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.
Video Conferencing Rental Solution for a period of 36 months 2018-12-03 11:00 HDA/JHB/2018/017
Appointment of Professional Service Providers to Compile Wayleave Applications on Behalf of Bloem Water for all Infrastructure Under their Control and Jurisdiction (Servitudes). 2018-12-14 12:00 BW249/WLA/18
Small-Scale Embedded Generation: State of Play Assessment and Policy Options to Support Social, Environmental and Economic Benefits for the Department of Energy 2018-11-23 11:00 #83306338
Mechanical Pumps Repair and Maintenance. 2019-01-18 11:00 DIA5635/2018RFP
Tracking the Transition to a Low Carbon and Climate Resilient Society and Economy 2018-11-23 11:00 #83306336
Develop, Manage, Operate and Maintain Balele Caravan & Game park. 2019-01-10 11:00 No refference
Supply, delivery and installation of a palisade fence for Lamberts Bay Caravan Park and the removal of old fence 2018-11-27 12:00 CED 06/2018-2019
Supply and delivery of Material for Foreman Containter Office Block at Clanwilliam Dam in the Western Cape for DWS Construction South 2018-11-15 11:00 WQ7605 WTE
Provision of live work training services within LOU. 2018-12-13 10:00 59CON1887
Supply and Delivery of Water Tanks, Pumps and Fittings at Clanwilliam Dam in the Western Cape for DWS Construction South. 2018-11-15 11:00 WQ7500 WTE
Erection of the Mc 310 K12 Potain Tower Crane Located at Clanwilliam Dam Raising Project Site with the view of Commissioning The Crane 2018-11-15 11:00 WQ7606 WTE
Supply and delivery of Assorted PPE. 2019-01-15 10:00 MPGXC005401
Supply: 1 each x brush cutter & 1 each x chainsaw 2018-11-15 12:00 GD11900588
Supply and delivery of “critical Spares” for the Continued Operation of the Liebherr Mobilmix 2.25 Concrete Batching Plant. 2018-11-15 11:00 WQ7503 WTE
Assurance of Engineering Integrity of the Critical Structural Beams and Critical Bearer Columns of the Liebherr Batch Plant Located at Clanwilliam Dam. 2018-11-15 11:00 WQ7553 WTE
Supply: Batteries rp240-bh 2018-11-21 11:00 GH11900216
Supply and Delivery of Temporary 200mm Dia Municipal By-Pass Pipeline on Right Bank for the Raising of Clanwilliam Dam in the Western Cape for DWS Construction South. 2018-11-15 11:00 WQ7554 WTE
Supply: Tools and equipment 2018-11-20 12:00 GD11900593
Supply: 1 each x hv oil dielectric tester 60kv 2018-11-20 12:00 GD11900594
Re-Commisioning of the Liebherr Batching Plant Located at Clanwilliam Dam Raising Project 2018-11-15 11:00 WQ7497 WTE

Pages

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
Free Keyword search

Search all tender notices for FREE!

No subscription or registration required!

You can also search by the reference of the the tender.

Advanced search

Search by Issuer, Region or Sector, individually, or using any combination of the three.