Friday, 2 August 2013

From Theory to Sharp Practice: Competitive Bidding

My intern has been learning this week about a few practical issues in pricing, as a result of sending out enquiries for a package sewage treatment unit and some associated plant for what will be the final resolution of the Indian Restaurant job. 

Non-compliant bids came back from more than half of the potential suppliers. Bids were made with less than the specified capacity, for less than the required scope, and for other then the requested terms. The offer letters from the worst offenders were full of phrases which attempted to make the potential purchaser responsible for ensuring that the offer was  suitable for the duty to which they intended to put it, even though the bids were counter-offers which ignored the basis which the client asked for.

I can tell whether the alternate basis implicit in the offers is is likely to be valid, but how about the guy who owns an Indian Restaurant, who tries to buy one of these plants directly? Is it fair and reasonable to offer him something on the basis that he is an expert purchaser?

I'm not sure that it is - I'll have to see if there have been any cases where this has been tested in court. I'm involved as an Expert Witness in two cases at the moment where this might come up as an issue. Unless these suppliers always fold before getting into the courtroom, it seems likely that these terms have been the subject of a legal ruling.

As is often the case, when we had adjusted all of the bids to reflect what had been left out, what had been the cheapest bid was the second most expensive, despite being undersized. Buyer Beware!

Our bid is in with the client now, and it is almost four times the unadjusted low bid received, though around the same as the highest bid received despite including a good deal of consultancy and site time, and a number of key items missing from the cheapest bids. Let's see if the client has learned from his experiences to date that he who buys cheap, buys twice....

No comments: