TENDERING

By: Kushagra Mishra

MBA-IB
 Tender
a written or formal offer to supply goods or do a
job for an agreed price.
Eg. The council has invited tenders for the
building contract.
tendering: to make or submit a bid to undertake
work or supply goods at a stated price. A tender is
usually submitted in response to an invitation to
bid for a work contract in competition with other
suppliers
 METHODS
The three main methods of tendering are:
1.Selective tender
2.Public tendering
3.Tendering by invitation.
 Selective Tendering

Under this system advertisements called Expression of

Interest (EOI) are placed in a major metropolitan
newspaper, and local paper for rural projects, inviting
tenderers to register their interest in tendering for the
project. The advertisement should indicate the
selection criteria applicable to the project and state that
a shortlist will be made from those registering.
Registrants are evaluated from which a number of
tenderers are then selected by the Principal Consultant
and approved by the Project Control Group (PCG).
Tender documents are issued to selected tenderers. The
number of tenderers in this situation is usually four to
six.
This method of tendering is the most commonly
adopted for the projects over $3-5M range.
 Public Tender

Public tendering is a system by which an invitation to

tender is advertised in the press and Builders/Contractors
are asked to apply for tender documents.
Advertising for registration of tenderers and shortlisting
is not regarded as fulfilling Public tender requirements.
Pre-registration of tenderers may be carried out to
establish the number of contractors who will be
tendering for the issue of tender documents
This method of tendering is most suitable for small (less
than $1M), non-complex and remote area projects where
it is difficult to obtain contestable tenders.
 Tender by Invitation

Under the system of Invited Tendering, a number of

Contractors are chosen from a list of pre-qualified
contractors, such as the contractor supply register
(CSR) lists held by the Department of Infrastructure,
or through an annual registration and evaluation
process that complies with Government guidelines.
The selected firms are approved by the selection panel
nominated by the Project Control Group (PCG),
having regard to the acceptability and capability of the
tenderers to satisfactorily carry out the project.
The tenderers chosen are then invited to tender for the
project and tender documents are issued to them in the
normal manner.
This method of tendering is suitable for projects where
there is a need to expedite the process, remote regional
works, construction management type projects, where
special expertise is required or where there may be a
number of ongoing small individual projects.
 Probity
Where necessary a Probity Advisor/Manager shall
review the process and attest as to the suitability of the
tender, evaluation and ward activities. Of particular
interest will be that all tenderers are treated equally
and fairly, that all material is kept confidential and that
the audit trail of decision-making is retained for proof
of process.
What does the tendering process involve?
Formal tendering will take one of two forms either an
"open" tender process or a one-off "select" list process.
With open tendering all suppliers who request
invitations to tender will be entitled to participate.
Invariably the one-off select list approach is adopted
and this involves a two stage process:
1. Potential suppliers are vetted for their suitability and
will be given a "pre-qualification questionnaire"
(PQQ) to complete.
Organisations short-listed from Stage 1 are invited to
tender against a specification and to complete and
return the tender documents by a specific date. Tenders
will be evaluated against pre-determined criteria,
which will be notified to all tenderers either in the
advertisement or in the invitation to tender itself. The
contract is awardedto the supplier which offers best
value in terms of cost and quality
CONTRACTING
Contracting is a purchasing mechanism used to acquire
a specified service, of a defined quality and quantity, at
an agreed-on price, from a specific provider, for a
specified period
Types of contracts are available
1. One-off Contracts
2. Renewable or “period” Contracts
3. Framework Arrangements
4. Partnership Arrangements
One-off Contracts
These are contracts to meet a specific need
 Short-term contracts to supply goods and services to
meet an individual requirement,
e.g the supply of consultancy services for a
particular project.
Renewable or “period” Contracts

These are contracts for services required on a regular

basis and are generally let over a longer period of time
(15 years) and will be monitored on a regular basis,
e.g. school meals, building cleaning, grounds
maintenance.
Framework Arrangements

This is an arrangement where the terms and conditions

(including pricing methodology where possible) are
agreed with the supplier(s) of goods and/or services,
which allows call-offs to be made without the need to
go through another formal tendering process.
 The contract length will usually be 2 or 3 years with a
disclosed option to extend for a specified further
period. Examples include stationery, furniture,
computer equipment, vehicles, fuel and food.
Partnership Arrangements

This is where the County Council seeks to develop a

relationship with a supplier based on "partnership
principles" (but not a formal partnership) with a
supplier thereby sharing the costs and risks involved,
for example, civil engineering works .
Issues with Contracting

High transaction costs offsetting efficiency gains

Contracts poorly designed or managed due to low
government capacity
Small or a weak private sector, with limited number
and capacity of bidders
Problems of price setting – Govt. overestimates
resources for the service & overpays contractor
Risks in Contracting process

Delayed payments .
Differing interpretations of loosely worded contracts
Limited number of providers in rural areas
Capture of contracting process by vested interests
Why subcontract?
Prime contractor cannot bid on a contract alone.
A firm wants to pursue new business opportunities but
needs to work with a prime contractor.
The government often requires prime contractors to
subcontract part of the contract work.
Subcontracting Benefits

Subcontractors learn many of the details of federal

contracting and learn new ways to conduct business.
By entering non-exclusive relationships, contractors
have the opportunity to bid with multiple primes.
By subcontracting successfully, subcontractors improve
chances of winning “re-competed” business.
THANK YOU