Open Tendering — Everything You Should Know
Open tendering is crucial in the acquisition of goods and services for a company. However, what is it?
For this article, we will discuss what open tendering is and the different kinds of tender in procurement. Additionally, we will show you the pros and cons of open and closed tenders.
Once you are done reading this article, you will be able to use open tenders in your company effectively. Additionally, you will have the knowledge of when to use open or closed tenders in your project. So without further ado, let us now start!
Open Tendering: What is it?
Open tendering, also known as competitive bidding, is a process aimed to purchase goods or services at the lowest possible price. It is a common type of tender that stimulates competition and minimizes discrimination.
It is a transparent procurement process that allows fair competition for competing contractors and suppliers.
In open tendering, it is the procurement manager of a company who applies for open tendering. His/Her team solicits quotations from potential suppliers to award the contract for specified services or goods.
The main requirements of open tendering are the following:
- It must be open to all qualified bidders
- The open tender must be advertised locally. If required, it must also be advertised internationally.
- Have objective qualifications criteria
- Contains neutral and clear technical specifications
- Set clear and objective evaluation criteria
- The tender must be awarded to the supplier who has the lowest possible price
Open tendering is presumed to foster effective competition and add value for money. However, many procurement experts argue that this procurement method is strictly procedure-based and is primarily designed for the procurement of simple goods.
Thus, it is not a suitable method for complex procurements where the focus is on the output and outcome of the contracting process rather than the strict adherence to standards.
6 Different Types of Tenders
No matter if you are in public or private procurement, tenders are important as they are used to source for suppliers that are the best match for your requirements. Here are some of the common types of tenders that may encounter in the field of procurement:
1. Open Tenders
As we said earlier, open tender is a common type of tender that aims to purchase goods or services at the lowest possible price. It gives equal opportunity to contractors and suppliers to stimulate competition and minimize discrimination.
2. Closed Tenders
Closed tenders, also known as limited tenders, are a type of tender that is open to only those who are specifically invited to bid. Those who have submitted a bid but have not been invited are likely to be ignored.
Closed tenders are popular among businesses, especially when they know the supplier landscape well, have done their research and narrowed the list to a select number of suppliers that can meet their requirements.
3. Competitive Dialogue
A competitive dialogue procedure is a tendering process that is commonly used for more complex contracts which involve numerous stages.
Once the selection questionnaire is completed, the shortlisted suppliers enter the discussion with the organization. The discussion covers more details regarding the requirements and solutions.
The discussion will help the bidders in the shortlist as they are informed of the important contents of the tender. Once evaluated, the organization will award the contract to the winning bidder.
4. Innovation Partnership
An innovation partnership is a tendering process where there are no existing products or services that can meet the organization’s requirements.
The selection questionnaire will help the organization identify suppliers that can potentially develop the required solution for their problem. The shortlisted suppliers must respond to the invitation tender.
Once evaluated, the winning bidder will develop the solution. The organization will only purchase from the supplier if it meets the minimum requirement of the tender.
5. Framework Agreement
Framework agreements are set up when there is a particular product or service that an organization needs. However, the organization does not establish the details of the delivery.
The outline of the agreement sets out the terms on price, quantity, and quality. This allows the organization to cancel contracts throughout the lifespan of this tendering process.
After the evaluation of the survey questionnaire, the framework may be awarded to single or numerous suppliers. However, being a part of the framework agreement does not guarantee work for suppliers.
6. Dynamic Purchasing Systems
This tendering process is commonly used for products or services that are available in the marketplace.
Additionally, it is similar to the framework agreement. However, new suppliers are allowed to be added at any time and without restriction on the numbers that can join.
Organizations can use the restricted procedure to set up dynamic purchasing systems to run the whole process electronically.
Difference Between Open and Closed Tenders
Pros and Cons of Open Tenders
Open tenders are the most commonly used tender in many industries. However, it has a fair share of pros and cons that we listed down below:
Pros and Cons of Closed Tenders
Our team has made a table of the pros and cons of closed tenders for you to easily understand how you can use them effectively:
Best Tender Management Tools
Procore is a construction software that handles construction projects, financials, and resources from planning to completion of a project.
It helps risk management by enabling you to know the critical costs and delays at the appropriate time. With Procore, you can easily track your project’s progress which is the reason why many people are using this software.
Knowify is a project management and job costing software that is built for trade contractors. It helps construction businesses to keep their projects, finances, and teams efficient.
It has powerful budgeting tools which can allow you to make a detailed estimation of all the costs in your project. Having an estimation will allow you to set a budget that you can translate into bids.
Furthermore, you can get a real-time view of your project with its unique project planning and tracking module.
Archdesk is a cloud-based management solution that covers everything a modern business needs which include finance, asset management, and project.
Archdesk prepares an in-depth analysis of the bids. With just a few clicks, you can assess and compare all the tenders that can help you choose which of the tenders are well-suited for your project.
With Archdesk, you can do more than just tendering as all processes in the systems are connected. Once you pick a tender, the prices will automatically show on the bill of quantities (BOQ). Additionally, you can issue a purchase order directly from your tender.
+ What is an open tender?
It is a common type of tender that aims to purchase goods or services at the lowest possible price and gives equal footing to suppliers.
+ What is a closed tender?
It is a type of tender that is open to only those who are specifically invited to bid.
+ What is the difference between open and closed tenders?
Like what the name implies, open tenders are open for all suppliers and contractors to bids. On the other hand, you can only bid on closed tenders if you are invited.
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