What is the difference between tender and procurement?

Published : 7/01/2020

The difference between Procurement, Purchasing, Tendering and Sourcing
Tender and procurement are the words you must have heard frequently in your daily life. If you are associated with the business, you must be familiar with these words as you come across with these almost everyday. Whether you go for private tenders or government tenders in India, the process of applying and granting them is very much similar in all the states with only a few differences. Tenders are bid and alloted to millions of people in India and worldwide as with the ease of internet and technology, it has become very easy to bid for tenders. If somebody is not abreast with the technology, they can still file tenders manually in government and private offices.

There is not much difference between tenders and Procurements when it comes to definition and we will be discussing the differences in easier language so that even if you are somebody who is new in the business of bidding tenders, you can understand the terminologies properly and work on it.

Tender in simpler terms is a process where a government or a private entity invites another organisation, company or entity to work for them. The entity will post the work related details on their website and people or organisation interested to work for them will bid on the work with their quotes. Whichever organisation is found suitable for the work based on the bidding price, days of completion and quality will be alloted the tender. Organisations or people who take regular tenders are more interested in bidding for government tenders in India as the safety of payment is always a big factor which is not a problem when it comes to government entities.

Types of Tenders
Tender is just a word or a simple process for many people who are either ignorant of it or new in the business but it has a very long and detailed process. Tenders are mainly classified into three categories which are discussed in short for you to understand

Open Tenders
Open tenders are the tenders which are open to bidding for everyone. An entity advertises the proposed project and whoever feels can apply for that project sharing their quotations and bids. In a nutshell, an open tender is open for all.

Selective Tenders
Selective tenders are not open to everybody but as the name suggests is open only for selective people. An entity before or after advertising the project wants people to share certain specific information with them and bidders are selected and rejected based on the information they share.
Negotiated Tenders
When the organisation allots the work to the contractor of its choice, it is called a negotiated tender. There are various reasons for allocating work to a particular contractor like on-time completion of work previously or the quality of work done in the past. The contractor builds a reputation of himself which is the reason why he gets work continuously from the organisation

Procurement is not just a word but is a complete process which involves many steps and intricacies. From buying goods and services to obtain receipts and processing the payments, procurement involves everything. Not only this, the procurement process also involves the processing and preparation of demands. Procurement involves supplier research and selection, specifications developments, purchase planning, negotiations in price, making the purchase, inventory control and many more things.

As compared to tenders, Procurement is a huge process and involves a lot of things and is often a part of strategy of a company because for a company to decide whether its operations will continue or not, its ability of purchasing certain materials is analysed. It becomes almost impossible for a business to survive, if the price of the procurement is more than what it makes as a profit. Profit here means the amount a business gets from selling the actual product.

Types of procurement
Just like tenders, procurement has a different type as well. We won’t be discussing each in detail here as it is a different and lengthy subject altogether but will list the types

Single procurement
Stock procurement
Vendor Managed Inventory
Just in Time procurement
Just in sequence procurement
Step to line procurement
Tender and Procurement is definitely inter related but there is a huge difference in their process and working. Hope this article must have cleared all your doubts regarding both