Competitive bidding is the process of inviting and obtaining bids from competing suppliers in response to documented specifications, by which an award is made to the best overall bid.
There are several important elements that require clear understanding by both the host company as well as the invited suppliers to ensure that bidding is fair when using e-negotiation tools.
What constitutes the best overall bid is a bid that meets or exceeds the specifications in areas such as price, safety, environmental best practices quality and other areas as outlined in the product specification. The process contemplates giving potential bidders a reasonable opportunity to bid, and requires that all bidders be placed on an equal playing field. Ideally each supplier must bid on the same documented specifications, terms, and conditions for all the items.
However breaking out individual line items that a specialty supplier can provide bids for can help to reduce the opportunity for suppliers to manage the overall gross margin of their bids and drive higher savings. The purpose of competitive bidding is to stimulate competition, prevent favoritism, and secure the best goods and services at the lowest possible price, for the benefit of the host company while making the job easier for buyers and category managers. Competitive bidding cannot occur where specifications, terms, or conditions prevent or unduly restrict competition, favor a particular supplier, or increase the cost of goods or services without providing a corresponding tangible benefit for the host Retailer.
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