Open and Closed Tendering — Explanation & 5 Key Differences

Open and closed tendering are two processes that streamline a company’s procurement. It can help a company decide on a partner supplier for a project. 

Open tendering is a company’s process of public bidding issuance that allow multiple interested suppliers to submit their offers.

Closed tendering is an exclusive bidding process wherein selected supplier groups are invited to meet a specific company project. We will discuss these two concepts in more detail. Let’s get started.

Difference Between Open and Closed Tenders

What is Open Tendering?

Open tendering is a company’s process of public bidding invitation issuance. It allows interested suppliers to submit their offers based on their qualifications. Typically, it involves transparent regulations and procurement outlines matching company objectives.

Companies publish notices that detail objective specifications and contract conditions. This process enables suppliers to see if they can prepare for the bidding. Furthermore, companies evaluate them based on predetermined criteria. These criteria include price, quality, and regulatory compliance. 

It’s an open competition fostering a dynamic environment and procurement growth. It’s a method ensuring efficiency and swiftness in achieving procurement goals.

However, let the business go with the procurement managers. These leaders are in charge of applying for open tendering. If the procurement team requests quotations let these pros seal the deal. 

This procedure-focused method tackles simple procurement deals. So, if you’ll target comprehensive and complex ones, check for another approach. Open tendering emphasizes simplicity and ease of business deals. 

Of course, we should also know how open tendering works. Below are its requirements to maximize its full effect:

Open Tendering Requirements

• It must be open to all qualified bidders
• The tendering criteria must have clear and fair evaluations
• The awarding goes to the supplier who offers the best price-quality
• There must be a local advertisement for this tendering. An international one can work if there’s a need for it

Duration of Open Tendering

The open tendering duration varies depending on various factors. It can involve the project’s scope and complexity. Additionally, it also tackles procurement requirements to ensure stability.

Depending on the processing period, it can take months at best. This period provides suppliers enough time to optimize their bids and proposals.  

Real-Life Example of Open Tendering

International Medical Corps’ Field Vehicle Rental Services

In 2022, the International Medical Corps, (IMC), a global humanitarian organization, wanted to enhance its operational capabilities in Ethiopia by securing reliable transportation services.  To achieve this, IMC employed an open tender inviting all qualified vendors to submit their proposal for a blanket purchase agreement for vehicle rental services.

The open tender was advertised on IMC’s official website, detailing the project’s scope, technical requirements, and evaluation criteria. This approach encouraged a wide range of suppliers to participate, promoting transparency, and healthy competition. After a thorough evaluation, IMC awarded the contract to, although it was not publicized due to confidentiality reasons, the vendor that best met the criteria of reliability, cost-effectiveness, service quality, and compliance with their operational standards.

This open tendering process not only ensured that IMC obtained high-quality services but also upheld the principles of fairness and transparency in public procurement. By engaging a wide range of suppliers, IMC benefited from competitive pricing, and enhanced service delivery, contributing to the successful implementation of their humanitarian efforts in Ethiopia. 

What is Closed Tendering?

Closed tendering is an exclusive bidding process of an organization. They invite a select supplier group to meet a specific company project. Unlike open tendering, this process focuses on setting qualifications to control quality.

The organization screens bidders through various factors. These factors include experience, technical capacity, financial position, and reliability.

Organizations issue closed tenders through a predetermined list. It can also be through direct contact with the selected suppliers. 

When it comes to closed tendering, an organization has greater selection control. Moreover, the competitor reduction makes the stakes higher for the remaining ones. The process also provides better-quality proposals. 

It occurs through a closed and strict screening process. Closed tendering ensures the organization can achieve its goals and objectives.

It’s possible by having narrower and more definite supplier selection criteria. It maintains quality control and operationality within the organization’s procurement process.

Dealing with Closed Tendering

In my experience as a procurement manager at Ahold Delhaize, I have dealt with closed tenders on multiple occasions. We primarily used this approach in the sourcing process of our private-label products. 

Throughout the year, we would seek potential suppliers who could participate in the tender. Key criteria included quality, capacity to meet quantity demands, and ensuring all certifications were in order. 

If these criteria were met, suppliers could participate in the tender. Following this process allowed us to have control over the participating suppliers and ensured that we did not waste unnecessary time on suppliers who could have otherwise come forward, as is the case with an open tender.

Below are the requirements of the exclusive closed tendering process:

Closed Tendering Requirements

• The selection process involves specific criteria to ensure quality in the tendering process.
• Closed tendering requires only a select group to ensure quality and project optimization.
• The documents in the tendering process are access-only. The organization requires bidders to sign confidentiality agreements as added security.
• Moreover, the organization encourages the selected suppliers to compete actively with the bid. 

Real-Life Example of Closed Tendering

Apple’s Supplier Selection for Advanced Manufacturing Fund 

Apple uses a closed tendering process to allocate funds from its $5 billion Advanced Manufacturing Fund, focusing on U.S.-based manufacturing innovations.

One key recipient was Corning Incorporated, a long-time supplier of Gorilla Glass, which was directly invited to submit their proposals for the new glass innovations, bypassing an open bidding process. This decision was based on Corning’s established track record and its ability to meet Apple’s high standards for quality sustainability, and innovation. 

By selecting Corning through a closed tender, Apple aimed to maintain confidentiality and protect its intellectual property, reducing the risks of leaks while ensuring rapid project timelines. This approach also aligned with Apple’s need for reliable partners who could support its fast-paced product development cycles. Corning expertise in advanced glass technology made it a trusted partner for Apple’s supply chain. 

While Apple’s tendering process minimized competition, it was justified by the long-term partnership with Corning, which has led to technological advancements and job creation in the U.S. However, critics noted that excluding other potential suppliers might limit competition and innovation.

This example highlights the benefits and drawbacks of closed tendering in high-stakes, high-tech industries like Apple’s. 

Why is Tendering Important? 

The importance of tendering shines through its value in ensuring fairness and transparency. It helps a company establish a robust and efficient procurement process.

The company secures the best value through bidding while achieving its needs.

Incorporating a competitive aspect pushes suppliers to offer better. Competitive and favorable terms for the contractor help the business’s continuity.

The tendering process also establishes accountability and transparency. This process happens through clear criteria and definite evaluation. It builds trust and reputation for those involved. It ensures minimal risk and avoids potential concerns like corruption.

Robust tendering processes enable procurement professionals to establish better selection criteria. It is possible because factors for consideration become available to build it. The tendering process provides reliability, material quality, timeliness, and financial capability.

Implementing the tendering in procurement is crucial for continuous operations. Moreover, it provides the necessary procurement data. It enables better reliability and operationality of the company.