Before a tender is prepared and released to prospective suppliers the purchasing company will need to decide on the type of tender procedure they wish to use. The tender procedure used will define the interaction with any prospective suppliers and how these suppliers will submit their tender contract application.
Each procedure has its advantages and disadvantages and should be carefully considered weighing up all the options. There are four main tender procedures as outlined below:
- Open Tender– an open tender is open to any company to apply to provide the goods or services required. So long as the potential supplier can fulfil the stated requirements they can apply. This procedure is generally used where the expected number of responses is likely to be easily manageable by the management team. The advantage of this procedure is the company can receive many applications from many potential new suppliers without the additional work of screening suppliers first. The disadvantage of this procedure is it does leave the requirements open to interpretation (unless extremely specific) and the company could receive many unsuitable responses. If a high volume of applications are made this will lead to a lot of administration work to filter and process each response.
- Restricted, Limited or Closed Tender – a restricted tender involves screening any new potential suppliers first to ensure they are suitable to apply before a tender application can take place. This pre-qualification process ensures only suitable suppliers are short-listed and invited to tender. Any potential supplier can still express an interest in responding to the tender but they must pass the pre-qualification process first. This has the advantage of filtering out suppliers that are unsuitable at an earlier stage which should mean all companies that do respond to the tender will all be capable of fulfilling the requirement. The disadvantage of this process is the additional administration work early on – depending on the number of suppliers that express an interest. It can also prevent new suppliers from responding if they are unfamiliar with the tender process.
- Competitive Dialogue – competitive dialogue is similar to a Restricted, Limited or Closed Tender but has a dialogue stage to discuss aspects of the tender contract. Although adding an additional stage, this dialogue can help the purchasing company and potential supplier clarify specific details. This has the advantage of further clarification early on in the tender process. This has the advantage of further ensuring the most suitable suppliers respond to the tender requirement. The disadvantage is it will slow the process considerably especially if the contract has a high level of interest, which could become an issue if there is a time deadline for the requirement.
- Competitive Negotiation – the negotiated tender procedure will involve assessing potential suppliers to ensure they meet all required criteria before being invited to apply to tender. This procedure is much more in-depth than the restricted or competitive dialogue procedure. This procedure is often used for a ‘known’ or ‘qualified’ supplier that has been used in the past. The disadvantage of using a single ‘qualified’ supplier is the purchasing company limits it options and base for comparison. There may be more suitable and cost effective suppliers available which, for whatever reason, are not classed and ‘qualified’ and will therefore be excluded from the negotiated tender contract.This form of tendering can be seen as anti-competitive and exclusive.
Regardless of the tender procedure chosen the company must abide by the tender principles to ensure fair treatment. Many companies prepare a tender statement outlining the principles and how they are addressed within the company. This can also be outlined within the tender information pack.