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Managing Bids & Negotiating Prices |
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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
contract.
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.
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 remember to do your homework. 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.
Last updated: March 7, 2011 |
