Tendering Process

In simple terms, a tender is a formal document that is used by organizations, both public and private, to
invite suppliers to provide goods or services. It‘s an invitation for interested parties to submit their bids,
outlining how they can fulfill the required specifications, at a specified price or rate.
Tenders play a crucial role in procurement as they allow companies to find the best suppliers who can
offer competitive prices and high-quality goods or services. By leveraging tenders, businesses can ensure
a fair and transparent buying process, giving all suppliers an equal opportunity to win the contract.

Difference between tender and procurement

Tender and procurement are terms that are often used interchangeably. But there are some core
differences.
A tender is a key component of the overall procurement process. It acts as a formal document that is used
by organizations to invite suppliers to provide goods or services.
On the other hand, procurement refers to the entire process of acquiring goods or services, which includes
activities such as sourcing suppliers, evaluating proposals, and negotiating contracts.
While tendering is a crucial step within the procurement process, it is important to note that procurement
encompasses a broader scope of activities.

Definition of Tender

A tender is an invitation to bid for a project. Tendering usually refers to the process whereby
governments and financial institutions invite bids for large projects that must be submitted
within a finite deadline. The word tender can also refer to the acceptance of a formal offer, such
as a takeover bid. This form of tendering is the process whereby shareholders submit their
shares or securities in response to a takeover offer.

Is Tender different from an RFT?

The short answer is yes, a tender is different from an RFT. Here‘s how…

RFT: As mentioned, RFT is an abbreviation of Request for Tender. This is the document(s) the
Buyer releases, inviting Suppliers to submit their responses. An RFT will typically include
documents outlining the following:
  Conditions of tender – rules of the tendering process and response
 Form of tender – schedules and details Suppliers need to include in their response
 Scope of tender – details of the good/services the Buyer requires
 Evaluation criteria – specifics of how the Buyer will assess responses
 Conditions of contract – particulars of the legal contract to be awarded to the successful
Supplier

Tender: On the other hand, a tender is the document the Supplier submits in response to the RFT
– essentially an offer to supply the goods/services the Buyer requires.

However, the terminology can be a bit confusing because both words are often used
interchangeably, so you might hear a Buyer say that they ―published a tender‖. What they really
mean is that they‘ve published a Request for Tender, or a similar request related to the supply of
goods/services.

Competitive Tender vs. Non-Competitive Tender

The terms competitive tender and non-competitive tender refer to two different methods
governments use to sell government securities. In the United States, the government
sells Treasury securities, such as bonds, bills, and notes, to help fund the government's
operations. Individual investors, commercial banks, corporations, pension funds, brokers, and
dealers are some of the typical buyers of government securities. In exchange for investing in
these securities, buyers will receive the government's promise of full repayment
at maturity along with a specified interest payment.

There are two ways that investors can purchase government securities—through a competitive
tender and a non-competitive tender. A competitive tender is a bidding process in which large
institutional investors buy newly issued government securities. These institutional
investors compete with one another to purchase the securities in an auction. The investor that
bids the highest will win the auction and can purchase the security at the bid price.

Smaller, non-institutional investors purchase government securities through a non-competitive

tender process. The price for these securities is set by the large institutional investors during the
competitive tender. For example, when the U.S. Treasury auctions securities to large
institutional investors, it will use the winning bid to establish the fair market value (FMV) for
its securities. It will then use this value to set the price that smaller investors will pay during the
non-competitive tender.

Benefits of competitive tendering

Now that we have a basic understanding of what a tender is, let‘s explore some of the benefits of
competitive tendering:
  Cost savings: Competitive tendering allows organisations to get the best price for their required
goods or services. By inviting multiple suppliers to submit their proposals, companies can
compare different offers and negotiate better deals.
 Quality assurance: By inviting suppliers to demonstrate their ability to meet specific
requirements, organizations can ensure that they choose a reliable and competent supplier. This
helps in guaranteeing quality goods or services.
 Transparency and fairness: Competitive tendering promotes transparency as it provides a level
playing field for all suppliers involved. The process is based on objective evaluation criteria,
ensuring fairness and equal opportunities.
 Innovation and continuous improvement: Tendering encourages suppliers to propose
innovative solutions and ideas to meet the buyer‘s requirements. This leads to continuous
improvement and fosters collaboration between suppliers and buyers.
 Compliance: Tenders help organisations ensure compliance with various laws, regulations, and
policies. By following a structured procurement process, companies can mitigate legal and
financial risks.

Types of tenders
Open tenders
The most commonly used type of tenders, open tenders are open for all eligible bidders to bid.
As a regular bidder, always check the ‗Tender type‘ in the tender notice for open tenders.
Open tenders increase competition as more bidders are eligible. However it also keeps the
process fair and gives opportunities to all business to participate in the e-tendering process.
Government civil works tenders, engineering tenders, construction tenders are usually floated as
open tenders to encourage regional and local participation as well.

Also known as ‗competitive bidding‘, open tendering is a procurement strategy that involves
offering bid invites to all potential suppliers or contractors to provide materials or services for a
business project.

It‘s a process that involves advertising the contract opportunity and inviting interested parties to
offer bids for the work.

Compared with ‗closed‘ tendering, the invitation is open to all eligible and qualified vendors
without any additional restrictions or prerequisite criteria.

Open tendering, therefore, promotes fair trade and transparency between clients and vendors. It
also provides equal opportunity for all interested parties to compete in the bidding process.

This also increases competition, which often results in the best value for the business.
For example, in the construction industry, a local government may extend an open tender to
construction firms to complete infrastructure work on a new school or building, upon which all
firms are eligible to bid.

Typical Process for Open Tendering

 Preparation

 Advertisement

 Bidder Registration

 Tender Submission

 Tender Evaluation

 Selection & Award

 Contract Execution

Closed tenders
Also known as selective or limited tendering, closed tender invites are sent to a selected
supplier/vendor group. These vendors have a proven track record and are required to share bid
proposals based on the specific requirements. Though competition is less, it‘s within a specific
group with niche skills and competence, making it often difficult to quote a competitive
quotation.
Closed tendering is an exclusive bidding process of an organization. They invite a select supplier
group to meet a specific company project. Unlike open tendering, this process focuses on setting
qualifications to control quality. The organization screens bidders through various factors.

Closed Tender Procedure

The mechanics of procurement involving a limited number of contractors consists of seven steps:

1. Distribution of invitations to tender to desired contractors.

2. Request for tender documentation by contractors and clarification of conditions.
3. Preparation and submission of tender proposals.
4. The procedure for disclosing tender proposals with the participation of all
potential contractors.
5. Qualification of participants.
6. Negotiations and lower prices.
7. Winner selection.
8. The conclusion of the contract between the customer and the contractor.
Negotiated tenders
Negotiated tendering is commonly used in the construction industry, as negotiation starts from
the tendering process to the dispute resolution stage. Negotiated tendering involves two phases:
the pre-contract negotiations and the post-contract negotiations.

This tendering process typically involves a single contractor but has an allowance for a
maximum of three contractors.

The negotiated tendering process begins when the employer identifies a suitable contractor to
deal with. The employer can select the contractor from their list of preferences or through the
guidance of the professional team.

Single stage tendering

Single stage tendering, also known as traditional tendering, is a straightforward process where
the client invites contractors to submit a complete and final tender in response to a project‘s
requirements and specifications. The key features of single stage tendering include:

 All-in-One Submission: Contractors are required to submit their technical and

commercial proposals together in a single package.
 Competitive Bidding: Contractors compete against each other based on their initial
submission, including price and proposed methodology.
 Fixed Price: The tender price is usually fixed and remains unchanged unless variations
occur during the construction phase.

Two Stage Tendering

Two stage tendering, also referred to as a two-step process, provides an alternative approach that
allows for more flexibility and collaboration between clients and contractors. It involves dividing
the tender process into two distinct stages:

 Stage 1: Prequalification and Initial Tender. In this stage, contractors are prequalified
based on their capabilities, experience, and financial standing. Once prequalified, selected
contractors are invited to submit an initial tender, which typically includes a basic design,
outline specifications, and a price range or target cost.
 Stage 2: Detailed Design and Final Tender. During this stage, the selected contractors
develop the initial tender further, working closely with the client and their design team.
Contractors refine the design, provide detailed specifications, and submit their final
tender based on the revised design and scope. The final tender includes the
comprehensive design, specifications, and a fixed price
 Tender vs Bid vs Quotation vs Contract – Meaning

Term Meaning Differences

Tender Buyer‘s formal invitation for proposal It‘s a formal invitation with all
for the supply of goods and services at information on requirements,
the most value-for-money rate. eligibility, timelines, payment terms,
etc. properly described and detailed
out.
Bid Seller‘s competitive price offer for the Part of the bidding process, where the
supply of goods or services. seller/bidder shares a competitive
price.
Quotation The fixed tender price An estimate (usually fixed) provided
quote (proposed) in response to a by the seller on the cost before
tender for a service or supply of finalizing any formal agreement.
goods.
Contract Formal agreement (legally binding) The final agreement with details on
between the buyer and seller on the the agreed upon SLAs and
terms for providing goods or services. deliverables, binding on all parties.

Who tenders?
Different forms of the tendering process are used by varying types of organisations, in lots of
different industries, across all sectors (public, private and non-profit).
While different forms of the tendering process are used by varying types of organisations in lots
of different industries and across all sectors (public, private and non-profit), tendering is more
common in certain areas.
It‘s particularly common for governments, councils, and non-profit organisations. In most cases
they‘re required by legislation or procurement policies to use the public tendering process for
contracts over a defined value threshold, in order to ensure the process is fair and unbiased.
Tendering is also more common in certain industries, like construction, engineering, information
technology, and business consulting. In general, the tendering process is likely to be used any
time the dollar value of the contract is high, or there is significant risk.

Why do people tender?

Buyers may decide to put a project ‗out to tender‘ for a number of reasons, some of which are:

 To get the best value for money through healthy competition

 To ensure valuable contracts are awarded in a way that is fair and unbiased.
 To minimize risk by using a rigorous screening process
Similarly, there are a lot of reasons for Suppliers to tender, including:

 To build a pipeline of work in advance to gain long-term financial stability.

 To grow revenue – tendering is a lucrative industry, worth approx. $60 billion annually.
 To expand their business by building long term relationships with Buyers

Stages of the tender process

 Advertising the requirement

 Selection Stage / Pre-Qualification Questionnaire (PQQ)
 Evaluation of selection Stage / PQQ
 Invitation to Tender (ITT)
 Evaluation of the tender submissions
 Award of contract

Advertising the requirement

The opportunity may be advertised in a range of ways, but will, at least include the following:

 E-tendering portal
 Official notice if required
 Other websites (e.g., Supply to Surrey)
 Trade publications
 Other social media forums e.g., Twitter

Selection Stage / Pre-Qualification Questionnaire (PQQ)

At selection stage bidders are requested to provide information online within a set timescale.
This gathers information about your business to ensure you meet minimum requirements to
allow the buyer to ensure that your organisation can provide its requirements and to either
progress your tender submission for full evaluation or to shortlist for the Invitation to tender
stage (ITT).

It assesses:

 Capacity
 Capability
 Experience

Supporting information on company finances and relevant experience / references and insurance
information may all be sought at this stage.
 Evaluation of selection Stage

 Evaluates submissions to ensure suppliers progressing for the evaluation of their full
tender submission (in the case of a single stage or open tender) or to shortlist and selects
those suppliers most able to meet the requirements to be invited to the ITT (Invitation To
Tender) stage in the case of a two-stage or restricted tender process.
 Decision communicated to suppliers.

Invitation to Tender (ITT)

Depending on the procedure followed the ITT may be open to all suppliers (open or single-stage
process) where selection and tender information are combined or only those who have
successfully passed the selection stage.

The ITT assesses the offer and the requirements as set out in the specification.

Bidding suppliers will be asked to complete online questionnaires and provide supporting
documentation. All tenders documents are available for download on the portal and will contain
all or some of the following:

 Instructions to tenderers
 Specification
 Pricing schedule
 Contract conditions – defining the relationship between the public body and the
supplier/contractor
 Tender evaluation model – how we intend to evaluate the submission
 Supporting documentation – depending on the contract requirements

Evaluation of the tender submissions

This is completed by an evaluation panel.

Award of contract

 All suppliers that submitted a tender will be informed of the decision to award the
contract via the portal. Decision letters should give details of the successful supplier/s and
score achieved in the evaluation of tender submissions.