Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

5 Stepsof the Bidding Process

The bidding process is like a job interview for suppliers as they showcase their capabilities to the organization. If your first impression is great, then you have the chance to move to the negotiation phase.

The bidding process for public projects requires high regulation compared to private projects. However, they usually follow the same procedure. 

The following are the necessary steps in the bidding process:

1. Bid solicitation

Bid solicitation is where the organization sends out a request for proposals (RFP) or invitations to potential suppliers. The invitations are usually large and open for public projects. 

Here, the organization lays out its project requirements, the specific contract type, and the delivery method. 

The bid solicitation phase needs more information such as the request for quotation (RFQ). It is the method utilized to acquire more information necessary to check the supplier’s credibility.

2. Bid submission

The bid submission includes all the relevant company information. It has the company’s history of projects, a track record for completing tasks on time, and a management plan. 

The bid submission must include a cost estimate based on the materials’ quantity and the plan for the project. It needs to have accurate costs to ensure cost-effective methods. Of course, the best price heavily influences the bid. 

3. Bid selection

There are rules for public sectors, especially the government, where the lowest bidder wins the contract. This somehow helps the public sector to rule out any manner of fraud or biases as the price is the greatest equalizer. 

On the other hand, the private sector considers some factors apart from the lowest prices. The price acts as the tie-breaker when both suppliers have comparable bids. 

4. Formation of the contract

Of course, after the organization selects a supplier, both parties must form and sign a contract. The contract will legally bind them to do their obligations.

The contract is a safeguard for both parties if one of them becomes non-compliant with the agreement. 

This phase is the final opportunity for the organization to negotiate the final price of the bids. Additionally, any other stipulations can be discussed for both parties to mutually benefit. 

5. Project delivery

After the contract phase, the project is now ready to roll. The project delivery is based on the project delivery method that both parties agreed on. 

Whatis Competitive Bidding?

Competitive bidding is a form of solicitation that is utilized in the acquisition of goods or services. 

It is used by government agencies and private organizations that need the delivery of materials or services on a large-scale basis. 

Both the public and private sectors must issue a form of solicitation which is usually called the request for proposal (RFP). It highlights the materials or services that the suppliers need to show interest in supplying through the competitive bidding process. 

The CompetitiveBidding Process

Interested suppliers or vendors send their bids for the organization to consider within a specific period. Usually, the bids are sealed to promote the confidentiality of each proposal sent by the vendors or suppliers. 

After the expiration of the bid, the organization selects the bidder with the lowest or best terms for the request for proposal (RFP). The selection of the suppliers or vendors can be done through an open or closed bidding process. 

The competitive bidding process aims at increasing the efficiency of the bids, avoiding biased treatments, and enabling the organization to get the best offer.

An Exampleof a Successful Bidding

A spaceship ride with Jeff Bezos

On June 12, 2021, a seat on a spaceship ride with Amazon’s founder, Jeff Bezos, went for $28 million during a live auction that concluded the month-long bidding process for the sightseeing trip on Blue Origin’s space trip. 

Within four minutes after the opening of the live auction, the bids reached beyond $20 million. After just 7 minutes, the bidding was concluded. However, the identity of the person who won the bid was not immediately disclosed. 

According to an analyst of the financial services company, Morgan Stanley, putting Jeff Bezos, the world’s richest man, into space is a huge advertisement for space as a domain for industrialization, investment, and exploration. 

An Exampleof Rigged Biddings

Construction of International Agency Headquarters in Europe

An international agency carried out a special audit to know if there was any fraudulent act in awarding a contract in constructing a new 300-euro headquarters building for the agency. 

The audit showed that only three firms submitted their bids for the project. The two bidders who submitted their bids are two large companies well-known in the region. On the other hand, the third bidder is a small private firm that appeared to be unqualified for the contract. 

The third bidder also submitted an incomplete bid at a much higher price compared to the other bidders. The higher price was due to the inflated quote to provide fire safety equipment. The private firm was given an opportunity to defend its bid but refused to do so. 

Furthermore, the investigation revealed that the international agency had already hired the firm to renovate the other properties it occupied and that the firm paid kickbacks to agency management in exchange for both contracts. 

The international agency has rewritten its audit report to exclude the above finding to conclude that there was no evidence of collusion in the construction of the project. 

Conclusion

This comprehensive guide on procurement bids explores the concept, importance, and key steps involved in the bidding process. By understanding procurement bids, readers gain insights into the mechanisms that organizations use to select suppliers and secure the best value for their projects.

The inclusion of real-life examples, both successful and problematic, further illustrates the dynamics and challenges associated with the bidding process.