What drives competitive bidding when using e-procurement tools?

February 14th, 2012

There are keys to understanding competitive bidding when using e-negotiation tools.

If you have ever been fishing, you already understand that the better the bait the greater the opportunity to catch something. In this case, the bait is your promise to award business. Casting that bait amongst suppliers provides an opportunity to catch a better product or service. There area variety of psychological techniques employed with these tools that also cause a type of phishing in order to get to drive pricing in a direction that would be considered a good catch. A well run e-auction takes all of these elements into consideration when they discuss a companies sourcing strategy.

There are also other important elements  that require understanding in order to drive competitive bidding when using e-negotiation tools.

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 that meets or exceeds the specifications in areas such as price, quality, safety and environmental impact.

The process contemplates giving potential bidders (vendors & suppliers) 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 within the event. 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. In this case however consideration as the whether or not you want ot split the award of business or just use this as a strategy. 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 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 company.

If you’d like to learn more, please contact a SafeSourcing representative.

We look forward to and appreciate your comments.

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