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.
IT Services 2019-09-06 11:00 NAMC/ 033/ 07/ 2019
The Provision of Travel Management Services for a period of Three years for National Agricultural Marketing Council 2019-09-06 11:00 NAMC/ F01/ 2019
The merSETA would like to invite potential service providers in the insurance industry to provide insurance brokering and claim services for permanently employed staff members 2019-09-05 12:00 RFP005/ 2019
Appointment of a Service Provider to provide Online travel management services to Provincial Departments and Public Entities in KwaZulu-Natal for a period of three (3) years. 2019-09-17 11:00 ZNT 1221/ 2019- G
Request for additional qualified panel to be part of the KwaZulu-Natal Film Commission production crew for a period of 3 years. 2019-09-09 11:00 KZNFC- T08/ 19/ 20
Provision of a turnkey service provider to write, translate, edit, design, illustrate, produce and distribute two Gautrain children’s books 2019-09-06 11:00 GMA/ 006/ 19
Provision of Upgrade and Integration of existing GMA Office Security Systems: CCTV & Biometric Access Control 2019-09-06 11:00 GMA/ 007/ 19
Terms of Reference for the Implementation of Skills Development Programmes For Government Officials and Teachers in the Northern Cape, Limpopo, Kwa-Zulu Natal, Mpumalanga, Free State, Gauteng, Eastern Cape And North West on Behalf of the Provincial Departments of Education 2019-09-09 11:00 SCMU: 08 - 2019/ 20
Delivery of pre-screening services to the dti for recruitment purposes for a period of 24 months 2019-09-06 11:00 dti 07/ 19- 20
The Appointment of a Service Provider to Develop a Business Plan for the Property Namely Remainder of the Farm 15 Dassenberg; Farm 16 Vriesfontein And Remaining Extent of Farm 17 In Extent of 1219.9742 Hectares, Cape Rd, Western Cape. 2019-08-23 11:00 SSC WC Q10 (2019/ 2020) DRDLR
Appointment of a Service Provider/S to Conduct Comprehensive Farm Assessments on Selected Restitution and Pro-Active Land Acquisition Strategy (Plas) Farms and Monitoring of The Stimulus Package Projects Initiated by the Department Of Rural Development and Land Reform In Nine Provinces for a period of(3) three years. 2019-09-06 11:00 5/ 2/ 2/ 1- RDLR 0031(2019/ 2020)
Appointment of a Serevice Provider(S) for Transalation and Transcribing Of Evidence In Criminal And Departmental Hearing for a period of two (2) years 2019-09-16 11:00 19/ 1/ 9/ 1/ 02 TP (19)
ZNTD 03895W: WIMS 063665: Kwazulu-Natal: Department of Education: Durban: Masimdumise Junior Primary School:Water and Sanitation: Phase 3 2019-09-20 11:00 ZNTD 03895W
ZNTD 03916W: WIMS 063661: Kwazulu-Natal: Department of Education: Durban: Ezindlovini Primary School:Water and Sanitation: Phase 3 2019-09-20 11:00 ZNTD 03916W
Appointment of a service provider for the outsourcing (provisioning) of three Specialised Research Papers for the legal fees investigation of the South African Law Reform Commission for a period of six (06) months 2019-09-06 11:00 RFB 2019 02
ZNTD 03852W: WIMS 063747: Kwazulu-Natal: Department of Education: Durban: Jonase High School:Water and Sanitation: Phase 3 2019-09-19 11:00 ZNTD 03852W
The Appointment of a Service Provider to Assist with the Development, Co-Ordination and Implementation of the Environmental Protection and Infrastructure Programmes Advocacy Strategy in the Environmental Programmes Branch of the Department of Environmental Affairs 2019-09-06 11:00 E1524
ZNTD 03875W: WIMS 063779: Kwazulu-Natal: Department of Education: Durban: Iwetane Primary School:Water and Sanitation: Phase 3 2019-09-20 11:00 ZNTD 03875W
ZNTD 03849W: WIMS 063753: Kwazulu-Natal: Department of Education: Durban: Inhlokozi High School:Water and Sanitation: Phase 3 2019-09-19 11:00 ZNTD 03849W
The Appointment of the Service Provider to Review Learners Learning Materials and Development of Facilitators Guideline for Kids in Parks Programme in South Africa for Period of Seven (7) Months 2019-09-06 11:00 Q- 126/ 19/ 20

Pages

Extension of validity period

By Werner van Rooyen

www.howtotender.co.za

31 January 2019

Those of you who are familiar with responding to tenders will know that it is common practice for procuring entities to extend the bid price validity period. We received the undermentioned queries regarding the extension of the validity period of the bid price.

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