. 2018-10-26 01:00 52/ 2018
KwaZulu-Natal: Department of Public Works: eThekwini Regional Office: Mayville Offices–South Wing: Upgrade of Air Conditioning System 2018-10-26 11:00 ZNTD 03279W
KwaZulu-Natal: Department of Public Works: eThekwini Region: Durban: Installation of 800KVA standby generator for the Mayville Complex and Relocation of the existing 400KVA to iLembe District Office. 2018-10-29 11:00 ZNTD 04430W
Appointment of a panel of service providers to undertake building maintenance and roof repair work for the KZN Department of Human Settlements on a rotational basis for a period of 2 years. 2018-10-24 11:00 ZNB17/ 2017/ 18HSE
Appointment of a panel of service providers to undertake land clearing work / field maintenance for The KZN Department of Human Settlements on a rotational basis for a period of 2 years. 2018-10-25 11:00 ZNB19/ 2017/ 18HSE
Appointment of a service provider to conduct wellness screening and related support services for employees within the employ of the Kwazulu-Natal Legislature. 2018-10-24 11:00 KZNL 17/ 2018
Supply, delivery and off-loading perishable provisions. 2018-11-06 11:00 LMN 06/2018 LIMPOPO
Consultancy Services - Designing a Programme for Renewable Energy Development in African Island States (REAIS) 2018-11-02 15:00 AUC/IED/C/378
Painting of palisade fencing at Ezamokuhle 1, Ezamokuhle 2, Grootdraai and Kendal ambient air quality sites using Cowrie Gold Colour Powder Coating Paint. 2018-11-01 10:00 ERIC1107
Supply and delivery of laboratory chemicals, reagents, glassware and consumables as and when required for a period of five (5) years. 2018-10-31 10:00 ERIC0588
Provision of Facility Management Services to Eskom Real Estate in the Free State Operating Unit for 3 years (NONE TECHNICAL) Cleaning & Gardening. 2018-11-15 10:00 MdB18/24
Request for information on multiple gauge coach bogie. 2018-11-27 10:00 TE18-BFX-05G-06843
Vat Review. 2018-11-06 12:00 VDM/FIN/11/09/2018/01
General medical practitioner (36 months). 2018-11-19 12:00 ULM-INFR009/19
The maintenance, repair and testing of earth equipment's for various zones within the Limpopo Operating Unit on an "as and when" required basis for a period of thirty-six (36)months. 2018-10-24 10:00 PTB1362
Supply and maintenance of printer machines. 2018-10-24 12:00 MN06/2018-19

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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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