The Limits of Competitive Bidding — an Alternative Viewpoint

Truly competitive bidding assumes a perfect world with perfect information and complete transparency of the bidders as well as the stakeholders. While this is not only impossible, the precept frequently introduces damaging inefficiencies. As private and public sector organizations scramble to save every cent possible today, it is increasingly relevant to consider the limitations of this process.

An example from one of my past lives: I managed the in-house printing operation for an East Coast University. "Purchasing", as it was then called, required three bids for all contracts over $5,000. I was responsible for keeping 8 offset presses and 20 pieces of collateral equipment running year round with 4 months of three shifts. The RFP required on demand servicing within three hours. I was well acquainted with the best area service organizations and knew which ones had the most competent technicians and mechanics. The risk of letting this contract to an organization that might not perform was unthinkable. It was always troubling to me when it came time to interview the two finalists that stood less than a 10% chance of being awarded the contract -- it was a waste of time, effort and resources to say nothing if not also disingenuous.

There are clearly circumstances under which forced competitive bidding amounts to nothing less than organizational mistrust of division managers. Commodity bidding makes perfect sense. But when the human competency factors of an organization are paramount to fulfilling the terms of contract -- as they are with all servicing agreements -- the theoretical saving metrics of competitive bidding are inadequate.

While some organizations grant stakeholders a veto over aspects of awarding contracts, this still represents a waste of time and resources in many instances. So long as sufficient compliance testing and visibility is in place, it will often times make better sense to forgo a competitive bidding process and allow local managers to do the jobs they have been entrusted to perform.

- William Busch, Spend Matters Columnist

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