Challenges with Competitive Bidding

Competitive bidding

The bidding process can be tedious even when process is automated. It is even worse in manual bidding.

A major challenge we face is when leading suppliers fail to participate. Leading suppliers could be manufacturers or authorised distributors and dealing with them directly eliminates middle men and reduces your total cost. If leading suppliers are not considered, the purchaser may end up buying inferior product or service. To pre-empt such scenarios, communicate with leading suppliers that you have published a bid and would be glad if they participate.

On the same breath, start-ups and small suppliers may not be able to participate and compete with medium and large scale businesses. For instance farmers may have fresh products but their compliance level is generally too low. Buyers working with these kind of suppliers should encourage/pressure them to put their house in order for continued business relationship.

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. When making significant purchases, frank and open communication between potential supplier and buyer is crucial. Bidder X may avoid asking certain questions because the questions or answers may help other bidders by revealing Bidder X's approach, features, and the like.

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 compromising on quality of labour and/or materials leading to poor quality goods or services. They could lower safety standards too exposing their business and that of the buyer to risk.

Well, they say time is money! When organizations use competitive bidding it can take longer times than expected to award the bid. The process is four times slower when manual and email bidding is used as opposed to e-tenders.

Suppliers continuously innovate buyers in order to provide buyers with better products. Competitive bidding can force a supplier to accept a very slim profit margin forcing them to cut on research, development and new technology.