Issue Date: 
Wednesday, October 30, 2019

7 Disadvantages of Competitive Bidding

By Werner van Rooyen, Director of HowToTender (Pty) Ltd which specializes in tender consulting and tender training.

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 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 based on price tag that people do not 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, inferior 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 inferior quality, the customer will often end up with inferior, inferior quality goods or services.
  5. Safety shortcuts
    Another area where suppliers may be tempted to lower costs is safety standards.  Safety costs can run 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 extended periods for goods or services that may be required quickly.
  7. Insufficient profit margin to allow for investment in research and development, modern 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, modern technology, and equipment.

To learn more about this and many other tender conditions attend our “Become a Tender Expert” 2-Day workshops presented in Johannesburg, Pretoria, Durban, Port Elizabeth, and Cape Town.  Book and pay online at https://howtotender.co.za/tender-expert-form/

Contact us at wernervr@howtotender.co.za should you require more information.

You can also purchase a Tender Manual (Handbook) on our website https://howtotender.co.za/ which is a step by step guide how to respond to a South African Tender.  It includes examples of completed SBD forms.

Title Closing Date Tender No.
Sale of 74 industrial and two unregistered portions of erf 1 Caledon situated in Chavonnes Way Caledon 2022-06-24 12:00 TPM 01/2022/23
Request for Proposal: Children on the Move End of Project Evaluation 2022-06-03 17:00 No reference number
Construction of a security room at the Nama Khoi Workshop in Springbok 2022-05-30 10:00 Q/NC062/10/2021-2022
Control of aquatic and terrestrial invasive plants, removal and disposal of biomass and litter from site 2022-06-21 10:00 343S/2021/22
Maintenance of lifts and escalators for a period of 1 year at King Shaka International Airport 2022-06-21 12:00 KSIA6813/2022
Operation of Tuck shop at Midrand High School 2022-06-03 12:00 Tuckshop Tender MHS_05/2022
Individual Consultant Selection – to Support Procurement and Disbursement Implementation for Bank Finance Projects 2022-06-03 15:00 ET-AUC-293330-CS-INDV
Terms of reference for the recruitment of five (5) consultants for the production of the 2023 Africa’s Development Dynamics Report 2022-06-03 15:00 No reference number
Consultancy services to: Develop proposal for the division of labour between the African Union, Regional Economic Communities, Regional Mechanisms and Member States, pursuant to assembly decisions Assembly/AU/Dec.635 (XXVIII), Ext/Assembly/AU/Dec.1 (XI) and Assembly /AU/Dec.798 (XXXIV) 2022-06-30 15:00 AUC/BCP/C/002
Re-Advert: Appointment of a labour relations specialist/consultant to assist with chairing disciplinary proceedings 2022-05-26 13:00 EWSETA/RFQ/015/2022
Request for proposal for the placement on the municipal panel of attorneys for a period of 36 months 2022-06-09 12:00 16/2022
TD-04/05/2022: Erection and construction of a new container hive next to Thusong and Bongulethu Police Station, Oudtshoorn 2022-06-20 12:00 FORMAL TENDER TD-04/05/2022:
Tender for the appointment of a service provider for online electronic search and information verification for a period of three (3) years from date of appointment 2022-06-20 12:00 FIN003/2022
On-site calibration of power meters at the SABS. 2022-05-24 11:00 RFQ 20570
Re-advert: Appointment of a service provider for the provision and management of security services for the period of three years 2022-06-15 12:00 T02/2022
Re-advert: Appointment of a panel of consulting engineering firms for various projects in Dr Pixley Ka Isaka Seme Local Municipality as and when required for a period of three years 2022-06-03 12:00 T01/2022
Rendering of medical related services as well as professional and community counselling services for a period of three (3) years from date of appointment 2022-06-20 12:00 BA024/2022
Provision for Pest Control and Sanitation Services 2022-06-13 12:00 CO 22/18 O
Supply and delivery of LBO-NCPM1064-AR: LBO pre-mounted in the oven and a Crystal oven with precision temperature controller to iThemba LABS-NRF, Faure, Western Cape 2022-06-02 11:00 iLABS/RFQ 2022/23:51
Provision for Medical Surveillance Services for Staff and Students 2022-06-13 12:00 CO 22/17 O

Pages

Who is the bidder or his or her representative?

By Werner van Rooyen, Director of HowToTender (Pty) Ltd which specializes in tender consulting and tender training.

In Organ of State tenders, the Standard Bidding Document 4 – Declaration of Inters – ask in paragraph 2.1 the following: “Full name of bidder or his or her representative... Read More

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