Colliers High Stool, a Purchasing Case Study

Key Problem: Improper and incomplete bidding policies and procedures by the purchasing department.

Case Summary: In regards to purchase of 850 high stools of style ‘carter 816' there were no proper bidding procedures followed by the purchasing department. The closing date was not strictly followed. Revised bids were accepted before and after the actual closing date (April 23). Extending the closing date by favoring two suppliers, who are already supplying to Colliers. Due to the pressure from other suppliers, closing date of the bid was extended to May 07. Three different quotes were accepted from 8 suppliers (except Supplier-C) from the original bid to May 07. Instead of doing a cost estimate before the bid, the supply manager with the help of engineers, did the cost estimate after May 07. Supplier-D was given on the basis of his past experience with the company. Supplier-C was not informed about the acceptance of new bids. Supplier-F feels that he deserves the business as he was the lowest as per the original bid.

Confidentiality

The confidentiality, which is key to a bidding process, was never maintained by the supply manager, by revealing they were ‘out of line' and ‘fairly competitive' etc ten days before the actual close date. The bidding information should not be revealed to any supplier till the actual close date. This will ensure to all the suppliers that the company is following a proper bidding process and will increase the confidence level and help maintain a good rapport with all the suppliers. Even it will help in our future businesses with other suppliers, who are actually not qualified.

Specifications

"Carter 816 or equal" is vague. May be more clear specifications can be used instead of ‘or equal'. By mentioning ‘Carter 816' we are restricting the number of suppliers to those who have ‘carter 816'. Instead, we can just mention the specification without a particular brand name to increase the number of suppliers, who would like to bid to have better price.

Criteria for contract award

Supplier-D was awarded the contract based on the past experience, which is totally against the bidding procedure and policy. If they wanted to give the business to Supplier-D, instead of going into a bidding process, they must have called Supplier-D and negotiated the rates with them. The bid must be awarded purely on the lowest priced supplier, based on the original closing date as there were no other terms and conditions (warranty, quality, and delivery) mentioned in the bid.

Bid Closing date and time

Bid closing date was changed twice, first extended for one more day then again extended to May 07. Bid closing date should never be changed or extended. The suppliers give their best quote at the first time for the best quality. If we change the closing date and allow the suppliers to change their quotes, we might end up awarding the contract to a wrong supplier, who will compromise the quality of the product just to get the business.

Usefulness of the engineering study

The engineers made the cost estimate after the bid closing date, which is not at