TRẦN THU HẰNG

HS150040

IB1502

The two most common forms of bidding today worldwide include competitive

bidding and negotiation. In the following essay, we will compare and contrast the

different aspects of these two forms of bidding .

First of all, let's understand 2 basic concepts:

Competitive bidding is a common procurement practice that involves inviting multiple

vendors or service providers to submit offers for any particular material or service.

Competitive bidding allows transparency, equality of opportunity and the ability to

demonstrate that the outcomes represent the best value. Hence, high value acquisitions

usually undergo the competitive bidding process. A competitive bid requires invited

contractors to provide the best possible price for an outlined scope of labor. Once all

bids are submitted, all-time low bid is usually chosen and therefore the winning

contractor signs a contract to start work. This method enables the owner to match

prices before work begins.

A negotiation is a process of formal communication, either face-to-face or via

electronic means, where two or more people, groups, or organizations come together
to seek mutual agreement about issue or issues. A negotiated bid is when an owner

negotiates a price for services with one contractor. during this method, contractors

don't compete against one another for very cheap possible price and owners don't

seem to be provided comparative pricing.

Based on the definition of the two methods, it can be seen that the competitive bidding

method will help businesses get the best price. But as a whole, this approach will lead

to a disadvantage that the best price offered "lowest bid" does not guarantee the value

and quality of the product supplied.

Along with that, negotiated bidding is chosen more for the following reasons:

o Total contract value or volume is large

o Complex technical requirements

o Product and process requirements and specifications may still be evolving

o Purchase involves utilization of capital-intensive plant and equipment

o Agreement involves special or collaborative relationship

o Supplier will perform important value-added activities, requiring…

 Appropriate compensation

 Performance standards

 Performance metrics

This will ensure the safety of all aspects of the project

 1. Competitive Bidding and Negotiation should be used in

Competitive Bidding Negotiation

1. The value of the procurement should 1. The purchase involves a significant

be high amount of money or requires an ongoing

2. The specifications must be clear effort. In these situations, negotiation

3. There must be an adequate number of may be used in conjunction with a bid.

potential suppliers in the market 2. The number of suppliers available is

4. The potential suppliers must be both too limited to create competition bid.

technically qualified and keen to win the 3. New technologies or processes are

business required for which a selling price has yet

5. There must be sufficient time to be determined

available 4. The supplier is required to make a

substantial financial investment or other

resources.

5. There is not enough time available to

seek competitive bids.

6. It is impossible to estimate production

costs accurately

7. Price is not the only almost important

criterion
2. Process of each method

Competitive Bidding Negotiation

1. Vision 1. Specifications

2. Concept 2. Request for Bids

3. Request for proposal 3. Bidding

4. Supplier qualification 4. Reviewing the Bids

5. Decision 5. Awarding the Contract

6. Contract

3. Advantages and Disadvantages

Competitive Bidding Negotiation

Advantages 1. Lowest bid price selected 1. Client has flexibility in

2. Simplified bid evaluation terms of choosing their

method preferred contractor.

3. Open for any contractor 2. Time and cost savings

3.It can allow early supplier

involvement.

4. Contractor’s costs and

pricing are more transparent

as they are not seeking to

win the bid purely on the

 lowest tender.
Disadvantages 1. Low Quality of the work 1.The costs may be driven up

2. Potential risks of project by the lack of competitive

not identified bidding.

3. Qualification of the 2.There is a heavy reliance

contractor not evaluated on trust between the parties.

4. Project experiences not 2.Unless it is carefully

used for future referenced structured and controlled, the

competitive Bidding negotiation process can

create an adversarial

atmosphere, even before the

contract has been awarded.