Procurement Glossary & Terminologies

Glossary / Letter C / Competitive bidding

Competitive bidding

What is Competitive bidding ?

Competitive Bidding is a procurement procedure wherein buyers request several suppliers or service providers to submit bids for certain goods or solutions. Competitive bidding is typically used for high-value acquisitions. Transparency, equality of opportunity, and the capacity to prove that the results represent the best value are all made possible by competitive bidding.

Advantages

The Request for Quotation (RFQ), Request for Proposal (RFP), and Request for Qualifications(RQFL) are the three formal competitive bidding procedures that are the most successful. These techniques offer:

  1. Increased savings
  2. Precise communication of needs and wants
  3. Equitable access to all qualified vendors
  4. Adherence to the state’s purchase policies and laws
  5. Improved vendor information
  6. Objective award evaluation

IPOs, Mergers, and Acquisitions

A competitive bid may also be used in several other commercial transactions. Initial public offerings (IPOs) and mergers and acquisitions are the two corporate business contexts where large-scale competitive bids may be an initial component of a deal process.

Since a company may want to control the competitive impacts of publicly disclosing the solicitation process, IPO solicitations are typically more covert than conventional goods or services. In an IPO, a private firm may ask underwriters for competitive bids to help with the process. A corporation may open a solicitation for underwriting services and maybe advertise the solicitation if it intends to offer its stock in an IPO.

Regardless, potential IPO underwriters who are interested will develop a proposal outlining their services and include a thorough analysis of the anticipated IPO valuation. The issuer solicits competitive bids from underwriters and awards the contract with the most favorable terms and price to the underwriter.

Competitive bidding can also be a part of mergers and acquisitions. Companies that want to merge with another business or sell their entire company may request competitive bids. An acquiring corporation may create a competitive bid proposal when looking to merge with or buy another company. The bidder would need to describe the price they are willing to pay adequately and, if relevant, the share exchange agreements included in these competing bids.

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