Bidding can be defined as a process of setting a price that an individual is willing to pay for buying a product or service (as in an auction) or for selling a product or service (as in project tenders).
It can also be defined as a process to determine the price of a product, and it is mostly prevalent in auctions, stock exchange and real estate. The purpose of bidding is to provide competition and thereby, reduce costs for an owner.
The owner holds a meeting for all bidders to whom he/she has sent a request for proposal or a request for bid. These conferences, which may be discretionary or mandatory, provide an opportunity for bidders to meet the contractor, receive detailed instructions and ask for any proposal-related questions.
Steps of the bidding process from the buyer’s side
Gathering the requirements:
It is obvious that before inviting bids for a project, one has to be clear about what one wants. Hence, the full description of the scope has to be debated upon and finalized.
This step starts with developing specifications of the project. For example, if an organization is required to construct a flyover, the blueprint should be designed. Then, the details of the specifications should be outlined. They include the terms, conditions, roles and responsibilities of individuals to be involved in a project.
The invitations are floated in the market to bid for the project. In some cases, only selected contractors are asked to bid, whereas in some cases, the bid opportunity is available to everyone.
The actual process of bidding is initiated in this stage. This process differs from client to client as per his/her own rules. Bidding documents are presented to the owner for an evaluation.
Reviewing the bids:
The bids received for the project or contract are reviewed for selection. The time period for reviewing the bids depends upon the number of bids received and the complexity of the project.
Awarding the contract:
The selected bid is awarded the contract after the process of screening, weighting and negotiations. While it is a general rule that the bidder with the lowest priced bid is awarded a contract, this rule may have to be exempted in special cases, as factors affecting the selection of a winner of the contract also include technical superiority, supplier’s past record, credentials, qualifications, etc.