What is a Tender?
A tender is a process where the public sector (schools and hospitals) and private sector invite bids for large project projects that require raw materials, products, and services. A tender invites other businesses to bid to fulfil the contract. In this blog, I will explain the 3 main types of tenders because each tender is different.
An open tender is open to anyone to submit a tender after being advertised publicly. This is the main procedure by both the private sector and the government (public sector). Open tenders are the fairest as they offer equal opportunities to everyone. These tenders are most common in the engineering and construction industry. As anyone can apply, this creates the greatest competition and would create the best outcome for the buyer because they have a lot of tenders to choose from. This gives great opportunities to smaller and less reputable suppliers to win the tender as they may have offered the best value but has less experience in the industry so wouldn’t be selected to offer a tender in selective tenders. However, this increases the number of unacceptable tenders which may waste time and resources when deciding which is the right tender for you. Smaller tenders also offer a higher risk as they have less experience in delivering so a selective tender process may be better as you have invited these bids because you can trust them to deliver the contract.
Selective tenders only allow suppliers to submit tenders through invitation. The main reason that selective tenders exist is that bring a sense of trust and reliability. If you only invite suppliers to bid that you have had success with before, you’re likely going to be successful once more. Even though you will have more offers from open tenders, there is lots more risk involved as you will not have worked with them before. Selective tendering is usually used for specialist or complex contracts although this excludes smaller, less reputable businesses from establishing themselves in a market.
Negotiated tenders are usually used in engineering and construction. Negotiating a contract is important for specialist contracts when competition is minimal. These types of tenders are also used when extending an existing contract. The main benefit of this type of tender is that contractors are part of the project team at an early stage of the project resulting in better communication and results.