A call for bids, call for tenders, or invitation to tender (ITT, often called tender for short) is a special procedure for generating competing offers from different bidders looking to obtain an award of business activity in works, supply, or service contracts. They are usually preceded by a pre-qualification questionnaire (PQQ).
Types of calls for tenders
Open tenders, open calls for tenders, or advertised tenders are open to all vendors or contractors who can guarantee performance.
Restricted tenders, restricted calls for tenders, or invited tenders are only open to selected prequalified vendors or contractors. This may be a two-stage process, the first stage of which produces a short list of suitable vendors.
The reasons for restricted tenders differ in scope and purpose. They are called because:
- There is essentially only one suitable supplier of the services or product
- There are confidentiality issues such as military contracts
- There are reasons for expedience such as emergency situations
- There is a need to weed out tenderers who do not have the financial or technical capabilities to fulfill the requirements
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Origin of the term
Dictionaries explain the etymology as coming from Old French tendre, which means "to offer".
The following false etymology is sometimes heard:
- When merchant ships arrived at a port of call, they would post a notice describing the goods they wished to buy or sell. This notice was delivered ahead of the ship by a tender--a small boat--and hence the process became known as tendering.
Double envelope system
In an open bid or tender system, a double envelope system may be used. The double envelope system separates the technical proposal (based on and intended to meet the statement of work) from the financing or cost proposal in the form of two separate and sealed envelopes.
During the tender evaluation, the technical proposal would be opened and evaluated first followed by the financing proposal.
The objective of this system is to ensure a fair evaluation of the proposal. The technical proposal would be evaluated purely on its technical merits and its ability to meet the requirements set forth in the Invitation without being unduly skewed by the financial proposal.
Tender box
A tender box is a mailbox that is used to receive the physical tender or bid documents. When a tender or bid is being called, a tender or bid number is usually issued as a reference number for the tender box. The tender box would be open for interested parties to submit their proposals for the duration of the bid or tender.
Once the duration is over, the tender box is closed and sealed and can only be opened by either the tender or bid evaluation committee or a member of the procurement department with one witness.
Security deposit
Registered contractors are usually required to furnish a bond for a stipulated sum as security or earnest money deposit to be adjusted against work done, normally in the form of Bank Guarantee or Surety.
Locating tenders
Public sector organizations in many countries are legally obliged to release tenders for works and services. In the majority of cases, these are listed on their websites and traditional print media. Electronic procurement and tendering systems or e-procurement are also increasingly prevalent.
A number of companies provide subscription alert services which send notifications of relevant tender documents to the subscriber.
An array of private organisations also assist businesses in finding out about these tenders. Cost may vary from a few pounds a week to a few hundred.
Because of the specialised language and sometimes difficult-to-grasp procedures, some organizations also offer companies tender writing training, or do the writing for them.
Typical template contents (in project management)
A typical invitation to tender template in any project has the following sections:
- Introduction
- Project background
- Legal issues
- Maintaining issues
- Supplier response required
- Timetable for choosing a supplier
- Requirements
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