Showing posts with label Benefits of Tendering. Show all posts
Showing posts with label Benefits of Tendering. Show all posts

The Benefits of Open Tendering

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: This is the simplest form of open tender. 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. It often requests bespoke pricing.
  • Invitation to Quote: This is an informal method of open tendering in which the requirements are slightly 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 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 most economically advantageous 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: Stipulating the quality of products, works, or services required is essential to evaluating 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 who is bidding at what price.
  • Market Awareness: Open tendering allows organisations to review the market's offerings and ascertain an understanding of the alternatives 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 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 it:

  • 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. However, writing down the requirements is often an excellent start to the decision-making process. Once the requirements specification has been decided upon and agreed upon, the open tender provides a smooth path to selecting a supplier who can fulfil the requirements because of its formality.

Although open tendering has disadvantages, many organisations utilise the process as it brings people together to consider the exact requirements for the products, works, or services. Within the open tender procedure, the decision-making process is formalised. 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 Procurement Made Easy. This site looks at procurement issues to assist organisations and people in increasing the quality, efficiency, and effectiveness of their product and service supply to the customers' delight. ©️ Procurement Made Easy. All rights reserved.