What is a tender?
A tender is a document that you need to complete when bidding for a contract; the tender document is how a buyer evaluates your suitability for the contract based typically on price and quality elements – you will therefore most likely have a pricing document and question set that you must respond to. Read below for more information on the full tendering process and how it works.
The tendering process
A tender is a formal offer, or a bid, to ultimately secure a contract.
One of your existing customers might ask you to tender for work (to either maintain your current services with them, or for a new service), or, to grow your business, you might find you need to submit bids for public sector contracts. Bidding via tender is the most common way in which a buyer will find an organisation to supply goods or services. The tender process is a structured process, in order to be fair and transparent, including a stringent selection process, expressions of interest from bidders, through to the request for tender and the evaluation process.
What does the tender process involve? Each tender process is different depending on the contract in question and how the buyer needs to evaluate the bidder. However, specifically in the public sector, they must comply with specific rules and regulations to make the process fair and transparent.
A tender document (or ITT, or tender bid) is the stage in the bidding process where you need to explain how you will deliver the contract, including your technical solutions and pricing proposals. Your company must provide high-quality, persuasive narrative responses to demonstrate why you are best suited to the contract. This is the opportunity to stand out against your competitors and showcase why you are the right company to deliver the contract. The buyer will then shortlist the most suitable bidders, before finally selecting a winning tender.
As part of the procurement process, you will be evaluated on both price and quality so that the buyer can make an informed decision during the selection process on who is best to deliver the contract. There is no margin for error, and you must get the tender process right. Please note your bid documents required are not evaluated solely on the lowest price; you will also be evaluated on a quality, narrative section of the invitation to tender document to demonstrate that you are capable of delivering the services, not simply price competitive.
For guidance on structuring your narrative responses in a tender and exactly what to include, see information on how to write a tender.
Tendering is a competition
It is also important to remember the reason behind the tender document and bidding process: it is for the contracting authority to identify the most economically advantageous tender. Simply put, the company that submits the highest quality bid response at the best price is the company the authority will shortlist, and then award the contract to. Or if it is a framework agreement, the top 5, 10, or more bidders will be awarded a place on the framework; this is very common in certain industries such as construction. You must make sure your company stands out from your competitors in the bidding process.
By using tender writing services provided by companies such as Executive Compass, you can receive assistance in submitting a successful tender. Research your main competition and then stress how your company differs from others in order to score the most marks available, which could be through innovations, added value, and price.
Different types of tenders
Like the businesses who submit bids for them, there are many different types of tender processes for winning a contract, both for private sector buyers and public sector organisations. As it stands, there are currently four main types of tender exercises:
- Open Tender: This tender process is open to any interested suppliers, contractors or service providers who meet the minimum qualification criteria. Open tenders will be publicly advertised alongside the submission deadline, and will permit any bidder who meets the minimum eligibility thresholds to submit their tender response.
- Restricted Tender: Equally, some contracting authorities will choose to employ a restricted tender process, where a limited number of bidders – for example, incumbent contractors – are permitted to submit proposals or tenders. Invitations could be based on previous experience or follow success at the initial PQQ or selection questionnaire (SQ) stage.
- Single-Stage Tender: This type of tender requires all bidder organisations to submit their bids at a single submission deadline. All elements of the tender, including the PQQ, selection questionnaire, quality or technical aspect and pricing schedules are then evaluated concurrently.
- Negotiated Tender: More infrequently, buyers will choose to operate a negotiated tender exercise, where they will engage in direct negotiations concerning the scope of works, quality/type of materials and pricing schedule with one or more suppliers. This type of tender is more commonly employed for complex, specialised projects which requires the buyer to implement customised solutions with input from the supplier(s) to ensure the project is tenable.
However, the introduction of the Procurement Act 2023 means that the types of tenders will be reduced to two. This will consist of the typical ‘open’ procedure, where any interested party is invited to bid, and the new ‘competitive flexible’ procedure, which will allow buyers in the private sector and public sector organisations to tailor the tender process to their requirements – for example, by changing the evaluation split between quality and price at different stages of the tender. The Procurement Act will come into force in October 2024.
The tender process for private sector vs public sector organisations
The tender process can vary based on the buyer organisation, including whether they come from the private sector or are public sector organisations. Generally speaking, public sector organisations tend to be more rigid and rigorous than the private sector during the tender process. This is because there is a slew of public procurement regulations which must be followed in order for the tender process to be legal and legitimate exercise.
Regulations include the Public Contracts Regulations 2015 and the newly released Procurement Act 2023, due to come into force in October 2024. Procurement policy notes also produce updates and amendments to current legislation – for example, the introduction of PPN 06/20, which mandated that a minimum 10% weighting of the total score should be applied to social value for all central government contracts, regardless of the type of tender.
Furthermore, to facilitate openness, transparency and equal opportunity during the tender process, public sector organisations are required to publicly advertise contracts over specified thresholds on Contracts Finder and Find a Tender. Currently, central government contracts with a minimum value of £12,000 must be published on Contracts Finder, and contracts from sub-central authorities exceeding £30,000 have a requirement to be published. For Find a Tender, the threshold for all types of tenders is slightly higher – just under £140,000 for central government contracts and around £215,000 for sub-central authorities, such as local councils.
Private sector tender process
There are substantial differences in the tender process for private sector buyers compared to public sector organisations. For instance, there is no centrally organised portal or noticeboard for private sector contracts, framework agreements and dynamic purchasing systems. This means that tender from private sector buyers need to be found independently or through industry word of mouth, leading to an overall lower volume of opportunities. Other differences include:
- Regulations: public authorities are constrained by a greater amount of regulations, such as mandatory publication of opportunities, evaluation criteria and a requirement to provide feedback to all bidders at the end of the tender process. In contrast, the tender practices of the private sector have limited, voluntary obligations and are largely based on best practice.
- Transparency: due to the public sector procurement regulations outlined earlier, public sector organisations are required to produce an audit trail of all relevant spending and information, such as pricing schedules and successful bidders. Private sector organisations are not governed by similarly stringent regulations.
- Quality/price split: understandably, private sector buyers are interested in profitability and price points during the tender process, typically translating to an outsized split in favour of price within the evaluation criteria. This will be closer to a 50/50 split with public sector organisations.
- Objectives: although buyers in public sector organisations and the private sector are looking to appoint the most capable and competent suppliers, the private sector will emphasise added value in their evaluation criteria – for example, additional services which can be offered outside of the scope of works.
Compass can support you throughout the tender process, helping you complete the selection questionnaire and the invitation to tender document, as well as other important tender documents required by the authority. The length and breadth of our experience means that we have seen many types of tenders, and are familiar with private sector tender processes in addition to those used by public sector organisations. We can help you to understand exactly what the tender process entails, what the buyer is looking for in the procurement process and the procedures you need to follow in order to submit a successful tender bid for a product or service.
Tender examples and references
At the tender stage when a buyer issues requests for proposals, you need to include examples and references to demonstrate your organisation’s capabilities. Exemplify your use of best practice and customer support in your management of your current contracts, preferably over the long term. Typically, a buyer will ask you to provide case studies and examples as part of your tender response. If you do not have a library of documented examples and references to use in tenders and quotations, Executive Compass will help you create one, based around your business and your clients, to help you win maximum points from your PQQ and tender submissions. If you feel you cannot provide suitable examples and references, it may not be the correct contract for you to bid for, which is a decision to make early on in the tender process.
The Tender Evaluation Process
Once you have submitted your tender bid to the contracting authority, they will review your financial and quality elements against the marking criteria, and alongside the submissions of your competitors to shortlist. Whatever the outcome of your submission, you should request feedback to use as continuous improvement or to identify why you have lost marks. Typically, the authority will produce a scorecard of all the tender responses, so you can see where you have ranked in the evaluation process. If there are certain topics that you have scored highly in your contracts awarded, save these responses in a bid library to help guide future tender processes. In this video, we explain how the tender process works and how your company can benefit from it.