An insider guide to the Tendering Process

Published : 5/07/2022

From our previous blogs, what a tender is, is well understood. Briefly, a tender is an invitation to bid for a project or accept a formal offer such as a takeover bid. Tendering usually refers to the process whereby governments and financial institutions invite bids for large projects that must be submitted within a finite deadline. These tenders are usually conducted in four stages: Prequalification; the issue of tender documents; tender evaluation; tender award. Let's look at each of them in detail.

  • STAGE 1: PREQUALIFICATION The prequalification stage simply means identifying contractors who believe that they are qualified and would be interested in tendering for a potential project. This step is often mistaken for tendering. Additionally, this step if not considered will not create much difference in the tendering process. These contracts reach the prospectus contractors through various mediums like Newspapers Articles, Business Magazines, online E-tendering portals, etc. Most contracts are publicly advertised for tender without the need for prequalification. Prequalification is primarily utilized for large, complex projects that require specialised technical expertise. Prequalification also allows for “Early Contractor Involvement“(ECI) provides an efficient means of designing and planning infrastructure projects in a cost-effective, more efficient and less adversarial structure in which qualified contractors can offer their expertise prior to the start of a project.
    Advantages of Prequalification Stage in Tendering Process:

    a. Prequalification saves the owner of the project time and money by eliminating unqualified contractors from the start.

    b. It acts as a narrowing funnel wherein contractors who possess the required competencies matching with the contract terms, i.e. the financial and technical ability to undertake the work.

    c. In the case where prequalification is used, only contractors which have been pre-qualified are eligible to bid on the contract.

  • STAGE 2: ISSUANCE OF TENDER DOCUMENTS Regardless of the type of tender process utilized, owners of the projects should understand that the lowest tender or price may not necessarily be the most advantageous. The contractors should be wetted on various parameters like; the working methods, environmental factors, and risk assessment before finalising them.
    Tender Documents

    The tender documents usually set out in detail the various conditions applicable to the tender procedure itself. Moreover, the contract conditions that will govern the relationship between the employer and the successful tenderer is defined. Sufficient information must be provided by the buyer in order to attract relevant yet worthy contractors for bidding.

    Evaluating Risk

    Before commencing a tender procedure, employers and consulting engineers should be aware that the fewer details given or the more vague the specifications and information contained in the invitation to the prospective tenderers, the greater the risk that irresponsible bidders will participate. It is believed that more the detailed engineering information available in the tender document, the lesser the risk the contractor has to bear towards the accomplishment of the work.

  • STAGE 3: TENDER EVALUATION The procedure to receive and review tenders will fall within strict deadlines and policy guidelines established by the buyer of goods and services. These methods should be well-structured, well-defined, documented and understood by all parties involved in the bidding process. The employer will review tenders and decide on which contractor has the capability and resources to meet the stipulated requirements for the project.

    Reviewing contractor documents will encompass risks and risk allocation including environmental risks. Additionally, buyers should keep in mind that if risks are difficult to evaluate, some marginally qualified contractors can offer lower prices, as they have not anticipated the damages borne towards some uncalculated risks. Collecting the most extensive and complete information about soil conditions may be costly, but it will pay off and often leads to the most economical contract price with the least amount of unpleasant surprises.
  • STAGE 4: TENDER AWARD The award of the tender to a specific contractor has to take risk evaluation and allocation into consideration. The award will hopefully also strive for the Best Value contract (i.e. in terms of price). When considering a “Best Value” contract, factors such as quality, options and incentives, ongoing maintenance and/or a longer project lifespan are considered and not just the lowest price.
    TenderTiger Insider Tip:

    A high-priced contact may seem unfair for the short term but will have a heavy risk-taking appetite, that will keep the buyer satisfied in the long run.

    Making more than 2 million tenders available to you across varied sectors and industries, TenderTiger is the one-stop for all your tendering needs. Additionally, we offer value-added tendering services for both buyers and sellers with our knowledgable and robust team.