Procurement Tender — The Ultimate Guide of 2022

Procurement tender is very important for the company to carefully select their supplier. But how do companies issue tender?

For this article, we will discuss everything about the procurement tender. We will explore how it works and what are the types that are usually used by companies. 

After reading this article, you will know how procurement tender works. This will allow you to use what you have learned here in your profession or your business. So without further ado, let us start uncovering the procurement tender. 

What is Procurement Tender?

Almost all professionals in supply chain and procurement know that it is part of the huge procurement process. A procurement tender is a document that the supplier needs to complete when bidding for a contract. 

In the procurement process, procurement tender is usually called tendering. The organization does this to source for the suppliers that best match their requirements to provide their needs

Procurement tendering is the process wherein the organization will invite suppliers to submit their proposals or bids. The invitation that the supplier will receive is usually called a request for tender (RFT). 

Tendering and request for tender (RFT) are often used interchangeably. However, it is different from one another. 

The request for tender (RFT) is a document that the organization usually releases when inviting suppliers to submit their responses. Typically, these are the following contents of the request for tender:

  • Form of tender
  • Conditions of tender
  • Scope of tender
  • Evaluation criteria
  • Conditions of the contract

While tendering or tender is the document that the supplier sends in response to the request for proposal. Commonly, the content of the document is the offer of the supplier to supply the needed goods or services of the organization.

So the next time you hear that the organization published a tender, it just means that it published an RFT.

Editor's note:

Hi there! My name is Marijn Overvest, I'm the founder of Procurement Tactics.
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The Tendering Process

Tendering is the most common way that an organization does to find suppliers that will provide for their needs. The tendering follows a strict process to promote transparency and fairness among bidders. 

Every tender process varies depending on the contract or how the organization wants to evaluate each supplier.

As part of the complex process of procurement, it needs to carefully evaluate each supplier. The organization evaluates the suppliers based on the price and quality of their materials or services. This allows the organization to make informed decision-making during the selection of its supplier. 

The organization has no room for mistakes when selecting a supplier as it will affect their overall productivity and efficiency. That is why suppliers are not just evaluated solely on price but also on the quality of materials. 

How Does Tendering Work?

First, the organization will send a request for tender (RFT) to suppliers. The RFT details their requirement and the deadline by which a supplier can submit their tenders for evaluation. 

Once all the needed documents are submitted to the organization, the selection process is open to all qualified bidders. 

Whether it is a public or private organization, it must ensure that the selection process is fair and transparent for all. Additionally, this will allow the organization to select the best possible candidate to provide for their needs. 

Why Does an Organization or Supplier Tender?

Organization

Organizations commonly request for tender to get the best out of their budget.
Tendering ensures that the contracts are awarded without bias.
Organizations minimize the risk of awarding the contract to unqualified suppliers through the rigorous screening process.

Supplier

Suppliers tender to gain long-term financial stability.
Commonly, suppliers tender to grow their revenue.
Suppliers want to expand their network and business by building long-term relationships with different organizations.

The 6 Most Common Types of Tender

1. Open Procedure

Open procedure or open tender is the most common tendering process that public and private organizations employ. 

It allows anyone to submit their tender that gives an equal opportunity to any organization no matter its size. Open procedure is a straightforward process that caused its popularity.

2. Restricted Procedure

A restricted procedure is usually used to reduce the high number of suppliers that can submit a bid. It is typically a two-way process. 

Potential suppliers of the organization are required to submit a selection questionnaire from the start. The suppliers are shortlisted once they are evaluated by the organization. 

The shortlisted suppliers will receive an invitation to submit their tender. The organization will award the contract to the winning bidder after it assesses all the submitted tenders. 

3. Competitive Dialogue Procedure

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. Of course, once evaluated, the organization will award the contract to the winning bidder. 

4. Innovation Partnership

Innovation partnership is a tendering process where there are no existing products or services that can meet the organization’s needs. 

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

Commonly, 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 a 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. 

The Procurement Process

Many professionals already know the procurement process. However, when you google it, there are many versions of the procurement process. Thus, the reason why many people are confused about the procurement process.

But do not worry, we are here for you. We have simplified the procurement process for you. The following are the common steps in the procurement process:

1. Market research

This step of the procurement process helps to know the number of materials needed by the organization. It can also help the organization to find new potential suppliers that suit them well. 

2. Request for information

Request for information is the next step after you know the quantity of the materials needed. 

This process asks for more information regarding the materials that will be purchased. This ensures that all purchases are necessary and cost-effective.

3. Request for quotation

This part of the procurement process focuses on asking suppliers for their initial pricing for the supplies needed. 

Once the organization receives the quotation, a detailed analysis of the pricing is considered by the procurement department. 

4. Negotiation phase

This part is the most exciting part of the procurement process. This is where the procurement department discusses with their suppliers the pricing of the materials. 

This allows the organization to procure the suppliers at a reasonable price. Additionally, both will mutually benefit because of the relationship created through negotiation. 

5. Contracting phase

This step is where the procurement managers keep all contracts, invoices, receipts, and documents. This is to ensure that both the supplier and the organization do their obligation accordingly. 

The Advantages and Disadvantages of Tender

Advantages

High levels of transparency and competition.
Selective or restricted bidder procedures take very little time.
Create opportunities so that the organization can receive a better price.

Disadvantages

If the lowest bid is not selected, public accountability may be doubted.
Less competition means that it is susceptible to biases.
Susceptible to choosing a contractor with no prior experience in the field.

Frequently Asked Questions

1. What is procurement tendering?

Procurement tendering is the process of inviting potential suppliers to submit their proposals in hopes of winning the contract.

2. Is tendering and RFT the same?

The RFT is an invite by the buyer to make the supplier submit their proposal or bids. On the other hand, tendering is sent by the supplier in response to the RFT of the buyer.

3. Why do organizations and suppliers tender? 

Both parties tender to promote financial growth and stability within their businesses. 

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