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.
Supply, Delivery and Off-loading of Coal Peas, Thohoyandou Management Area (Limpopo Province ). 2018-11-06 11:00 LMN 15/ 2018 LIMPOPO
Non Adherent Dressing With Soft Silicone Technology Atraumatic Dressing, Dressing With Safetac Dressing 20x30. 2018-10-02 11:00 ZNQ NO.2593/ 08/ 18
Bacteriostatic Gel which Containspropylene Glycol (Box Of 10) 15g Tubes 2018-10-02 11:00 ZNQ NO.2592/ 08/ 18
Supply, Delivery and Off-loading of Groceries for Thohoyandou and Polokwane Management Areas ( Limpopo Province) 2018-11-06 11:00 LMN 09/ 2018 LIMPOPO
Smooth Bore Breathing Circuits With Extra Limb And 2lt Breathing Bag Adult (3 Limb) 1.6mtr Long 2018-10-02 11:00 ZNQ NO.2586/ 08/ 18
Disposable Bed Sheets - 100cm X 200cm, Sample Required With Quote. 2018-10-02 11:00 ZNQ NO.2528/ 08/ 18
Supply, Delivery and Off-loading of Cleaning Material and Toiletries for Thohoyandou and Polokwane Management Areas ( Limpopo Province) 2018-11-06 11:00 LMN 12/ 2018 LIMPOPO
Adaptic Digit Non Adhering Dressing Digit. 2018-10-02 11:00 ZNQ NO.2526/ 08/ 18
Supply: Teledyne Benthos 867 Battery Replacement Kits (3002855) - x 4. 2018-09-28 11:00 RFQ000289
Suture Grasper 14 Gauge 15cm Length 2018-10-02 11:00 ZNQ NO.2479/ 08/ 18
Appointment of a services provider for the supply, delivery, training and maintenance of two waste palletizer. 2018-10-12 11:00 GT/ GDARD/ 131/ 2018
Please Supply Sxm40-40 Hot Water Circulating Pumps as per required specification 2018-10-02 11:00 ZNQ NO.2810/ 08/ 18
Supply and Install the Birds Deter Stand (See Picture Attached) Quantity: 1 Unit 2018-10-02 11:00 ZNQ NO.1523/ 06/ 18
Northern Cape: Upington and De aar Area: Rehabilitation of Bridges in Upington and De aar area. CIDB GRADING: 7 CE or Above. 2018-10-16 11:00 DRPW 001/ 2018
Supply, delivery, installation, training, commissioning, internal validation and support of a Microfluidics Fragment Analyser (MFA) for DNA analysis, for use in the Molecular Forensics Laboratory at UCT Health Sciences Faculty for the Western Cape Forensic Pathology Service. 2018-10-19 11:00 WCGHCC034/ 2018
Steam Bend Mild Steel 1/2” (15mm) Male Thread Both Ends, Sabs Approved Only 2018-10-02 11:00 ZNQ NO.1645/ 06/ 18
V-Loc Sutures 180 2/0 Gs-21 Taper 1/2 Circle 37mm 2018-10-02 11:00 ZNQ NO.2292/ 07/ 18
Pliable Polymer Tubing for Suction Sterile Id 6mm X Od 11mm, Six Months Period Contract Request 720 Pkts of 7.5 Mtr = 5400 Mtrs/Month. 2018-10-02 11:00 ZNQ NO.2969/ 09/ 18
Provision of ICT Infrastructure upgrade tender notice of closing date extension. 2018-09-25 11:00 OPFA/ INUP2019/ T1
Disposable Laparoscopic Scissors Curved With Monopolar Cautery 5mm Shaft 30-35cm In Length Sterile Expiry Date, Single Use Shears With Monopolar Cautery. 2018-10-02 11:00 ZNQ NO.2473/ 08/ 18

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.