Open tendering is the most widely used
form of competitive process within the public sector, less so within the
private sector. It is used for procuring products, works, or services. An
organisation’s requirements are detailed in a document advertised in the open
market for all suppliers to consider.
An open tender follows established
procedures within the organisation’s procurement guidelines. The process can be
undertaken in several diverse ways, each with its increasing level of
complexity. Such methods include:
- Request for Information: Is the simplest form of open
tender. In this form, an organisation searches for what is available from
a specific market sector, with the simplest requirements and a broad
element of sample pricing requested.
- Request for Pricing: This is a more formal form of
open tendering, generally undertaken for simple procurement requirements,
often requesting bespoke pricing.
- Invitation to Quote: An informal method of open
tendering in which the requirements are a little more complex. They
require a more detailed and in-depth specification and often request just
pricing, although quality questions may be asked.
- Open Tender: This is the most complex form of
open tendering, where quality is an element to be considered. Quality
questions will be asked along with a robust schedule of rates and charges
in the final supplier selection decision, which will utilise a scoring
method based on a price/quality ratio.
The fundamental requirements of open
tendering are that tenders should:
- Be open to all suitable suppliers and bidders.
- Be advertised within a reasonable geographical region.
- Have objective supplier selection criteria.
- Have neutral, transparent, and unambiguous
requirements specifications.
- Have an objective and straightforward evaluation
process.
- Be awarded to the least-cost supplier without further
contract negotiations.
There are many advantages to open
tendering being used, some of which may include:
- People Involvement: The people responsible for the
products, services, or works are directly involved with selecting the
supplier within an evaluation panel.
- Due Diligence: Due diligence criteria can be
standardised, reducing the commercial, operational, and legislative risks
of supplier selection.
- Service: An evaluation panel can consider
service levels, and specific service KPIs can be incorporated into the
tender documentation. Suppliers will be aware of the standards the
organisation wishes to achieve and can price the level of service
accordingly.
- Quality: It is essential to stipulate the
quality of products, works, or services required to evaluate the balance
between price and quality accordingly.
- Competitive Value: The open market offers the most
significant level of price competition. As suppliers compete for the tender
award, they are unaware of who is bidding at what price.
- Market Awareness: Open tendering allows
organisations to review the market's offerings and ascertain an
understanding of what alternatives are available.
- Control: organisations can periodically
review their requirements to suit the prevailing market conditions in
terms of service, pricing and quality based on specific requirements. The
open market is the most significant source of innovation.
- Best Fit: Tendering is the best way for
organisations to test their pricing against the market and source the best
suppliers for various spend categories.
- Service Level Agreements: An organisation can establish its
key performance indicators, quality standards, and service levels from the
outset to better position itself to negotiate terms with suppliers and
reduce any pricing, operational, or legislative risks.
For many public and private sector
organisations, open tendering is the preferred method of procuring products,
works, or services exceeding £100,000.00 per annum at the most competitive
level. Different requirements for quality and price may govern each tender
project.
The open tender remains the most popular
among the diverse tenders (restricted, negotiated, competitive dialogue, open).
However, participants have cited several disadvantages of this kind of
procedure, such as:
- Takes time to complete the
procurement project.
- Restricts the supplier from
determining the technical specifications.
- Limits supplier participation due
to its excessive formalism.
- Requires strict adherence to
compliance procedures.
- Limits the building of long-term relationships with
suppliers.
- The decision-making part of the
open tender process is often the most challenging stage.
Decisions will invariably be influenced
by politics, uncertainty, lack of knowledge, and people's unwillingness to be
accountable for their actions. However, writing down the requirements is often
an excellent start to the decision-making process.
Once the requirements specification has
been decided and agreed upon, the open tender, because of its formality,
provides a smooth path to selecting a supplier who can fulfil the requirements.
Although open tendering has
disadvantages, many organisations use it because it brings people together to
consider the exact requirements for the products, works, or services.
The decision-making process is
formalised within the open tender procedure. It is made by the tender
evaluation panel, whose auditable decision removes bias, personal feelings, and
sentiments and ensures openness, probity, and transparency.
Additional articles can be found
at Commercial Management Made Easy. This site looks at commercial
management issues to assist organisations and people in increasing the quality,
efficiency, and effectiveness of their products and services to the customers'
delight. ©️ Commercial Management Made Easy. All rights reserved.