A competitive bidding procedure is commonly used in the procurement of goods and services. It provides a wider choice in selecting the best bid among the competing suppliers and contractors.
This is an initial step in the public offering whereby an underwriter submits the sealed bid to a company that is making its first issuer to the stock. After collecting bids from several other underwriters. The issuer awards the contract to the company with best price and contract terms. Competitive bidding is a commonly used method in government tenders and is generally issued by utility companies.
Companies undertaking competitive bidding process usually command valuation. They typically operate in companies where they have developed a competitive advantage as a price leader. Buyers rarely undertake competitive bidding unless the company provides post-transaction advantages that can be readily quantified and pose little risk to be realised.
Types of Competitive Bidding:
National Competitive Tendering: This is a Procurement proceeding wherein the procurement entity or the government decides that only the domestic suppliers or contractors may Participate in the tenders. The bidding process may then employ National Competitive Bidding procedure.
International Competitive Bidding: This is one of the most appropriate methods of competitive bidding in public procurement. The process entails the procurement entity to internationally advertise their requirement of goods and services. In an internationally acceptable language. The contract is then awarded to the bidder with the best bids and contract terms.
The procurement entity in such kind of arrangements enjoys a certain amount of freedom in selecting winning bids for its projects. ICB procedures are normally employed for contracts with estimated values that exceed thresholds set at the time of procurement plan preparation
Advantages of International Competitive Bidding:
It promotes competition between suppliers, resulting in best “value for money” for purchasers and users
It offers a kind of transparency and help avoid corruption and favouritism
It gives all suppliers the opportunity to win the business that is advertised
International Competitive Bidding enables effective competition and gives equal opportunities for businesses to participate and win in government procurement activities.