There is one major reason for which an organizational buyer would want to get competitive bids. The reason is so as to get the best possible price for whatever goods or services are needed. If no competitive bids are solicited, the organization will not necessarily get the best price. It will only find out about the price that is being offered by one vendor and will have no idea if that is the best price. By taking competitive bids, the organization finds out what the best price each vendor can offer is. It can then get the overall best price for the good or service.
A buyer, acting as a representative of an organization that was preparing to make a purchase of goods or services, might seek competitive bids in order to obtain the best possible price for the transaction. Usually this would mean the lowest price offered for the given goods or services, but that is not always the case.
A competitive bidding process involves the buyer providing the same set of requirements to be met in the purchase to a variety of potential suppliers. Each supplier develops a bid based upon the estimated cost that supplier would face to fulfill each part of the required product. All bids are submitted to the purchaser's agent, who determines if each bid meets the standards and requirements needed for the project and if the total estimated cost is acceptable for the budget of the purchase.
Competitive bidding differs from other pricing strategies in that with bid pricing, a specific price is put forth for each possible job rather than a generic price that applies to all customers.
Competitive bids allow the organization to save money by purchasing for the lowest offered cost that meets the criteria set out for the purchase.