Literature Review and Business Practices in Tendering Processes

The existing literature and business practices in relation to tendering, tendering process, tender evaluation, tendering selection criteria, tender methods, advantages and disadvantages.

Introduction

The tendering process is generally as follows: First, the requirements for goods or services to be obtained will be specified by a company or organization (employer, customer or sponsor). Then, public tendering occurs in the process of tendering. Companies that consider themselves competent for the project can submit their plans and quotations to customers (e.g. local governments) to meet these requirements. Tendering provided by the government will be reviewed to determine which offer is best suited to its requirements. Finally, a company wins in the tendering process and provides goods or services to employers, customers or sponsors by performing contracts.

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Main ways of tendering

1. Open tender

In public bidding, the employer publishes its proposed project and allows interested contractors to apply for bidding documents. Sometimes, applicants are required to pay a security deposit, which will be refunded upon receipt of the bid by the employer.

However, this method could waste of the Contractor’s resources. Many contractors spend a lot of resources and time on bidding but they are not selected. On the other hand, some contractors just make a careless bid because they don’t think they are likely to get a bid.

Therefore, the risk of selecting the lowest quotation is that he may get a tender without careful consideration or a contractor who is not able to complete the project [1].

Some disadvantages of the open bidding process are:

a)      It is difficult for suppliers and contractors to establish long-term relationship

b)     The supplier is unable to fully control the determination of technical specifications

c)      The owner only wants the lowest price

d)     It takes a long time to complete the purchase action

e)      Innovation inhibited

f)       Long time to complete procurement action

g)     Due to strict compliance with the requirements, suppliers’ participation in the bidding process is restricted by formalism.

2. Selective bidding

In selective bidding, the prequalification meeting will be held before the tender is accepted. The invited contractors provide the employer with information about themselves, so that the employer can select the contractors who are capable completing the project. In addition, each contractor has the incentive to study the bidding documents in depth and propose the lowest price because they all know that they are likely to be selected [1].

However, those new suppliers may be excluded. This reduces the motivation for innovation. Bias may occur due to the employer’s habitual impression of a company. It can also lead suppliers to keep in touch with employers to check if they are eligible to be invited [2].

3. Negotiation and bidding

A negotiated bid is one in which the employer negotiates with only one contractor who, in his opinion, has enough experience and resources.

Professional contracts or changes to the scope of existing contracts may require negotiation with a single supplier. It can reduce the time and cost of bidding and allow suppliers to participate as early as possible. However, if the structure of the negotiations is not clear, conflicts may occur in the negotiations. In addition, suppliers do not compete and it is difficult to make both sides feel fair.

Disadvantages of negotiation and bidding: first, it may lead to market monopoly. Second, it is exclusive and anticompetitive and there is the possibility of an ambiguous relationship between employers and suppliers. Due to a lack of accountability, some organizations may not be allowed to negotiate bids [3].

Description of the problems

There are illegal problems such as underground trading. From the basic form, tendering is a strict and broad economic activity, which involves many legal system problems. For example, national laws and rules for tendering and procurement of enterprises. However, due to the lack of legal awareness of staff in some companies. There are blind areas of laws and regulations, which are vulnerable to adverse external factors and illegal operation in tendering projects. The main problems are generally as follows: Firstly, tendering enterprises conspire to seek illegitimate interests by maliciously raising the bid price. Second, small groups of tendering companies collude with government or project officials to obtain contracts. Thirdly, the tendering company bribes the leadership and obtains the qualification of winning the bid by improper means.

In addition, some enterprises or government officials have insufficient understanding of the rules and regulations of tendering. Tendering requires good business practices, which are complementary to tendering. The company needs to clear up the rules and requirements of tendering. If the tendering company’s requirements are not clear and clear, it may lead to suppliers providing inappropriate products to bidders. In addition, the understanding of tendering rules enables the buyer to clearly compare suppliers. It is worth the time to understand the tendering specifications [4].

Examples

Southeast Asia Highway Project

From 2000 to 2003, government and project officials colluded with small groups of local construction companies to manipulate tenders in road rehabilitation projects through underground transactions. Project officials deliberately delayed the announcement or publication of tender applications in order to protect the designated candidate companies. They refuse to sell tender documents to external companies, or seek reasons for indifference or falsehood to cancel candidates who have ability to bid. Finally, government and project officials negotiate privately with all companies to select the internal winners from the competing companies. Designated unsuccessful bidders will deliberately submit higher or unresponsive bids to allow the winning bidder to raise his price sufficiently, to finance the necessary bribery and to make considerable profits [5].

Europe, Construction of International Agency Headquarters

One company is engaged in number of industrial services across the UK, including road, civil engineering and environmental services. In the bidding stage, there are some worrying situations. First, generic copying and pasting occur frequently in tenders, often in the wrong place, and are used in the context. In addition, the evidence and case studies used are untested and are not directly related to specific contracts. Researchers found that the company’s answers to certain bidding questions were outdated and repetitive, and the number of replicas used was a big problem. Overall, these findings indicate that the company has not sold its services, capabilities and experience to the evaluators as comprehensively as possible. Their prospects for success are undermined by unclear understanding of the bidding process and rules [6].

Transport Projects in Southeast Asia

In bidding for a transportation project in Southeast Asia, government officials and local companies undertook underground transactions to win the domestic companies. Government officials even threaten uncooperative bidding companies that they will be cancelled any future contracts, which proves the underground operation of government procurement officials.

Two of the brave bidding companies did not care about temptation and threats. They tried to submit real bids. The first company was forced by the government to raise its price by 40%. An employee of the second company was kidnapped and detained in a local hotel on the way to submit a tender until the public bidding meeting was over. The bidder paid a large amount of compensation to bidders who had previously been reluctant to cooperate, including the company whose employees had been kidnapped.

In the case of China, Bangladesh, Vietnam and other countries, the “muscle man” employed by the winning bidder illegally forced the bidding of the rival company by illegal means. Such cases often involve local governments.

Ways of approaching the problems

Establishing Ethical Culture

One of the best things people can do to prevent corruption in bidding is to establish a moral culture in their companies. This will eliminate those who may be inclined to immoral behaviour while encouraging legitimate behaviour. Moral culture needs to be nurtured from the top. Every employee, from the CEO to the organization, must be regarded as honest and responsible in every aspect of their daily life. This requires a moral review of those who hold certain important positions.

A good starting point is to establish a code of conduct for bidding and establish moral policies and procedures. This is helpful for employees to make good decisions and provides a rule to deal with situations where corruption risks may arise. Employing ethical employees and training them to identify danger signals can encourage employees to use proper bidding behaviour. It also conveys the message that your organization will take immoral behaviour seriously [7].

Knowing about bidders

It is very important to work with ethical bidders. Before choosing the right bidders to provide services, systematic background checks should be conducted among all bidders to ensure that their actions are in accordance with the law and morality. Obtain references and check for potential conflicts of interest between companies and bidders. If you can, understand their business culture. For example: Do they care about employee morality? Are their values consistent with your company or organization? In addition. If the tenderer does not want the supplier to subcontract certain services or commodities, it should make it clear in the contract and ensure that his supplier has ability to fulfil its obligations without subcontractors. If the tenderer has no objection to subcontracting, get a list of the companies subcontracted by the supplier and then investigate it. Just because bidders do not deal directly with subcontractors does not mean that their (potential) bad behaviour will not affect bidders [8].

Being ware of Warning signs

Notable warning signs are communication between employees and suppliers (e.g. personal mail), conflicts of interest, supplier gifts, failure of internal control and resistance of employees to last-minute audits. The procurement process is segmented, so no individual can monopolize the whole bidding process. This allows at least two groups of eyes to stare at each step, increasing the likelihood that someone will notice anything that looks “wrong” and act.

When someone violated the code of conduct of a company or organization, make sure that there are penalties for these erroneous actions no matter who violated it. Policies and rules should be used to prevent corruption and to protect the reputation of a company or organization [8].

Discussion

This article introduced the writing of a paper on tendering, bidding process, evaluation of tenders, selection criteria of tenders, bidding methods, pros and cons and so on. It can be found from the case that many problems can be found in bidding. These problems are caused by many reasons, such as corruption, lack of moral standards and unclear understanding of the laws and rules of bidding. So this article puts forward several solutions:

1. Establishing Ethical Culture

Strengthening legal education. Only by strengthening legal education to all the bidding staff so that they know the law and understand the law, can they abide by the law and use it consciously, and use the law to restrain themselves. Otherwise, corruption will easily breed and spread.

2. Researching about bidders

Background investigation of bidders is necessary. This helps to reduce the possibility of bidders making adverse decisions and maintain the image and reputation of the company or organization.

3. Being ware of Warning signs

Supervise the communication between employees and suppliers, and make the whole process of bidding public. Publication of tender announcements, pre-qualification of bidding units, bid opening, bid inquiry and announcement of winning bidding results shall be carried out publicly.

These methods are helpful to prevent the occurrence and spread of various problems in bidding. However, due to time and space constraints, this article does not collect many cases to illustrate the problems encountered in bidding. The main purpose of this article is to elaborate on the main and fatal bidding problems in limited space and to provide effective solutions, which is more effective than studying thousands of cases.

Conclusions

Purchasing products or services needed by enterprises or organizations through bidding and procurement is one of the important measures for enterprises to reduce operating costs and gain more profit margins. However, bidding and procurement involves all aspects, and there are certain complexities in all aspects of the work. A little carelessness will produce certain negative effects, thus affecting the smooth progress of bidding and bidding work. Therefore, the establishment of relevant rules and regulations and supervision system to check the details of bidding and procurement of enterprises has become one of the important measures to ensure regular bidding. Therefore, the government should specify reasonable and clear laws and regulations to regulate the bidding process. Companies and organizations need to strengthen the study and implementation of laws and regulations to improve the ethical standards of companies or organizations in order to avoid the occurrence of improper behaviours. Bidders need to strengthen their professional knowledge and business capabilities, rather than obtain contracts through illegal methods. Further work is to find abundant cases in a broader scope and get more credible information and solutions.

References