Competitive bidding is widely used within private sector organizations and government agencies. This is a method of procurement that is known for its transparency. Competing suppliers, contractors or vendors; all submit their bid and then the issuer will award the contract to the bidder that has provided them with the best price and contract terms. The purpose of this procurement method is to prevent favoritism and stimulate competition. But is this process effective for IT buyers? We take a look at some of the advantages and disadvantages of awarding IT projects via competitive bidding…
IT buyers may choose to go down this route when they wish to benefit from value for money. Through promoting competition, it is believed that competitive bidding is the best way to guarantee you get value for money from the IT Company in question. Nonetheless, this is a theory that many experts disagree with, as you will soon discover. Apart from this, competitive bedding is beneficial because of its transparent nature. This helps mitigate corruption and favoritism. And, when it comes to open competitive tendering, all companies have opportunity to win the IT business that is advertised.
These are essentially the main reasons for choosing competitive bidding as your IT procurement method. Nonetheless, there are a lot of people who do not believe in this process and challenge the theory behind it. One of the main reasons for not choosing this process is because leading suppliers may not choose to participate in competitive tendering and thus, you will be missing out on the best companies in the industry. Moreover, by playing the competitive bidding game, companies are often forced to lower their costs in order to win business. It is likely that you will suffer as a result, as they will have to use cheaper IT equipment, software and such like, or cheaper labor may be utilized. Thus, you may be getting a cheaper service, yet many people believe that competitive bidding does not actually provide value for money as it promises.
Nonetheless, one of the main issues with competitive bidding, especially in relation to the IT industry, is the fact that there are major barriers to communication between the buyer and the supplier. Competitive tendering is not conducive to open communication. This is especially the case when you consider that in a lot of instances, it is necessary that any dialogue must be kept open to other bidders. Because of this, suppliers may withhold certain information or not ask specific questions, as they do not want their competitors to hear. This is highly damaging. Open and frank communication is vital to ensure you end up with the service you want and to the standard you want it.
When you take all of the points that have been mentioned into account, most people would concur that competitive bidding is a risky procurement method to utilize, especially in the IT industry. Of course there is no right or wrong. If you are a start-up and have a restricted budget, you may see this as the best option. Yet you do need to be aware of the potential issues.