Invitation to tender

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A tender announcement from the Indonesian Ministry of Finance Indonesian tender announcement 2009.png
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).

Contents

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

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

Pre-qualification questionnaires

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

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

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

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

Lowest price

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

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

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

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

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

See also

Related Research Articles

Business-to-government (B2G), also known as business-to-public-administration (B2PA) or business-to-public-sector (B2PS) refers to trade between the business sector as a supplier and a government body as a customer playing a major impact in public procurement. Business-to-government also includes the segment of business-to-business (B2B) marketing known as public sector marketing — a form of business-to-business-to-government (B2B2G) phenomenon, which encompasses marketing products and services to various government levels—local, state/provincial, and national—through integrated marketing communications techniques such as strategic public relations, branding, marketing communications, advertising, and web-based communications.

A request for proposal (RFP) is a form of reverse auction that solicits a business proposal by an organisation interested in the procurement of a service or product from potential suppliers. It is usually part of a complex sales process, and made through a bidding process.

Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual obligation to "procure", i.e. to "ensure" that something is done. When a government agency buys goods or services through this practice, it is referred to as government procurement or public procurement.

The Information Services Procurement Library (ISPL) is a best practice library for the management of Information Technology related acquisition processes. It helps both the customer and supplier organization to achieve the desired quality using the corresponded amount of time and money by providing methods and best practices for risk management, contract management, and planning. ISPL focuses on the relationship between the customer and supplier organization: It helps constructing the request for proposal, it helps constructing the contract and delivery plan according to the project situation and risks, and it helps monitoring the delivery phase. ISPL is a unique Information Technology method because where most other Information Technology methods and frameworks focus on development, ISPL focuses purely on the procurement of information services. The target audience for ISPL consists of procurement managers, acquisition managers, programme managers, contract managers, facilities managers, service level managers, and project managers in the IT area. Because of ISPL's focus on procurement it is very suitable to be used with ITIL and PRINCE2.

E-procurement is a collective term used to refer to a range of technologies which can be used to automate the internal and external processes associated with procurement, strategic sourcing and purchasing.

Strategic sourcing is the process of developing channels of supply at the lowest total cost, not just the lowest purchase price. It expands upon traditional organisational purchasing activities to embrace all activities within the procurement cycle, from specification to receipt, payment for goods and services to sourcing production lines where the labor market would increase firms' ROI. Strategic sourcing processes aim for continuous improvement and re-evaluation of the purchasing activities of an organisation.

<span class="mw-page-title-main">Bid rigging</span> Form of procurement fraud

Bid rigging is a fraudulent scheme in a procurement action which enables companies to submit non-competitive bids. It can be performed by corrupt officials, by firms in an orchestrated act of collusion, or by officials and firms acting together. This form of collusion is illegal in most countries. It is a form of price fixing and market allocation, often practiced where contracts are determined by a call for bids, for example in the case of government construction contracts. The typical objective of bid rigging is to enable the "winning" party to obtain contracts at uncompetitive prices. The other parties are compensated in various ways, for example, by cash payments, or by being designated to be the "winning" bidder on other contracts, or by an arrangement where some parts of the successful bidder's contract will be subcontracted to them. In this way, they "share the spoils" among themselves. Bid rigging almost always results in economic harm to the agency which is seeking the bids, and to the public, who ultimately bear the costs as taxpayers or consumers.

A purchasing cooperative is a type of cooperative arrangement, often among businesses, to agree to aggregate demand to get lower prices from selected suppliers. Retailers' cooperatives are a form of purchasing cooperative. Cooperatives are often used by government agencies to reduce costs of procurement. Purchasing Cooperatives are used frequently by governmental entities, since they are required to follow laws requiring competitive bidding above certain thresholds. In the United States, counties, municipalities, schools, colleges and universities in the majority of states can sign interlocal agreements or cooperative contracts that allow them to legally use contracts that were procured by another governmental entity. The National Association of State Procurement Officials (NASPO) reported increasing use of cooperative purchasing practices in its 2016 survey of state procurement.

In the United States, the processes of government procurement enable federal, state and local government bodies in the country to acquire goods, services, and interests in real property. Contracting with the federal government or with state and local public bodies enables interested businesses to become suppliers in these markets.

In procurement technology, ERFx is an acronym for electronic request for [x], where x can be Proposal (RFP), Quotation (RFQ), Information (RFI) or Tender (RFT). Other pseudonymous acronyms include ITT and PQQ. All relate to a similar activity: a buyer requesting information from potential suppliers for the purpose of evaluation and comparison. Often this is part of a tendering exercise. The more structured this information is, the easier it is to compare the suppliers. For example, it is more effective to ask 20 multiple choice questions than it is to ask 2 essay questions, as long as suppliers have an opportunity to provide commentary to qualify their answers. Therefore, eRFX software should help the buyer to compare suppliers in useful ways – e.g., apples vs. apples.

Industrial marketing or business-to-business marketing is the marketing of goods and services by one business to another. Industrial goods are those an industry uses to produce an end product from one or more raw material. The term industrial marketing has largely been replaced by the term business-to-business marketing (B2B).

Government procurement or public procurement is undertaken by the public authorities of the European Union (EU) and its member states in order to award contracts for public works and for the purchase of goods and services in accordance with principles derived from the Treaties of the European Union. Such procurement represents 13.6% of EU GDP as of March 2023, and has been the subject of increasing European regulation since the 1970s because of its importance to the European single market.

Government procurement or public procurement is when a governing body purchases goods, works, and services from an organization for themselves or the taxpayers. In 2019, public procurement accounted for approximately 12% of GDP in OECD countries. In 2021 the World Bank Group estimated that public procurement made up about 15% of global GDP. Therefore, government procurement accounts for a substantial part of the global economy.

A request for quotation (RfQ) is a business process in which a company or public entity requests a quote from a supplier for the purchase of specific products or services. RfQ generally means the same thing as Call for bids (CfB) and Invitation for bid (IfB).

The term Public eProcurement refers, in Singapore, Ukraine, Europe and Canada, to the use of electronic means in conducting a public procurement procedure for the purchase of goods, works or services.

Government procurement in Russia relates to the public procurement in Russia by all governmental, regional and local authorities. The government procurement in Russia represents a big segment of the budgetary expenses. The volume of government purchases makes about 25 trillion rubles in 2015 and 30 trillion rubles in 2016. The government purchases system is constantly modernized due to changes in legislation, technical components and information.

Construction bidding is the process of submitting a proposal (tender) to undertake, or manage the undertaking of a construction project. The process starts with a cost estimate from blueprints and material take offs.

<span class="mw-page-title-main">Reverse auction</span> Auction with one buyer and many potential sellers

A reverse auction is a type of auction in which the traditional roles of buyer and seller are reversed. Thus, there is one buyer and many potential sellers. In an ordinary auction also known as a forward auction, buyers compete to obtain goods or services by offering increasingly higher prices. In contrast, in a reverse auction, the sellers compete to obtain business from the buyer and prices will typically decrease as the sellers underbid each other.

GSL Mine Counter-Measure Vessels are series of twelve naval ship that were jointly proposed to be built by Goa Shipyard Limited and a yet to be decided TOT partner for the Indian Navy.

MV <i>Glen Sannox</i> (2017) Car and passenger ferry for Caledonian MacBrayne

MV Glen Sannox is a car and passenger ferry constructed at Ferguson Marine in Port Glasgow for the Scottish Government asset company CMAL to lease to its ferry operator Caledonian MacBrayne, planned to serve the Ardrossan to Brodick crossing to the Isle of Arran. It is to be the first of two dual-fuel CalMac ferries, capable of operating on either marine gas oil, or LNG which offers a marked reduction in sulphur, nitrous oxide and carbon emissions. The ship's name, chosen from a shortlist by public ballot on 1 June 2017, recalls an earlier Arran ferry.

References

  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. 1 2 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