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What does a Tender mean in Business?

What is a Tender in Business

What does a tender mean in business? It is the term used for a formal and structured approach for the purchase or procurement of business in the form of services or goods. Companies create a ‘tender’ (or create an ‘Invitation to tender’) when they ask suppliers to submit bids for goods or services, the company then evaluates the bids on the table and decides to contract with a supplier. This evaluation usually requires a formal process to assess the applications fairly. It is common for businesses to reveal the price versus quality assessment weighting to be used within the tender documents so the applicants understand the priority focus.

 

 

How Tendering Works

 

Typically, tendering consists of the following process:

  1. The buyer company requires supplies; they research the market to identify options.
  2. The buyer announces the ‘tender’ to the market inviting suppliers to register interest.
  3. Interested suppliers are sent full tender documents, these include the overall requirements, timescales, and evaluation criteria.
  4. The suppliers submit their tender proposals by the deadline, outlining how they intend to fulfil the provision of goods and services.
  5. The buyer then reviews the submitted proposals scoring them according to their ability to meet the target criteria.
  6. Before contracting with a supplier, the buyer may have discussions with the top bidders to clarify or negotiate elements of the tender.
  7. When satisfied with a bid, contracts are awarded to successful suppliers and other bidders are notified.

 

Types of Tender

 

  1. Open Tendering: This is probably the commonest type. It literally allows any type of business to bid for the contract.
  2. Restricted Tendering: Also called Selective Tendering. This is when applicant are restricted based upon criteria or skills. These can be assessed by a pre-qualification application. 
  3. Negotiated Tendering: This approach allows for a negotiation between the buyer and prospective seller. It can be useful when the process is more complex than a straightforward form allows or in a strong buyer’s market.

 

Why Organisations Issue Tenders

 

Organisations issue tenders for several reasons, these include:

  • Finding the best market value: by comparing suppliers, buyers ensure the best price.
  • Creating a fair bidding process: tendering is transparent eliminating unfair selection.
  • Legal standards: in the public sector, high-value contracts must be tendered by law.
  • Few risks: thanks to tender documents, buyers are protected from procurement risks.
  • Healthy competition: tendering means suppliers offer better solutions and pricing.

 

Creating Strong Tender Documents

 

Strong tender documents should be created for suppliers, they include:

  • Some background on the buying organisation
  • Comprehensive specification on the goods/services required
  • The proposed terms of the contract
  • A questionnaire to assess supplier’s qualifications
  • Information on how the supplier is evaluated
  • Pricing and payment information
  • Information on the submission’s deadline

Well-thought-out tender documents help suppliers understand the requirements and submit better bids.

 

Defining Requirements

To create strong tender documents buyers must survey the market and develop a clear statement of requirements. These include:

  • The scope and nature of the goods and services required
  • Whether or not there are any technical standards expected
  • Concise information about timelines and deadlines needed
  • Information on governance and reporting requirements
  • All pricing and payment expectations placed on the supplier
  • Any evaluation factors that might be placed on the supplier

Crafting well-defined requirements such as these, allows suppliers to submit tailored bids.

 

Providing Background on the Organisation

Suppliers also require information on the ‘buying’ organisation, these are provided in the tender documents issued to suppliers and include:

  • An overview of the company and its general operations
  • Some background information on previous procurement relationships
  • Some background on the industry sector the buyer operates in
  • Some background on the organisation’s structure and processes
  • Buyer information helps future suppliers to understand the nature of the business and industry and to craft more tailored bids.

 

Explaining the Selection Process

The tender process needs to be transparent, so suppliers must understand the following:

  • The stages which are involved in assessing potential suppliers
  • The scoring methodology and criteria used for assessing candidates
  • Any subtleties used in weighting various assessment criteria
  • The nature of internal decision-making processes used in tendering
  • Any rules used with regard to clarification and negotiation

Better transparency allows suppliers to submit better bids and manage expectations.

 

Assessing Tender Proposals

Tender proposals are evaluated by the buyer using a scoring methodology as defined by the tender. The methodology takes account of the following:

  • Compliance: Does the supplier meet the essential criteria defined in the tender?
  • Scoring: How well does the proposal meet the published evaluation factors?
  • Clarification: Can proposal issues be resolved through discussions and negotiation?
  • Shortlisting: Which bid(s) score highest and offer the best overall value

Following the shortlist, a supplier is chosen using evidence-based assessment results.

 

Initial Compliance Checks

Initially, the buyer verifies the tenders by ensuring they meet their pass-fail requirements, as stated in the ITT documentation. At this stage, non-compliant proposals may be disqualified.

 

Scoring Submissions

For compliant bids, the buyer undertakes a detailed assessment using the published scoring criteria and weightings.

Common scoring factors include:

  • Proposed technical solution
  • Supplier experience and credentials
  • Resources and staffing
  • Quality/performance standards
  • Risk management approach
  • Pricing schedule

Each tender is rated on how extensively it addresses these factors.

 

Clarification Processes

The buyer may contact suppliers to clarify aspects of proposals, like:

  • Ambiguities around proposed methodologies
  • Queries on pricing-resourcing models
  • Seeking more evidence for claims

Clarification gives bidders an opportunity to refine their tender to meet the requirements.

 

Shortlisting the Best Bids

 

Using evaluation scores, the buyer then makes a shortlist identifying the highest-scoring tenders.

Shortlisted bidders progress to the next stage, while remaining suppliers are notified they were unsuccessful.

 

Awarding the Contract

 

Prior to awarding the contract, there is a 10 day period where unsuccessful suppliers can challenge the decision.

If there are no issues, the buyer formally awards the contract to the winning supplier – the project can then commence.

 

Notifying Successful and Unsuccessful Bidders

Following the standstill period, the buyer sends formal notifications to:

  • Successful bidder(s) – Informing them of their successful tender.
  • Unsuccessful bidders – Advising them their tender was declined and announcing the winning supplier.

Prompt notifications ensure fairness and transparency.

 

Mobilising Delivery

After awarding a contract, the buyer and supplier begin work to mobilise delivery:

  • Finalising contractual documentation
  • Initial project planning meetings
  • Securing required resources
  • Agreeing on timelines

Close coordination ensures a smooth start to the contract.

 

Providing Feedback

Though not always mandated, best practice is for buyers to give constructive feedback to unsuccessful bidders if requested.

Helpful feedback highlights areas for improvement like:

  • Compliance issues
  • Areas solutions were weaker
  • Overly high pricing
  • Lack of evidence

This supports suppliers to refine their tendering capability.

 

The Supplier Perspective

Suppliers must write high-quality proposals to win contracts:

  • Carefully review the buyer’s requirements in the tender documents – can you meet them?
  • Write the tender to match the buyer’s specifications and evaluation criteria, offer evidence like case studies and testimonials to back up claims.
  • Follow all guidelines on format, structure and submission method stated in the tender documents.
  • Check your tender response thoroughly before submitting to avoid errors.
  • If unsuccessful, ask for feedback and learn lessons for future bids.

 

Identifying Opportunities

Suppliers should proactively seek tender opportunities to match their offerings. Useful sources include:

  • Government and industry procurement portals
  • Trade publications and press releases
  • The buyer’s website and supplier database
  • Networking events and trade groups

Setting up alerts and feeds saves time hunting.

 

Analysing Capability Fit

Before bidding, carefully determine if the contract matches your core competencies and capacities.

Check these factors:

  • Does your company have the skills and expertise to meet all requirements?
  • Do you have sufficient and suitable resources to allocate if successful?
  • Can you deliver the buyer’s criteria within the stated timeframes?

Bidding for tenders outside your wheelhouse wastes time and money.

 

Developing the Response

Tender responses should demonstrate how you will provide value and meet the buyer’s needs. Key components:

Executive summary – Concise solution summary, value proposition, and benefits.

Company profile – Provide background and credentials to build credibility.

Technical proposal – Details your methodology, approach, expertise, and innovation.

Resources – Introduce qualified team members who will work on the contract.

Relevant experience – Provide case studies proving you have delivered similar work successfully for past clients.

Pricing – Commercial offer following the format dictated in the ITT documentation.

Risk management – Strategies to identify and mitigate potential delivery risks.

Supporting evidence – References, data, and documentation to validate all claims made in the proposal.

Bid Writing Best Practices

Follow these best practices when developing your tender response:

  • Adhere strictly to all formatting instructions, limits etc. stated in the ITT documents.
  • Ensure the entire proposal aligns with the buyer’s stated requirements and evaluation criteria.
  • Use clear, concise, professional language – avoid marketing fluff.
  • Focus on communicating your expertise, not boasting.
  • Thoroughly proofread the final document before submission.

 

Checking and Submitting

Before submitting:

  • Perform an internal review to identify possible refinements.
  • Ensure you send the tender via mandated channels before the deadline.

Late or incorrectly submitted tenders may be disqualified.

 

Tender Scoring Systems

Tender documents explain how proposals are scored: for example:

  • Technical quality – rated 0-5 on meeting requirements
  • Pricing – the lowest price gets maximum points

Review the scoring approach to focus on maximising points in your tender response.

 

Award Criteria and Weightings

The ITT documentation includes a score matrix showing the criteria and associated percentages.

For example:

  • Technical Solution – 30%
  • Resources and Experience – 20%
  • Quality/Risk Management – 15%
  • Pricing – 35%

These weightings indicate where to concentrate effort in the tender response.

 

Scoring Price

For quality criteria, proposals often receive:

  • Maximum points for fully meeting requirements
  • Partial points for partially meeting requirements
  • Zero points for failing to address requirements

References can provide evidence for stronger bids.

 

Partnering and Subcontracting

If a tender opportunity is beyond your capacity, partnering with other suppliers can enable a joint bid:

  • Identify non-competing providers to complement your offer.
  • Clearly define responsibilities – who will do what, how will cost-profits be split.
  • Present collective credentials, experience and assets in the bid.
  • Ensure seamless end-to-end process for the buyer.

Partnering expands skill sets and resources available for delivery.

Alternatively, larger suppliers may engage SMEs as sub-contractors on specific work packages if their niche expertise adds value.

 

Competing as a Small Business

Small suppliers can be hesitant to tender against larger companies, but SMEs can win if they play to strengths:

Specialist expertise – Deep knowledge and skills in exact services required.

Customer service – More attentive and adaptive service due to small size.

Simplicity and efficiency – Avoid the bureaucratic processes of big corporations.

Competitive pricing – Lower overheads mean more attractive rates possible.

Innovation – Nimble SMEs can create bespoke solutions.

With strategic bids, small companies can effectively compete on quality, not just size.

Collaborating with Big Suppliers

Instead of competing directly, SMEs can partner with larger bidders to deliver elements.

Suppliers gain niche expertise while smaller companies get access opportunities at scale.

Reserved Tendering

Some tenders are reserved for SMEs, particularly for public sector procurement, which levels the playing field.

Small firms should actively target these earmarked tenders that prohibit big competitors.

 

Summary

  • With the right tendering approach, businesses can access lucrative revenue streams.
    • Applying for tenders provides businesses with opportunities to win new contracts.
    • Suppliers must understand requirements, and offer detailed, evidence-based proposals.
    • Always follow the bid formats and deadlines carefully.
    • Have a good understanding of what the business is looking for (quality versus price) to have the best chance of being successful. 
    • Offering tenders can mean that you get a choice of new services or goods at competitive prices

 

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