source : purchasing-procurement-center.com
No Bid Contracts – Simple And Quick But Can Be Problematic
No bid contracts – seems a contradiction of terms and their other name
“sole source contract” sums it up even more. It is a contract where
only one company is being considered for the contract to undertake the
This usually happens when there is only one company that is available
or able to undertake the work. Large government contracts for ships,
submarines, army tanks etc. are commonly no bid contracts.
No bid contracts are sometimes controversial and should be used sparingly. They are common when:
There are legal or security reasons why negotiations with only one company should be undertaken.There is a need for great speed. Sole or single source contracts are much faster to negotiate and award
than a conventional bidding environment which may take many months to
complete.It is in the public interest. An example of this would be if a national asset such as a car
manufacturer or bank needed to be sold, bailed out or remodeled and only
one possible purchaser had been identified.
The USA has a law colloquially called “Cronyism” which
makes no bid contracts particularly difficult in that country and there
are several investigations currently under way on some these awarded
They seem to be particularly popular in defense and
building and many large companies have won this type of contract, simply
on their reputation and contacts in high places.
Sometimes the particularly unappealing contracts are
awarded on the basis of the receiving company having little option but
to accept the contract. In this case, the government usually offers
other deals, loans and rewards for undertaking the project.
This may be the case where a company is asked to merge
with or bail out another company in the same industry that is having
financial and operational problems. In this case loans and financial
assistance may be offered. This option can often save a country’s key
assets. This was quite common at the height of the worldwide financial
and banking crisis in 2008.
Great care must be taken to ensure that these no bid
contracts are fair and seen to be fair and that no inducements are
received or offered.
Return from No Bid Contracts to Tender Management
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