Competitive Bidding
The term “competitive bidding” is used in a number of different contexts, but generally refers to the process by which companies or government entities solicited bids from potential vendors or contractors. The goal of competitive bidding is usually to secure the best possible price for goods or services, although other factors such as quality and delivery timeframe may also be considered.
In some cases, companies may issue a request for proposal (RFP) instead of issuing a formal invitation to bid. An RFP is typically used when the requirements of the project are more complex and/or subject to interpretation, and allows interested parties to submit their ideas for how the project should be completed.
Competitive bidding can be accomplished through a number of different methods, including sealed bids (in which all bids are submitted confidentially and opened at the same time), open auctions (in which bids are submitted openly and in real-time), or reverse auctions (in which prices are driven down through successive rounds of bidding).