Competitive Bidding as an Effective Tool for Vendor Selection
CHAPTER ONE
OBJECTIVES OF THE STUDY
The major objective of this research is to access competitive bidding as an effective tool for vendor selection in Ministry of Works, Imo State, other specific objectives are:
- To identify the vendor selection process used by the company.
- To identify the company’s purchasing policy
- To understand vendor selection method and processes
- To know the needs and objectives of competitive bidding
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Bidding or Negotiating
Identifying potential suppliers is different from reaching a contract or agreement with suppliers. Competitive bidding and negotiation are two methods commonly used when selecting a supplier. Competitive bidding in private industry involves a request for bids from suppliers with whom the buyer is willing to do business. This process is typically initiated when the purchasing manager sends a request for quotation (RFQ) form to the supplier. The objective is to award business to the most qualified bidder. Purchasers often evaluate the bids based on price. If the lowest bidder does not receive the purchase contract, the buyer has an obligation to inform that supplier of the reason it was not chosen for the contract. Competitive bidding is effective under certain conditions:
Volume is high enough to justify this method of business.
The specifications or requirements are clear to the seller. The seller must know or have the ability to estimate accurately the cost of producing the item.
The marketplace is competitive, which means it has an adequate number of qualified sellers that want the business.
Buyers ask for bids only from technically qualified suppliers that want the contract, which in turn means they will price competitively.
Adequate time is available for suppliers to evaluate the requests for quotation.
The buyer does not have a preferred supplier for that item. If a preferred supplier exists, the buyer may simply choose to negotiate the final details of the purchase contract with that supplier.
Buyers use competitive bidding when price is a dominant criterion and the required item (or service) has straightforward material specifications. In addition, competitive bidding is often used in the defense industry and for large projects (e.g., construction projects and information system development). If major nonprice variables exist, then the buyer and seller usually enter into direct negotiation. Competitive bidding can also be used to narrow the list of suppliers before entering contract negotiation.
Negotiation is logical when competitive bidding is not an appropriate method for supplier selection. Face-to-face negotiation is the best approach in the following cases:
- When any of the previously mentioned criteria for competitive bidding are missing. For example, the item may be a new or technically complex item with only vague specifications.
- When the purchase requires agreement about a wide range of performance factors, such as price, quality, delivery, risk sharing, and product support
- When the buyer requires early supplier involvement
- When the supplier cannot determine risks and costs
- When the supplier requires a long period of time to develop and produce the items purchased. This often makes estimating purchase costs on the part of the supplier difficult.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought Competitive bidding as an effective method for vendor selection
Sources of data collection
Data were collected from two main sources namely:
Primary source and Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain Competitive bidding as an effective method for vendor selection. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of Competitive bidding as an effective method for vendor selection
Summary
This study was on Competitive bidding as an effective method for vendor selection. Three objectives were raised which included: To identify the vendor selection process used by the company, to identify the company’s purchasing policy, to understand vendor selection method and processes and to know the needs and objectives of competitive bidding. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of selected SMEs in Lagos state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made managers, secretaries, sale rep and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
The study concludes that Competitive Bidding even if the evaluation score is not based on a technical evaluation, Small and Medium Food Processing Enterprises determination must be made that the technical solution proposed by a bidder is feasible, deliverable and robust, that it is based on reliable technologies, that it meets all minimum technical requirements set and that the costs and financial structure are consistent with the technical solution and it is important to look at the proposed project management.
Recommendation
The study recommends Competitive Bidding in Small and Medium Food Processing Enterprises the buyer then selects from among those submitting packages vendors it will invite to bid on a job. In more routine situations, the buyer will tend to develop a list of trusted suppliers and will only ask those people to bid. Precisely because evaluating proposals can be time-consuming, especially when proposals are for some unusual program and are complex, buyers frequently begin with a formal qualification under which vendors are invited to submit packages defining their experience, personnel, and history of performance.
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