Reviewed by Aug 16, 2023| Updated on
When it comes to the business industries, there is a lot of dealing and trading of goods and services that takes place. These deals require the companies to make a formal offer for the exchange of goods and services with other organizations. This offer or bid is put forward in the form of a tender. To understand the importance of a tender in the business industry, let us go through the term in a little more detail and see how it actually works.
Basically, a tender is an offer or invitation to bid for a project or to accept a formal offer such as a takeover bid. This term usually refers to the process through which the government and financial institutions put forward invitation bids for large projects. These bids are to be submitted within a given deadline. Another application of the term tender or tendering is when shareholders submit their shares or securities in response to a takeover offer.
The shareholders also get a tender offer which is considered as a public solicitation to all the shareholders that requests them to tender their stocks for sale at a specific price during a specified time period. This tender offer usually exceeds the current market value of the shares in an effort to entice the shareholders to release a specific amount of shares.
On the other hand, a request for tender or RFT is a formal request or invitation to the suppliers which asks them to submit competitive bids to supply products, services and raw materials. The request for tenders or RFT is usually referred to as request for proposal or RFP in the private sector. These requests allow the potential bidders to respond to the needs of the issuer.
Both tender and RFT may seem similar and it can get a little confusing to differentiate between them. However, if you understand both these terms separately it may get a little easier to understand. As we discussed above, RFT or request for tender is a document that the buyer releases to invite a supplier for submitting their responses. The RFT as a whole includes a number of documents like conditions of the tender which includes the rules of the tendering process and response, form of tender which includes schedules and details that the supplier needs to include in the response, scope of tender which includes the details of the goods and services required by the buyer, evaluation criteria which specifies how the buyer assesses the responses given by the supplier, and conditions of contract which includes the particulars of the legal contract that is to be awarded to the supplier.
As opposed to the request of tender or RFT, a tender is a document which is submitted by the supplier in response to the request for tender or RFT. Which is why tender is basically an offer to supply goods and services to the buyer based on their requirements.
In more simple terms, you can say that a tender is an offer to perform a particular task or supply goods at a pre-decided and set price rate. In the initial steps of the tender process, the contractors are invited to submit the sealed bids for a construction or for providing the said goods and services at a fixed rate during a specific period of time.
India now has an e-tender process which is well structured to ensure that the work to be performed for the government or a particular client is done reasonably and efficiently. On these grounds, most institutions have a specific procurement that is carried out in a well-defined process and have fixed policies which direct the institutions on how to make a decision and which tender to accept. This process involves careful opening, evaluation and selection of the vendors which is fair and transparent.
In India there are various types of tenders like open tender, selective tender, serial tender, negotiated tender and term tender. To understand what each of these tenders mean, let us go through them one by one.
Open tender Both private as well as government sectors accept the procedure of open tender which ia a principal tender procedure. This is considered to be the main form of tender in which the client or the customer advertises the tender openly in a newspaper or on the e-tender platform along with some important information about the proposed works to invite the interested contractors and suppliers.
Selective tender Selective tender was developed as an alternative to the open tender procedure to address the latter’s limitations. The aim of this tender is to increase the quality bids received while also ensuring that the contractors with the requisite expertise are given the right opportunities to submit the required bids on time.
Serial tender The process of serial tendering is a more hybrid or advanced tendering method which combines normal competitive tender with negotiation. This competitive tender can be either single stage or two stages. This type of tendering is mostly used for clients who have a number of phases of similar work.
Negotiated tender Negotiated tender is used largely in the engineering and construction industry. This is because these industries are subject to pre-contract and post-contract negotiations.
Term tender This type of tender is mostly used in large projects which require high maintenance. Through this tender, the contractor is asked to cover specific buildings or constructions in various locations. Term tender is limited to a fixed time and can demand certain criterion which is to be met by the supplier adhering to the needs of the client.
Now that you know what tendering is, you should also know that varied types of tendering processes are used across different industries from different sectors including all public, private and non-profit sectors. While we saw how tendering is a common process in various businesses and industries, this process is more common in certain areas like information technology, business consulting, engineering and construction.