Managing Bids & Negotiating Prices
Managing a Bid
Once you have selected a few qualified suppliers, the best method to determine
if an offer is competitive is to request a written bid. Bidding will allow you
to verify the pricing provided by the supplier, tell the supplier you are
seeking competition, delineate your expectations of the supplier and his/her
expectations of WHOI and, when needed, can form the basis for a legally binding
The bidding process begins with the development of a set of specifications or objectives. To be able to define the requirements exactly requires doing your homework. The resources to assist you in this include colleagues, trade manuals, the Procurement Team and the suppliers themselves. Try to make your specifications as generic as possible allowing the suppliers to use their expertise to find the best solution to your needs. Here are some tips on preparing a bid:
- You will need sufficient time to prepare and evaluate the bid. The suppliers will need sufficient time to respond (usually two to four weeks depending on the complexity).
- All suppliers should receive identical copies of your bid documents and any subsequent changes.
- Sometimes it may be more cost effective to use WHOI's own assets to manufacture an item or perform a service. 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 you extend this deadline for one, you must extend it for all.
- If the bid is quite complicated and will generate a host of questions or require a site visit from the suppliers before they can bid, it may be most expedient to hold a pre-bid meeting with all parties present.
- Make sure the person who is submitting the response is appropriate. All bids should be signed by an officer of the supplier's company with authority to commit the company's resources.
- All bids are confidential and should not be used as a bargaining tool among suppliers.
- 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.
Last updated: May 29, 2007