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What is the Difference Between a Bid and a Tender?

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Tendering is a great opportunity for businesses to develop and earn long-term revenue for their services. A successful tender from a high-profile organisation could mean regular contracts and revenue for many months or years to come. And with hundreds of public and private organisations submitting tenders every day, there are lots of opportunities to win those contracts.

But, for anyone outside the tendering process, all of this can seem a bit confusing. What is a tender? What is a bid? What does the tendering process involve and how does a company submit a successful bid? Luckily, we have the answers to these questions and more.

Photo by Cytonn Photography on Unsplash

What is a tender?

A tender is made when an organisation wants to buy products or services from suppliers. The tender document sets out what the organisation requires, which could be anything from purchasing office supplies to building IT infrastructure to offering management training services. Suppliers are then asked to submit proposals (or bids) to the tender on what they will offer and how much it will cost. Tendering can also refer to the process by which shareholders submit shares in response to a takeover offer made to a company.

Types of tenders

While tenders can include a huge range of products or services, they are generally divided into two types: open and selective. These describe the process of tendering, rather than the contents of the tender itself.

Open tenders

Open tenders are, as the name suggests, open to anyone to bid for. Open tenders are subject to laws and regulations to ensure the process gives all suppliers a fair chance of winning. Open tenders avoid the potential risks of favouritism, nepotism or bribery. These are common with public sector and governmental organisations.

Selective tenders

It takes time for organisations to go through all the bids for open tenders, so sometimes they decide to go with selective tenders. Selective or limited tenders are not listed publicly for all suppliers to see, but instead to a pre-qualified list of suppliers that the organisation has worked with before. Selective tenders are often for smaller contracts, or contracts with specific requirements suited to particular organisations.

What is a bid?

A bid is another word for the submission a supplier makes to a tender. A bid will include specifics on what is being offered, a breakdown of costs and a planned delivery schedule. Once the tender process is closed and all bids have been received, the organisation then consults all bids and decides which supplier will win the contract.

How a tender works

Most companies have a structured tendering process to standardise the process from opening, through bidding and evaluation to selection. Each company’s process can be different, so it’s important to research how a company manages its specific tendering process before bidding on a tender.

1. Opening

First, the company submits a Request For Tender (RFT) or a Request For Proposals (RFP). If it is an open tender, the organisation may post their tender openly on their website or a procurement platform for all suppliers to see. If it is a limited or selective tender, they may send the documents individually to a list of pre-agreed suppliers.

2. Bidding

Once the tender is available, suppliers have a window in which to bid. Bidding usually involves submitting a written proposal in a standardised form or format, either online or in paper. The reason for the standardised form is so that the tendering company can more easily compare different bids. The bidding process can sometimes involve a request for questions (RFQ), where suppliers can submit any questions about the tender document for clarification. This is also the stage where companies might approach a tender management consultancy to make sure their tender has the best chance of winning. Once submitted, bids are sometimes sealed to avoid the tendering panel pre-judging submissions before the evaluation stage.

3. Evaluation

After the bidding process has closed and all bids have been received, the company can evaluate the bids against each other. If the bids have been sealed, they are opened together, sometimes in front of the bidding suppliers, in order to ensure transparency in the evaluation process. Evaluation of the bids is usually based on a set of pre-agreed criteria, in order to ensure fair and equal comparison of all bids.

4. Selection

Once the evaluation is complete, it is time for the tendering organisation to select the winning bid. While many tenders are decided on price, there are a wide variety of subjective criteria that can make one submission the winning bid. Which bid is selected depends on the organisation, the tendering panel, and, of course, the quality of the tenders.

What makes a good bid?

First, it’s important to say there’s no formula for the perfect bid. Every tender is different and no two companies’ tendering processes are exactly the same. The most important thing you can do to write a successful bid is to learn as much as you can about the company you’re bidding for. Figure out who they are, how they work, and, crucially, how their tendering process works. The tendering evaluation criteria should be made available with the tender documents, make sure you study that carefully.

Once you know their tender inside and out, ask yourself four key questions:

  • Can you realistically meet the buyer’s requirements?
  • Do you have the necessary accreditations, memberships or qualifications listed?
  • Do you have relevant experience?
  • Do you meet the financial criteria?

If the answer to all of these questions is a firm yes, you can start on your bid with confidence. If not, really consider whether you want to invest the time in submitting a bid, or if there’s another tender out there more suited to you and your organisation. If you’re unsure, speaking to advisors at a tender management consultancy is a great way to test the waters and figure out if this is the right opportunity for you.