Purchasing refers to the process of ordering and receiving goods and services. It is a part of the bigger procurement process. Generally, purchasing refers to the process involved in ordering goods such as request, approval and creation of a purchase order record and ultimately the receipt of goods. Tendering is part of the procurement process that can create a win-win solution for the purchaser and supplier itself. Before deciding to bid for a tender, one must have a strategy in place, which defines how one approaches a bid, as well as options for what one will and will not agree to and the checkpoints to ensure that resources in writing the bid are used effectively.
Tendering is the process by which bids are invited from interested contractors to carry out specific packages of construction work or supplying of materials. The two most commonly used methods of tendering are single-stage selective tendering or two-stage selective tendering.
Single-Stage Selective Tendering
Single-stage selective tendering involve the invitation of tenders from firms on a pre-approved or ad hoc list, chosen because they meet certain minimum standards in general criteria such as financial standing, experience, capability and competence. The competition element of the tender is provided on the basis of price and quality.
Two-Stage Selective Tendering
The two-stage process, the contractor becomes involved in the planning of the project at an earlier stage, so the tenders are submitted on the basis of minimal information, and in the second stage the employer’s team will develop the precise specification in conjunction with the preferred tenderer. This method is favoured in more complex projects, where the contractor may have significant design input.
Open Tendering Technique
Open tendering allows anyone to submit a tender to supply the goods or services that are required. Generally, an advert will be placed giving notice that the contract is being tendered, offering an equal opportunity to any organization to submit a tender. On larger projects, there may then be a pre-qualification process that produces a short-list of suitable suppliers from the respondents expressing interest in the contract. This short list will then be invited to prepare tenders. The selection of a short list can include pre-qualification questionnaires and interviews.
Open tendering has been criticized for being a slow and costly process, attracting tenders or expressions of interest from large numbers of suppliers, some of whom may be entirely unsuitable for the contract and as a result it can waste a great deal of time, effort and money. However, open tendering offers the greatest competition and has the advantage of allowing new or emerging suppliers to try to secure work and so can facilitate greater innovation. The number of firms tendering can be reduced (ideally to a maximum of six) by a pre-qualification process, and if this uses a standard pre-qualification questionnaire, then the time wasted by unsuccessful applicants can be minimized.
Selective Tendering Technique
Selective tendering only allows suppliers to submit tenders by invitation. A pre-selected list of possible suppliers is prepared that are known by their track record to be suitable for a contract of the size, nature and complexity required. They might then be asked if they would be interested in tendering for the contract, and then based on the responses received, a number of them invited to tender (generally no more than six). From the tenders received, a preferred tenderer is selected based on criteria such as price and quality and negotiations entered into.
Selective tendering may be particularly appropriate for specialist or complex contracts, or contracts where there are only a few suitable firms. Selective tendering will tend to be faster than open tendering, and can be seen as less wasteful, as there is no pre-qualification process as part of the tender procedure itself, and only suppliers that are known to be appropriate for the proposed contract are invited to prepare tenders.
Restrictive open tendering Technique
Unlike open tendering, restricted tendering only places a limit on the amount of request for tenders that can be sent by a supplier or service provider. Because of this selective process, restricted tendering is also sometimes referred to as selective tendering. Like open tendering, restricted tendering is considered a competitive procurement method, however, the competition is limited to agencies that are invited by the procuring team. The procuring entity should establish a set of guidelines to use when selecting the suppliers and service providers that will be on the invitation list. Randomized selections will not bode well for procuring. This method is selective to find the best-suited and most qualified agencies to procure goods and services from. It’s also employed as a way for the procuring team to save time and money during the selection process.
Serial Tendering Technique
Serial tendering generally involves the preparation of tenders based on a typical or notional bill of quantities or schedule of works. The rates submitted can then be used to value works over a series of similar projects, often for a fixed period of time following which the tender procedure may be repeated.
Serial tendering may be used where the client has a regular programme of works that they would like to be undertaken by a single contractor, often minor works, repetitive works (such as housing) or maintenance work.Serial tendering can reduce tender costs, and may encourage suppliers to submit low rates to secure an ongoing programme of work. However, it may be seen as anti-competitive and exclusive.
Negotiated Tendering Technique
Negotiated tendering occurs when the client approaches a single supplier based on their track-record or a previous relationship and the terms of the contract are then negotiated. Negotiating with a single supplier may be appropriate for highly specialist contracts (where there may be a limited number of potential suppliers), or for extending the scope of an existing contract.
It can give the client the confidence of working with a supplier they already know, can reduce the duration and costs of tendering and can allow early supplier involvement. Negotiated tendering can be seen as anti-competitive and exclusive, with the potential for ‘cosy’ relationships to develop between the buyer’s and the supplier.
Tendering and post tender negotiation are fundamental purchasing and supply management skills which must be executed professionally and ethically in order to obtain best value for money. This document has described the principles and processes of good practice in respect of the above but does not intend to be prescriptive. In particular, purchasing and supply management professionals in the utilities and public sectors must ensure compliance with the EC procurement rules.
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