Far too many businesses still stick to the principles of competitive tendering (bidding), on the basis that it ensures better “value for money” by forcing suppliers to compete. In reality, it is a deeply flawed approach to procurement.
Although it may offer transparency and a low-cost solution, competitive tendering leads to suppliers cutting costs to ensure a satisfactory profit margin. This implies the use of cheaper labour and materials. Safety standards are often jeopardised and the buyer may end up with inferior, poor quality products or services.
I could refer to several egregious examples of this, but a particularly salutary one is the story of the Space Shuttle Challenger disaster:
Click here for an analysis of the Space Shuttle Challenger disaster.
In a world where striving for success is everything, we lose sight of the meaning of value. In the end, making a product or service cheaper and cheaper risks making it worthless.
