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.
Paarl : SASSA : New office accommodation : District Office : 453.82m2 & 10 parking bays : Category A, B, C, & D : BBBEE Level - 4 2018-11-09 11:00 CPTL38 / 18
Paarl: SASSA: New office accommodation: Local Office: 868.75m2 & 8 Lockup garages, 2 open parking bays and 5 visitors parking bays: Category A, B, C, & D: BBBEE Level - 4 2018-11-09 11:00 CPTL39 / 18
Supply, install and service wall mounted automatic Air Fresheners x 100 units to be installed in Eastboom CHC and 12 Clinics - public and staff toilets (12 months contract) 2018-10-26 11:00 ZNQ 263/ 18
Supply, install and service Sanitary Towel Bins x 64 units to be installed in Eastboom CHC and 12 Clinics - public and staff toilets (12 months contract) 2018-10-26 11:00 ZNQ 230/ 18
Industrial Tilting Pan 2018-10-30 11:00 PSH 926/ 1819
Measuring Cylinders -Stainless Steel 1,2,5 And 10 Litre 2018-10-30 11:00 PSH 864/ 1819
Betterment and Regravelling on District Road D761 between Chainage 0.00km to 4.00km in the KwaDukuza Local Municipality for Grade 3CE Vukuzakhe Contractors 2018-11-20 11:00 ZNT373T/ 3/ C2930/ 019/ S/ 1/ 2018- 2019
Betterment and Regravelling on District Road D1575 between Chainage 0.00km to 1.50km in the Ndwedwe Local Municipality for Grade 3CE Vukuzakhe Contractors 2018-11-20 11:00 ZNT373T/ 3/ C2930/ 017/ S/ 1/ 2018- 2019
Firearm safe - wall mounted 2018-10-30 11:00 PSH 783/ 1819
The Drain Clearing and Verge Maintenance On P2-3 From Km 7.567 To Km 38.056 in the Mandeni Local Municipality (Kz291) For Grade 3CE/SH Vukuzakhe Contractors 2018-11-22 11:00 ZNT 373T/ 3/ C2910/ 049/ S/ 1/ 2018- 2019
Folding white cane 2018-10-30 11:00 PSH 711/ 1819
The Betterment, Regravelling and Drainage on D1525 From Km 0.00 To Km 4.00 in the Maphumulo Local Municipality (KZ294) For Grade 3CE Vukuzakhe Contractors. 2018-11-22 11:00 ZNT 373T/ 3/ C2940/ 007/ S/ 1/ 2018- 2019
The Appointment of a Structural Engineer to Assess the Structural Integrity of Roofs for the Rooftop Solar Project. 2018-11-09 11:00 GT/ GIFA/ 146/ 2018
The Construction Of Sidewalks On D893 From Km 0.80 To Km 1.10 In The Maphumulo Local Municipality (Kz294) Contract 2 For Grade 2CE Vukuzakhe Contractors 2018-11-22 11:00 ZNT 373T/ 2/ C2940/ 186/ S/ 1/ 2018- 2019
Invitation for open tender for the development of a Transport Masterplan for the 7157ha of the Tshwane Automotive City in Rosslyn. 2018-11-13 11:00 AIDC T07/ 2018
The Betterment, Regravelling and Drainage On D881 From Km 0.00 To Km 6.00 In The Maphumulo Local Municipality (Kz294) For GRADE 3CE Vukuzakhe Contractors. 2018-11-22 11:00 ZNT 373T/ 3/ C2940/ 004/ S/ 1/ 2018- 2019
The Betterment, Regravelling And Drainage On P224 From Km 0.000 To Km 4.386 In The Mandeni Local Municipality (Kz291) For Grade 3CE Vukuzakhe Contractors. 2018-11-22 11:00 ZNT 373T/ 3/ C2910/ 008/ S/ 1/ 2018- 2019
The Construction of Sidewalks on D894 From Km 1.00 To Km 1.30 in the Maphumulo Local Municipality (KZ294) for Grade 2CE Vukuzakhe Contractors. 2018-11-22 11:00 ZNT 373T/ 2/ C2940/ 187/ S/ 1/ 2018- 2019
The aim of the project is to undertake a province-wide physical verification of all spaza shops and produce quality reliable data to assist the GEP and Gauteng Department of Economic Development (GDED to make informed decisions pertaining to legal and illegal spaza shops. 2018-11-13 11:00 GEP003/ SPAZASHOPPROJECT/ 18
The Betterment, Regravelling And Drainage On D1632 From Km 4.50 To Km 8.50 In The Maphumulo Local Municipality (KZ294) For Grade 3CE Vukuzakhe Contractors 2018-11-22 11:00 ZNT 373T/ 3/ C2940/ 009/ S/ 1/ 2018- 2019

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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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