Why The Lowest Tender Never Wins!

It seems in every sector there’s always someone or some company looking to take the shortcut in bidding wars and enter into the tendering process competing on price alone.

Newsflash!

You can’t and nor should you.

Legislation’s been in place since ’06 and it’s further reinforced in the updated 2015 Public Contract Regulations.

There’s an issue with it though…

It’s for public contracts.

Don’t you think this should apply equally to the private sector?

In a nutshell, yes it should.

Tell you why…

When you bid on a public sector contract during the tendering stage, every company is considered. 

Not just on price, but you’ll certainly make your proposal stand out if it’s considered abnormally low.

What’s abnormally low?

Hard to define but the decision makers can spot it a mile out. If all bids are in the tens of thousands and there’s you with a proposal of a few grand, it’ll stick out like a sore thumb.

When it’s spotted, the bidder is contacted to explain themselves. What the Contracting Authorities are looking for during an explanation stage of a bid that’s lowballed is satisfactory evidence that you’re complying with environmental, social and labour laws.

This brings into question supply chain management.

Will you be able to provide evidence that you’re sourcing products in a sustainable way?

If you’re using overseas suppliers for your materials, do you have audits to prove there’s no slave wages being paid to employees; that the working conditions are in line with health and safety standards, and that there are no children in the workforce?

Supply chain management is a tough battlefield. It’s easy to source cheap materials from around the world, but the bottom line is you just can’t do that.

Your suppliers are your responsibility. Funding unethical businesses overseas won’t get you any public contracts.

This is why the private sector should be adopting the same principles. There’s many a thing the government do that only bring red tape and more administration, but in the case of the updated Public Procurement Policy, they’ve took a step in the right direction.

It makes sense that to eradicate the poverty in third world countries, we source while supporting developing.

The Best Procurement Policy Should Outline Supporting The Supply Chain Long-Term

When you’re sourcing products, think about how long your supplies can realistically last. That’ll give you a good idea if you’re doing it right.

Say for example you’re in the clothing sector, bulk shipping garments from overseas and selling them wholesale or even job lots on eBay.

·         The staff need sufficient wages to live on

·         The factory requires sufficient profit margins to source materials

·         The materials providers need sufficient margins to continue their operations

There’s a further profit margin for the shipping of goods, and you’ve packaging to consider too.

It adds up to a lot of expense, but if you get it wrong, it’ll be even heftier. 

This is why it’s fundamental to get your pricing right. Sell at too low a price and you can’t support the supply chain longevity.

Business sales contribute to quite a few businesses. Often worldwide too given the nature of how the digitised businesses operate today. 

Do you think your suppliers really value your trade? 

Image courtesy of masterstv.com.