Tender and Bidding | Process of Tendering in Construction

The process of tenders or tender bids is a system extensively followed in the construction industry. However, it’s not limited to only construction. In fact, it’s an important part of the public procurement process of government and private entities.

Construction tenders, in particular, include submission of proposal or tender in other terms. This bidding may be to undertake construction projects or to manage them. Generally, such tenders start with the process of cost estimation, followed by making blueprints and material selection.

What is a Tender?

In the simplest terms, tender is a process where government entities or private organizations (called contracting authority) invite another entity or organization (a service provider) to supply them with products or services.

Generally, the entity requiring the work or services starts the tender process by posting the work-related details on its official website or newspaper. All the organizations (known as bidders) that are willing to work as per the specifications then compete among themselves (a process known as bidding) to get the work.

The organization that meets selection criteria comprising of price, timeline, and technical expertise gets the tender to start the work.

In other words, a tender bid is an RFP for a particular work, and when the bidding process completes, work is allocated to the suitable organization placing a successful bid.

Types of Tender

Tender in itself is a very long and detailed process. There are mainly three categories of tenders. Here is a short description of each category.

Open Tender

In an open tender, the bid opportunities are open to all. When the advertisement for open tenders is published, anyone interested can share their quotation via the tender document and bid for it.

Selective Tender

A selective tender is not open to all but only to a select group of people. Generally, people with relevant experience and expertise in a particular field are qualified to apply for this tender. As a part of the tendering process, the tender issuing authority asks the interested parties to share certain information before submitting their bid document. Finally, the bidder is selected or rejected based on the specific information they share along with the bid form.

Negotiated Tenders

A negotiated tender is when an organization assigns the tender to the contractor of its choice. There are several reasons for assigning work to a specific contractor. The causes may include their niche service, reputation, and on-time completion of previous work. Some contractors like L&T (a global EPC contractor) have earned a name themselves due to their quality standards.

What is Bidding?

Bidding and Tender are often used interchangeably. However, to be precise, bidding is just a part of a tender process. It’s a competition among different parties to win a tender. Here the parties are called bidders, and their quotations for the work proposal are called bidding.

On the other hand, Tender is the whole process of publishing ads, inviting RFPs, selecting the suitable bidder, and awarding the contract to the winning bidder to proceed with the work.

Invitation to Tender (ITT)

An invitation to tender or ITT (alternatively called a request for tenders or a call for bids) is a formal procedure inviting competitive bids from various suppliers willing to secure a contractual business activity, either in works, supply, or service. Most of the time the tender issuing party refers to previous criteria for suitability. These criteria can be either by means of SQ (Supplier Questionnaire) or PQQ (Pre Qualification Questionnaire).

In India, the alternative term "NIT (Notice Inviting Tenders) is often used in the government procurement process.

There is a distinction between an ITT and an RFP or RFQ. ITT mainly looks at the cost factor, and the lowest bidder may be awarded the contract. Contrary to that, RFP considers other factors like expertise in the relevant field, technical merit, and past experiences; thereby, the second-best offer also remains in consideration.

What is the benefit of winning bids and tenders?

A winning bid brings several benefits for the tenderers. A few have been mentioned here.

Securing a pipeline of work

Bidding for work helps contractors to secure a pipeline of business activities. Securing a place in the framework agreement or DPS (Dynamic Purchasing System) is even better as these systems frequently provide work contracts in various sectors, including healthcare and construction. Regular workflow, which runs for years, is another benefit of these tenders.

Guaranteed pay (for tender from government)

Winning public tenders or government contracts is an assured way of getting work as well as guaranteed pay. Since public sector organizations have to follow the rules and regulations, they are liable to pay the contractors as per the contractual agreements.

Gain experience

Bids and tenders will often require you to include 2 - 3 case studies of past contracts you have delivered during the bid submission. Securing smaller contracts can help you build up that experience. The more case studies and experience, the bigger contracts you can go for. The bigger contracts you can go for, the bigger your business will grow.

In many cases, tender submission has a requirement to produce two or three case studies of your previously completed contracts. Getting a major contract without experience is almost impossible for any contractor. Therefore, securing smaller contracts gives the necessary experience and exposure. The more the experience, the better and bigger the contract will be.

Build relationships

Another significant advantage of bidding is the ability to create relationships through your business. Winning a bid in the tendering stage and impressing the buyer increases the likelihood of working in the future again. They may even recommend your services to other firms they know. This is both a business advantage and free but effective marketing.

How can you bid for a global tender opening?

Public sector organizations 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 print media.

Traditionally, to make the bidding process fair for everyone, interested parties submit their tender in the form of a sealed bid. However, recently, electronic procurement and tendering systems, commonly known as e-procurement is becoming prevalent to make the whole prices transparent and impartial.

There are various private organizations that offer specialized services in projects and tender tracking. Collaborating with us makes it easy for you to keep track of tender openings in private and public sector entities around the world.

Furthermore, you will be able to get the latest status of new opportunities, projects, and tenders right from the initial stages of planning or development to the final stages. Staying updated with the status at the early stage helps contractors to prepare for the tender or initiate association with project owners.

Conclusion

Tender is a process where companies, private entities, and government organizations invite third parties to work for them. These works are often bound by contracts with details of work nature, minimum requirement, payment, and timeline. Once a tender is released, competitive bidding starts among the potential suppliers to get the contract award.

FAQsWhat are the three types of tenders?

3 Types of tendering in construction are:

• Open Tendering - open to everyone
• Selective Tendering - only selected participants having the prequalifications are allowed to bid
• Negotiated Tendering - the tinder issuing authority awards tender to a specific entity without any bidding competition

Which type of tender is most commonly used?

Open tender: Among the different types of tender, Open tender is the most prevalent form of tendering in construction. Even tender from government is mostly an open tender. In open tender, everyone is allowed to participate.

What is the difference between a bid and a tender?

Tender is a whole process of releasing requirements from a vendor, asking for quotations, and evaluating to select the meritorious vendor. There are different types of tender.

Bidding is a part of a tender process. In bidding, different participants compete to get the tender.

What are the four steps of a tender procedure?

Usually, four stages are followed in any tender opening.

• Prequalification
• Issue of tender documents
• receipt and review of tenders
• award of contract

What is the difference between bid and auction?

In bidding, the price information is kept secret until the winner is announced. Here the aim is to get the work done at the lowest possible price or get the maximum value while selling something.

In an auction, the auctioneer tries to get the maximum value for the auctioned item. Here, people compete openly and the price is known to everyone.

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