What is tendering in procurement? EXPLAINED
Everything you need to know to answer:
‘what is tendering in procurement?’
There’s so much information about tendering but what is tendering in procurement? You may or may not have come across this phrase before. However, by the end of the post you will be familiar with the term – ‘ tendering in procurement?’
An easy way to answer ‘what is tendering is procurement?’ is it’s the acquisition of products and services. This is specifically for a business purpose. The procurement covers the entire process. This starts with identifying the need for goods and services. These activities include the process of publishing a tender, evaluating bids, selecting vendors and negotiating contracts.
Understand the terminology
A way to help you understand ‘what is tendering in procurement?’ better is by learning about some common terminology:
- PQQ – Pre-qualification questionnaire. This is usually a stage 1 questionnaire asking for specific company details. It will likely ask for insurance details and similar contracts you’ve worked on in the past.
- ITT – Invitation to tender. This is where pricing comes into play and answering technical questions about your ability to carry out the work.
- RFP – Request for Proposal. This is where cost and quality are assessed. You need to define the scope in detail. Your proposal should be clear and descriptive.
- RFQ – Request for Quotation. This is similar to the tender although it is a lot smaller in size and scope. They are generally more targeted to clients who are requiring pricing information for a defined scope of work.
- Framework agreement – An agreement between one or more businesses or organisations. By joining a framework agreement, you will be one of the suppliers who will deliver an aspect of the contract.
- DPS – Dynamic Purchasing System. Similar to an electronic framework agreement. The two differences are suppliers can join at any time and it can be run as an electronic process.
- TUPE – Transfer of Undertakings of Professional Employment. When employees are transferred from one company to another due to contract changeovers.
The procurement process
To understand ‘what is tendering in procurement?’, you need to understand the process to follow which includes:
Forming the procurement team
The procurement team will usually include:
- A Procurement Manager
- The budget holder
- Others involved in managing the contract
- Possible representatives from HR or health and safety.
The higher value of the contract the bigger procurement team required. This will often involve senior management.
Develop tender and evaluation criteria
The procurement team then agrees on what is needed in the tender, such as:
- Specification or general requirements
- Supplier requirements and mandatory requirements
- Tender instructions
- Evaluation criteria
- Contract details
- The tendering process.
This is the selection process to decide which suppliers are most suitable. A list of chosen bidders will be invited to tender for the contract. The qualification stage may consist of the following:
- Approved supplier list
- Initial screening interview
- Formal questionnaire to assesses minimum requirements.
Some tenders include the PQQ within the tender, therefore eliminating this stage.
Issue the tender
The next stage of the tendering in procurement process is the ITT. This involves anything ranging from questions to pricing. It could also be less formal such as asking the bidder to submit a proposal and a quote.
The evaluation panel marks each bid against the scoring sheet. This results in a league table of the lowest and highest bidders.
The evaluation process helps the panel to shortlist potential suppliers. The number of bidders that make the shortlist will depend on the type of contract.
Presentations, interviews and site visits
Candidates that are short-listed may sometimes be required to undergo further evaluation. This could be one of the following:
- Question and answer sessions
- A site visit to the supplier’s premises and meeting some of their customers.
The evaluation will help the panel determine their final scores and select the best supplier/s to award the contract to.
Still wondering ‘what is tendering in procurement’? That’s fine, we still have plenty to discuss.
The limit of tender negotiations depends on the nature of each individual tender procurement process. A formal tender may not offer any scope of negotiation. Others will allow small negotiations such as, aspects of prices or contract wording or specification. It is unlikely there will be a chance for any major negotiations. It is worth finding out what is negotiable before submitting your tender. Always ask clarification questions.
Once everything in the procurement process is finalised the contract/s are awarded. If you are unsuccessful on a bid, you can request feedback. This will help you understand where you missed out on marks and how you can improve in the future.
Types of tenders
Now we answer to ‘what is tendering in procurement?’ the final step is to talk out the different tendering procedures.
Public sector tenders
Most tendering opportunities are published by public sector departments. This is because most publicly funded organisations have to spend their money fairly, ensuring value for tax payers. They have to create equal opportunities to suppliers competing for the bid.
Open tendering procedure
This process is commonly used when procuring good or services that are considered to be ‘straightforward’. Any business can bid on open tendering procedures. For this tender, an ITT is released for any suitable suppliers to respond to. After evaluating the responses, the contract is awarded to the most economically advantageous tender (MEAT).
This is generally used if the buyer is procuring more complex goods/services. The buyers will shortlist suppliers that can definitely deliver the contract. The buyer releases a PPQ followed by an ITT before deciding who to award the contract to.
This tendering process is used if buyers require more information about their solution. In these cases, buyers have already identified the need for good/services but aren’t sure of the full details.
Negotiated tendering procedure
The first stage of this procedure is the buyers will ask potential suppliers to complete a PQQ. The second stage of the procedure is inviting suppliers who have been shortlisted to negotiate.
This tendering process was introduced in 2015. This tender is used when the buyer needs a solution that isn’t currently available. The buyer would have to work with suppliers to develop the desired product or service. The process generally follows these steps:
- Calls for competition
- Developing the solution
Private sector tenders
Privately owned organisations can use tenders to outsource good/services. They don’t have to follow the same regulations as public sector buyers. Private organisations don’t have to publish their tendering opportunities. They can just send selected businesses a proposal form to complete.
Understanding the importance of tendering in the procurement process can help you see more success.
Are you all clued up?
By now, you should be able to answer ‘what is tendering in procurement?’. We hope we have provided plenty of insight into the topic.
For more information about tendering, watch our masterclasses, here on Tender VLE.
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