Why do Companies Tender?

Have You Ever Wondered Why Public Sector Organisations & Private Companies Tender Contracts?

The tendering process can be very frustrating and sometimes you may feel that companies use tenders just to annoy you! However, there are some simple reasons and it is very useful to understand why companies tender.

The previous post Tender Procurement Process explains the various steps that form a typical tender. It may help put the following points into perspective.

Why do Companies Tender?

Best Performer Wins

Tenders involve a competition where a number of potential suppliers compete against a set of criteria including:

  • Specification or requirement
  • Quality
  • Price

These are measured and the best scoring bidder(s) win the contract.

Demonstrates Good Procurement

Procurement can show that everything was done fairly and correctly with the right decision taken – selecting the best performer(s).

Controls the Sales Process

Having a tender at an agreed time helps the customer to manage the sales process:

  • The purchase can be made when required ie to a schedule
  • It limits number of sellers involved
  • Unwanted sales calls can be instructed to wait until the tender comes out

Allows Input from all Interested Parties

The specification or general requirement can be agreed by all those who want to be involved eg:

  • Board
  • Budget holder
  • Service  user
  • Procurement  (buyer)
  • HR / Quality / H&S

They can also be involved in the tendering process and supplier selection.

TIP: It is very useful to know exactly who is involved. If possible, try to consider all the decision-makers’ views and requirements when submitting your bid. For example, if you know that the MD has specific worries about the current service, demonstrate how your solution will help alleviate those concerns.

Even Playing Field

Because everyone is bidding on the same tender, it should ensure that the opportunity is fair and even to all those invited to tender. This supports “Best Performer Wins” and “Demonstrates Good Procurement”.

Quality of Tender Response

The invitation to tender will provide information of the company’s needs. This greatly improves the quality of the tender response when compared to ad-hoc briefings where each individual supplier could provide an entirely different offer.

  • Ease of evaluations
    • same format for all tender submissions
    • same package to score
    • can ‘compare apples with apples’
  • Right information first time

Can Define Specification

The company might have a clear idea of what it wants and how it should be done. Alternatively it might know what it needs to achieve but not necessarily how to do it. There are two types of specifications:

  • Input specification – this sets out ‘how to do it’ eg use Dulux Trade paint
  • Output specification – this only asks for the ‘desired end result’ eg walls painted to last for 3 years

TIP: Input specs are very limiting as there is little scope for innovation or improvement whilst output specs are open and allow the bidder to show what makes them different.

Once you understand why public sector and private companies tender their contracts, it makes dealing with tenders a little easier. Appreciating what is trying to be achieved and who is involved definitely boosts your chances of winning tenders.

Please do add your thoughts in the comments box.

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