Managing Bids & Negotiating Prices
Managing a Bid
Ideally you will want your pick of several qualified suppliers, and the best method to determine if an offer is competitive is to request a bid. Bidding will allow you to verify that the pricing provided by the supplier is competitive. It’s appropriate to advise the supplier when you are seeking competition, delineate your expectations of the supplier as well as identifying the supplier’s expectations of WHOI. Once you have identified all of the variables, they are used to form a legally binding contract.
The bidding process has 5 steps that begin with the development of a set of specifications or objectives. Sometimes a collaborative approach to identifying specifications is helpful. There are a number of resources available to engage that include colleagues, trade manuals, the Procurement Team, and the suppliers themselves. Try to create your specifications with sufficient latitude to engage the suppliers in a way that leverages their expertise. You may ultimately find that the best solution is revealed and better suits your needs.
Five Steps to the Bidding process
- Request for Bids
- Reviewing the Bids
- Award of the Contract
Here are some tips on preparing a bid:
- Allow sufficient time to prepare and evaluate the bid.
- All suppliers should receive identical copies of your bid documents and any subsequent changes.
- Whenever practical, every effort should be made to include our internal shops and departments in the bidding process.
- Specify a deadline for receipt of bids.
- If the bid is quite complicated it may generate a host of questions or require a site visit from the suppliers before they can bid.
- Make sure the person who is submitting the response is appropriate.
- All bids are confidential and should not be used as a bargaining tool among suppliers.
- The suppliers will need sufficient time to respond (usually two to four weeks depending on the complexity).
- If you extend this deadline for one, you must extend it for all.
- It may be most expedient to hold a pre-bid meeting with all parties present.
- All bids should be signed by an officer of the supplier's company with authority to commit the company's resources.
- This is called bidding collusion and it ruins the bid process.
Once bids are received, you need to evaluate them in a fair and open process. While the procuring of goods and services at the Institution does not require the lowest bid, it is required to document when a lower bid was not accepted (see Single or Sole Source justification section of this Guide). Some tips on evaluating bids include:
- Take the time to review the bids carefully.
- Narrow the field by determining which vendors are responsive. A responsive bid will include ALL the information needed to procure the product or service up front.
- Look carefully at the proposed prices. Be wary of suppliers who substantially underbid others. It might mean the supplier misunderstood the requirements or is low balling the bid. In this case, the product or service might suffer.
- Consider the supplier's past performance, after sale support and services, technology and other criteria that might separate one supplier from another.
- Always compare TOTAL acquisition and life cycle cost. This includes shipping, consumable supplies, service agreements, potential repair parts and other after purchase costs.
Negotiating a Price
There are times when the bid process cannot be used. When this occurs, prices must be negotiated. Negotiation should be used when:
- The purchase involves a significant amount of money or requires an ongoing effort. In these situations, negotiation may be used in conjunction with a bid.
- The number of suppliers available is too limited to create competition via a bid.
- New technologies or processes are required for which a selling price has yet to be determined.
- The supplier is required to make a substantial financial investment or other resources.
- There is not enough time available to seek competitive bids.
When negotiating a price, it is important to consider all of the opportunities that exist. Find out as much as possible about the company. Be sure you understand your requirements fully and how these might affect prices. Investigate the costs associated with providing the service or materials you are requiring. Develop your own strategy for the negotiation and try to anticipate the strategy of the supplier. Make sure the person you are negotiating with has the authority to make offers and commit the supplier. Finally, remember that a successful negotiation is a win-win for both parties. You must allow the supplier enough leeway to make supplying the goods or services attractive.
And WHOI Procurement is available to help with this. Engage us, we will assist in the process
Last updated: November 10, 2015