Invitation to tender

Not to be confused with Invitation to treat.
A tender announcement from the Indonesian Ministry of Finance

An invitation to tender (ITT, also known as a call for bids[1] or a request for tenders) is a formal, structured procedure for generating competing offers from different potential suppliers or contractors looking to obtain an award of business activity in works, supply, or service contracts, often from companies who have been previously assessed for suitability by means of a supplier questionnaire (SQ) or pre-qualification questionnaire (PQQ).

Unlike a request for proposal (RFP), which is used when a company sources for business proposals, ITTs are used when a government or company does not require the submission of an original business proposal and is looking solely to award a contract based on the best tender submitted. As a result, whereas ITTs are often decided based on the best price offered, decisions on RFPs may also involve other considerations such as technology and innovation. Both are forms of reverse auction.

At the same time, variants may be requested in an ITT, which allow suppliers to offer proposals which differ in non-essential terms from the supplies or services requested. The European Commission has suggested that requesting variants is one way in which suppliers can be asked to offer more socially responsible solutions to meeting public needs.[2]

Public sector organisations in many countries are legally obliged to release tenders for works and services. In the majority of cases, these are listed on their websites and traditional print media. Electronic procurement and tendering systems or e-procurement are also increasingly prevalent. The European Union states that 235,000 calls for tender are issued annually using its Tenders Electronic Daily system, including those issued by countries in the European Economic Area and beyond.[3]

The term "notice inviting tenders" (NIT) is often used in India.[4] The European Union's institutions often use the terms "calls for tenders" and "calls for expressions of interest".[5]

Types

[edit]

Open tenders (also known as open calls for tenders or advertised tenders) are open to all vendors or contractors who can guarantee performance. Restricted tenders (also known as restricted calls for tenders or invited tenders) are only open to selected pre-qualified vendors or contractors. The tender stage may form part of a two-stage process; the first stage comprises issuing an expression-of-interest (EOI) tender call,[6][7] resulting in a shortlist of selected suitable vendors. The reasons for using restricted tenders differ in scope and purpose.

Sole source tenders involve only one potential supplier being invited to submit a tender. A sole source tender may be used where there is essentially only one suitable supplier of the services or product.

Tenders have a bid preparation period available to bidders. Research has shown that the length of this period might affect the number of bids and, as a result, the level of competition among tenderers.[8]

Process

[edit]

Pre-qualification questionnaires

[edit]

Supplier questionnaires or pre-qualification questionnaires ensure that potential suppliers are all asked the same information when assessing their suitability to be invited to tender or to have their tenders evaluated. Some organisations issue a standard pre-qualification questionnaire, for example the UK government has developed standard core PQQ questions which have been revised several times and are mandated for use across government, and has also stipulated that PQQs should not be used by central government contracting bodies when procuring goods or services valued less than the threshold values set by UK procurement legislation.[9]

Tender box

[edit]

A tender box is a mailbox used to receive the physical tender or bid documents, or a digital equivalent.[10] The tender box is not implemented in every country around the world.[where?]

Tender validity date

[edit]

A tender validity date is a date until which a tenderer commits to keeping their prices (and other tender details) open for acceptance (or otherwise) by the client. Such a date is usually included in a form of tender,[11] either as a specified date or as the termination of a specified period from another key tender date. For example, in tendering for gym equipment in 2013, West Dunbartonshire Council required tenderers to accept that "Your tender shall remain open for acceptance for ninety (90) days from the date for return of tenders indicated above, or any subsequent date notified to you by us. Your tender may be accepted by us at any time during this period."[12]

Tender evaluation

[edit]

There are several different methods for available for tender evaluation, which are related to the proposition method asked by the procurement management:

Lowest price

[edit]

This method is the simplest and oldest of all. Under this the procurement contract is awarded to the best price. Some relevant methods are these of examining the overall or in parts and in total discount in a given price list or on a given budget. One of the options available under rules applicable to government procurement in the European Union (EU).[13]

Most economically advantageous

[edit]

This is applicable to proposals of different quality within the limits set. Under this the proposals are graded according to their price for value and the contract is awarded to the one with the best grade. Similar to this is the grading of the proposals according to time, making the proposals needing less time of implementation seem more valuable. One of the proposed for public tenders within the EU.[14]

Mean value

[edit]

The contract is awarded to a bid close to the mean value of the proposals received. This may apply to procurements where numerous proposals are expected and there is a need for a market-representing value.[15]

Exclusion of the extremes

[edit]

Under this method the proposals that are deviating the most from the mass of the proposals are excluded and then the procedure continues with one of the above methods.[15]

There are also many variants and/or combinations of these main methods. Upon completion of tender evaluation it is usual to award a contract.

Post-tender negotiation

[edit]

Post-tender negotiation involves negotiation between an intending buyer and seller after a seller's tender has been submitted.[16]

See also

[edit]

References

[edit]
  1. ^ Consular reports: Commerce, manufactures, etc, Issues 164-167. United States. Bureau of Foreign Commerce, United States. Dept. of Commerce and Labor G.P.O., 1894. Pg 361
  2. ^ European Commission, Directorate-General for Employment, Social Affairs and Inclusion and Directorate-General for the Internal Market and Services, Buying Social: a Guide to Taking Account of Social Considerations in Public Procurement, Publications Office, 2011, accessed 30 May 2023, pages 30-31
  3. ^ European Union, TED: Tenders Electronic Daily, accessed 13 June 2020
  4. ^ Telecommunications Consultants India Limited, Notice Inviting Tenders (NIT), accessed 6 March 2019
  5. ^ Council of the EU, Procurement at the General Secretariat, last reviewed on 25 October 2022, accessed 9 May 2023, reproduction authorised provided that the Council of the EU is always acknowledged as the original source of the material.
  6. ^ Urizar, Mark (24 July 2013). The Project Manager's Checklist for Building Projects: Delivery Strategies & Processes. Xlibris Corporation (published 2013). p. 236. ISBN 9781483662954. Retrieved 2015-12-03. The Expression of Interest (EOI) tender call is to inform tenderers of the context of the project, nature of proposed appointment and submission requirements. The aim of the EOI process is to shortlist the contenders who may be suitable for the appointment.
  7. ^ Compare: Herbst, Douglas; Edmondson, Samuel A. (2012). "Design-Build Procurement Approaches". In Shorney-Darby, Holly (ed.). Design-build for Water and Wastewater Projects. American Water Works Association. p. 73. ISBN 9781583218181. Retrieved 2015-12-03. An Expression of Interest (EOI) is a document that an owner can issue prior to the release of the RFQ or RFP. [...] An EOI [...] would request basic information about the design-builder, solicit comments on the requested project features, and ask for an EOI for the project from the practitioners.
  8. ^ Pliatsidis, Andreas Christos (2022-11-01). "Impact of the time limits for the receipt of tenders on the number of bidders: evidence from public procurement in Greece". Journal of Public Procurement. 22 (4): 314–335. doi:10.1108/JOPP-05-2022-0025. ISSN 2150-6930. S2CID 253312170.
  9. ^ Crown Commercial Service, Procurement Policy Note – Use of Pre-Qualification Questionnaires: Action Note 01/12 10 February 2012, accessed 5 August 2021
  10. ^ Electronics Corporation of India Limited, User Manual - Tender Box Opening, Version 2.0, accessed 5 August 2021
  11. ^ Designing Buildings Wiki, Form of tender, accessed 1 June 2020
  12. ^ West Dunbartonshire Council (2013), INVITATION TO TENDER FOR Tender Ref: 1314-59, To Supply, Deliver, Install and Commission Gym Equipment, with Training and Marketing support provision, and 5 years Maintenance Service FOR West Dunbartonshire Leisure Trust, accessed on 8 October 2024
  13. ^ 2004/18/EC article 53§1b of the Directive on the coordination of procedures for the award of public works
  14. ^ 2004/18/EC article 53§1a of the Directive on the coordination of procedures for the award of public works
  15. ^ a b Assaf, S., Bubshait, A. and Aitah, R., Bid-awarding systems: An overview, Cost Engineering, August 1998; 40, 8; ABI/INFORM Global, p. 37, accessed on 17 October 2024
  16. ^ Chartered Institute of Procurement & Supply, Tendering and Post Tender Negotiation, accessed 4 June 2018

Further reading

[edit]
Retrieved from "https://en.wikipedia.org/w/index.php?title=Invitation_to_tender&oldid=1253535021#Tender_evaluation"