Bidding Wars
Bidding wars are more likely to occur when there are two or more than two buyers interested to purchase an item. The interested parties then engage in competition to increase the price offers so as to be selected as the owners of the new commodity. In this instance United Airlines awarded the tender to Indianapolis (Lewis, 2007).
One of the major economic implication of the move by United Airlines is to bear the losses as a result of being awarded the bid, the state of Indianapolis is therefore at risk of running into losses as it had purchased the tools and equipment required for the running of the air-craft repair base. The state had spent $3110 million of the taxpayer’s money in the hope that the construction of the airbase will bring back the returns and profits.
United Airlines after being faced with bankruptcy risk sort to outsource their services which means that they aimed to minimize costs incurred during the financial crisis. The relocation of the airlines also meant that the 7500 jobs that had been created were lost and many people were left jobless. Legally, United Airlines were obliged to notify the bidders of their financial crisis so that the bidder would have had the opportunity to make an informed decision regarding the financing of the project.
Having already received the contract award, Indianapolis is obliged to complete the job assigned to them as per the tender agreement. However, the tax money spent from the tender bid will be the responsibility of the state. However, the state is allowed to contest for compensation by the bidding firm United Airlines (Kennedy, 2007).
The local citizens should be allowed to vote on the offers made in tenders. This is because the money for the bidding is from the tax payers, i.e. the citizens of the state/region from where the tender is being placed. It is therefore expected that unrealistic bidding fees such as the one made by Indianapolis would have been contested by the citizens of that region. Firms placing bids should also be limited on the kind of incentive they offer to present to the winning bidder as it encourages use of millions of taxpayers money and encourages unfair competition to those region that are not financially better placed to compete with the otherwise well off region (Kennedy, 2007).
Reference
Kennedy, G. (2007). Strategic negotiation. Gower Publishing, Ltd., 2007
Lewis, H. (2007). Bids, Tenders & Proposals: Winning Business through Best Practice.
Kogan Page Publishers
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