A tender is a proposal that offers to provide goods or services for a particular price and for a fixed period. The organization identifies the needs, specifies the tender requirements, evaluation criteria, and the most suitable type of tender. Some organizations use prequalification to define qualified tenderers. An Invitation To Tender will be sent to the tenderers to invite them to submit a formal and detailed offer to supply the required services or goods. Tender proposals that received before the deadline will be evaluated. Organization will hold a meeting with the potential tenderer before the final selection. The tender will be awarded to the best value-for-money tender proposal.
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Specifying Tender Requirements
Conducting an effective and efficient tender process requires good preparation and planning. The organization needs to determine a clear procurement objective, understand the nature of the supplier market, and develop a tender strategy for market engagement as it is the best way to reach out to potential tenderers and ensure competition and contestability. Tender planning and the timeline of procurements will vary according to the situation. The organization needs to review the procurement progress scheduled dates from time to time and try to stick to them as much as possible. The organization needs to define the important points such as the general requirements and specifications, the appropriate type of tender, essential requirements, tender regulations, evaluation criteria, type of contract, and the tender procedure.
Prequalifying Vendors
Prequalification is an initial selection process to screen the vendors based on a set of pre-determined standards to ensure the vendors have the ability and meet the required baseline to provide goods and services. The vendors that fulfil the prequalification criteria will be invited to submit the tender proposals. Prequalification helps to reduce the administrative burden and risk of contract failure, streamline and simplify the supplier selection process, and lower the risk and cost. An organization often uses prequalification if the purchase incurs a higher amount, the risk of the project is high, or when there is a large pool of vendors to choose from.
There are several types of tenders used in the market. The organization will select the type of tender based on the nature of the contract. In an open tender, everyone has an equal chance, any company is allowed to submit a tender. Hence, an open tender has the greatest competition among the tenderers, and it offers new opportunities for new vendors. The evaluating and awarding processes take longer as they often require a pre-qualification questionnaire (PQQ) and a more comprehensive tender response to be returned. A selective tender is more restrictive as it allows only the eligible vendors to submit a tender. Selective tendering is more suitable for complex or specialist contracts. The process of the selective tender is faster and the cost is lower compared to the open tender as it eliminates the pre-qualification requirements and directs the vendors to the main tender. The selective tender can be either single-stage or two-stage. A negotiated tender is used when there is only a single supplier who is well suited for a specialized contract or to extend an existing contract. Negotiated tenders are widely used in the construction and engineering industries. An invitation to tender (ITT) is the first step in tendering. It is a formal procurement document sent by the organization either via email, by mail, or through an online portal, to invite the vendors to submit the tender proposal. ITT will consist of an invitation letter, a tender form, a scope of work, specifications, timelines, tendering procedure, and evaluation criteria.
Receiving and Appraising Tender Submissions
The vendor will submit a tender proposal that consists of a tender return slip, company background, a complete proposed technical specification, pricing proposal, and other documents required by the organization. A Tender Opening Committee will take charge of the tender opening. Tender proposals will be accepted by the committee only if they are submitted before the deadline specified in the ITT. Any late tender will be rejected, and the tender documents will remain unopened. The tender received will be opened in the presence of the tenderer or appointed representatives. The tender proposal will be rejected if it does not meet the requirements. No amendment is allowed. In the single-stage one-envelope bidding procedure, the vendor will submit the price proposal and the technical proposal in one envelope. In the Single-Stage Two-Envelope Bidding Procedure, the vendor will submit two sealed envelopes that contain a technical proposal and a price proposal. Both proposals are enclosed in a single outer envelope. Only the technical proposals will be open and evaluated after the deadline of the tender, and the price proposal will remain unsealed. Proposals that do not meet the tender specifications will be rejected. The price proposals will be opened in public and evaluated if the technical proposal is passed.
In the two-stage bidding procedure, the vendor will submit a technical proposal. The committee will evaluate the technical proposal. Any inadequacy, unnecessary provisions, or inadequate technical features will be pointed out to the vendors, and they will be allowed to revise the technical proposal according to the organization’s requirements. The vendors will be invited to submit a price proposal after their technical proposal is approved, while those vendors that are unable to meet the technical requirements will be denied.
Analyzing and Evaluating Tender Submissions
Tender evaluation will be conducted by the evaluation committee, which consists of both technical and administrative personnel. The tender evaluation must be conducted according to the procedure outlined in the tender documents and must be kept confidential all the time. The committee will start the tender evaluation with the preliminary examinations for responsiveness to formal qualification requirements. The tender proposal will be reviewed to ensure it meets the required tender criteria. The unfulfilled tender documents will not be considered for the next stage, which is technical evaluation. The committee will assess the technical specification requirements, vendor’s past experiences, delivery schedule, after-sales services, warranty, and other requirements that are indicated in the tender proposal. Tender proposals that do not fulfil the technical requirements will not be considered for the next stage, which is price evaluation. The committee will evaluate the price offered, other factors like preliminary sums and discounts will also be considered.
Award criteria are used to define the best proposal and award a contract among the qualified tenders. The lowest-price criterion and The Most Economically Advantageous Tender (MEAT) are the most common award criteria used by organizations. The lowest-price criterion is the straightforward tender award criteria whereby the contract will be awarded to the lowest vendor. However, unrealistic offers can result in a financial inability to carry out the required work and cause the risk of the vendor’s poor performance.MEAT criterion is used when quality is important as it identifies the ideal combination of cost-related and non-cost-related factors to meet the tender requirement. MEAT evaluates price, quality, technicality, and sustainability. The vendor that offers the best value for money will be awarded.
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References
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