Question

What advantages and disadvantages does the competitive bid process have as a method of price determination?

Answer 1

Competitive bidding as a process has a number of advantages and disadvantages which can be:

DISADVANTAGES

1. The process of competitive bidding is a slow one.

2. In order to deal with the increased competition, the supplier might need to resort to using cheap labor and/or materials.

3. Discourages open communication due to the fact that the same information would then need to be made available to all the other bidders.

4. It can create unfair profit margins for the suppliers.

ADVANTAGES

1. Transparent procurement and selection process due to the fact that the same information is available to all the bidders.

2. Allows easier selection of the possible area of interests.

3. Promotes competition, which is a necessary factor for improvement in any given industry.