Tuesday 20 October 2015

Negotiation or competitive tendering - which is best?

Whilst I'm not the greatest fan of first past the post/competitive tendering, the market will at least give you a 'price'. You know where you are and can make a judgement accordingly. The trouble is the price could be low for various reasons - bid error, start up in new sector, new client and so on. But, where the price is too low, will the buyer actually get everything they bargained for or will the seller cut corners in delivery? In preparing the price, how well do bidders in the short period they have to tender, truly grasp the project and its risks? These are the main issues.

With negotiations, hopefully this will allow adult conversations to thrive on deciding best for project, problem solving and optimise the scope/price accordingly. But there's always this nagging doubt that the buyer is paying a premium for negotiation as it's uncompetitive. I like how the sellers eyes are opened so that they get their head around risk and are encouraged to price/programme accordingly. I also like how the seller can open the buyer's eyes to the whole life cost of technical requirements. Every chance is offered up in negotiations that really is not readily available in the world of competitive bidding.

That said, is there a place for both or does one size fit all? Ignoring Ojeu requirements (as that's tail wagging the dog stuff), what works best in people's experience or does it just depend?