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COMPETITIVE BIDDING AS AN EFFECTIVE TOOL FOR VENDOR SELECTION

ABSTRACT

This work presents a competitive bidding as an effective tool for vendor selection in different corporate environment using a multiple exploratory case study approach and the 150 9000 standards. The corporate environment examined was Ministry of Works Imo State. This research indicates that the vendor performance measurement criteria most commonly used by these industries are quality, delivery and service. Also, depending on the corporate environment of these industries, the importance of these performance metrics can vary in general, quality is the most important criterion in the organizations studied. Delivery is a critical vendor’s performance measure in the Ministry of Works, since the reliability of the vendors is affected in case of delivery failure in this sensitive market. Finally, these organizations continuously review and implement effective quality systems following the rigorous 150 9000 series of standards and most companies have developed in house procedures and software for the vendor selection process. 

CHAPTER ONE

1.0 INTRODUCTION

Traditionally organizations have been divided in operative function such as marketing, planning, production, purchasing, finance, etc supply chain, is a strategy that integrates these functions creating a general plan for the organization, which satisfies the service policy, maintaining the lowest possible cost level due to the incredible competition environment that they are exposed to. A supply chain is a network of departments, which is involved in the manufacturing of a product from the procurement of raw materials, to the distribution of the final product to the customer. Purchasing commands a significant position in most organizations since purchased parts, components and supplies typically represents 40 to 60 percent of the sales of its and products (Ballow, 1999). This means that relatively small cost reductions gained in the acquisition of materials can have a greater impact on profit than equal improvements in other cost-sales areas of the organization.

There has been an evolution in the role and structure of the purchasing function through the nineties. The purchasing function has gained great importance in the supply chain management due to factors such as globalization, increased value added in supply and accelerated technological change. Purchasing involves buying the raw materials, supplies, and components for the organization. The activities associated with it includes selecting and qualifying vendors, rating vendor’s performance, negotiation contracts, comparing price, quality and services, souring goods and services, timing purchases, selecting terms of sales, evaluating the value received, predicting price, service, and sometimes demands changes, specifying the form in which goods are to be received, etc. 

A key and perhaps the most important process of the purchasing function is the efficient selection of vendors, because it brings significant savings for the organization. The objective of the vendor selection process is to reduce risk and maximize the total value for the buyers, and it involves considering a series of strategic variables. Among these variables is the time frame of the relationship with vendors, the choice between domestic and international vendors, and the number of vendors that is choosing between single or multiple sourcing and the type of product. 

Some authors have identified several criteria for vendor selection such as the net price, quality, delivery, historical vendor performance, capacity, communication systems, service and geographical location, among others ( Dickson, 1966; Dempsey 1978; Weber, Current and Benton 1991). These criteria are a key issue in the vendor assessment process since it measures the performance of the vendors. In general this research tends to provide empirical evidence of the criteria and the procedures for the vendor selection process used in different corporate environments. Also, it plans to evaluate if these processes follow rigorous regulations as the 1500 9000 standards. Finally, identify the suitability of the Analytical Hierarchical Process (AHP) to assist in decision making to resolve the vendor selection problem.

1.2 STATEMENT OF PROBLEM 

The problem of competitive bidding and its implications in public sector contract management and administration had been identified by many as not only enormous but complex. These problems have become more complex now that there is serious need on the part of our various governments to provide more services with little fund and the issue of corruption in our public lives. The negligent on the part of the various authorities as to ensure a uniform codes/standard of practice or and professional ethics of conduct all have made a complete mess of our public sector tendering hence our public sector contract management and administration.

1.3 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:

1. To identify the vendor selection process used by the company. 

2. To identify the company’s purchasing policy 

3. To understand vendor selection method and processes

4. To know the needs and objectives of competitive bidding.

1.4 RESEARCH QUESTIONS 

1. What type of vendor’s selection process is used by companies?

2. What are the purchasing policies of the organization under study?

3. What are the vendor selection method and process of the organization?

4. To what extent has the vendor process contributed toward the growth of your organization?

5. What are the needs and objectives of competitive bidding?

1.5 SIGNIFICANCE OF THE STUDY 

The significance of study such as this cannot be overemphasized. Based on this fact therefore, this study will provide reliable information for vendor selection in different corporate environment.

1. It provide explanatory approach of evaluating vendor selection process using the 150 900:2000 standard. 

2. It will also help other researchers.

1.6 LIMITATIONS OF THE STUDY 

The limitations of the study lie in the under-listed constraints: 1. Time and duration of this project work was too short and this adversely affected the research work. 2. Lack of finance was also one of the limitations faced by the researcher during the time of conducting this research work. 3. Most people interviewed were ignorant of what is called research, so they failed to give elaborate information about their organization despite the fact that the researcher told them that all information they give would be confidential. 4. The researcher found it very difficult to find good or accurate records and qualified personnel from the focus department, lack of published journal, bulletin, book relating to this field was completely absent in the Federal Polytechnic Nekede Library, so I need to run around to many places for data collection on the study.

1.7 SCOPE OF THE STUDY 

The scope of this project is to compare the vendor selection process across and within companies using both qualitative and quantitative approaches. The focus is limited to companies from different manufacturing sectors in USA and Ruerto rica, including pharmaceutical, agricultural equipment, and plastic organizations. Also , the focal point process of this research is the selection and evaluation of vendors.

1.8 DEFINITION OF TERMS 

Competitive Bidding: Competitive bidding process is a formal process to identifying and request the products and services you need so that potential services providers can review those request and submit bid for them.

Vendor: A supplier, in a supply chain is an enterprise that contributes goods or services in a supply chain.

Procurement: Procurement is the acquisition of goods, services or works from an outside external source.

Bidding document: This is a document which contains information on what the contract to be undertaken by the supplier required. 

Tendering: It is a process whereby supplier are also to submit their quotation in which the lowest bidder is chosen.

Quantity: This is the amount of goods to be purchased at specific period of time.

Contract: This is an agreement between two or more persons which is intended by them to have legal consequences. 

Lead time: This is the interval between when a need is perceived ad the fulfillment or satisfaction of that need. 

Bidder: Potential participant or participant in public procurement proceedings. 

Bid Security: Means any guarantee by a bank or other relevant institution to allow the prospective bidder to participate in tendering.

Quotation: A form statement prepared by a contractor/supplier to his customers that includes cost estimates specification and other key information about an agreement between the two partners. 

Negotiation: This is a process that involves communication discussion and bargaining with the objective of reading an agreement.

Procedure: This is a system of performing a work, service etc.

Specification: This is a detailed description of the materials, parts and components used in making a product. 

Quality: This simply means fitness for use

Purchaser: The procuring entity is a purchaser of goods, works and consultant services. 

Tender Committee: means a committee established by the procuring entity to assist the procurement unit, in the bid opening, evaluation and recommend for award.

Successful bidder: Means a bidder whose offer has been accepted after being considered the most competitive both financially and technically.

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