What are bids and tenders and why do they exist (1 of 3)

What are bids and tenders and why do they exist?

Are you wanting to unlock doors and grow your business or wish to understand more about bids and tenders?

Here’s a good place to start.

This is Article 1 of 3 in our “Bidding and Tenders” series.

What are bids and tenders?

At first glance, some of the terms are confusing.

What is a Bid?

A bid is a formal response to a customer’s specific request for provision of product or services. The act of bidding is arguably the generation of a proposal that meets the customer’s defined requirement.

Bids take place for a range of commodities and services. In both the public and private sectors.

The customer details their requirements within a package that is generally issued to potential suppliers. The nature of bidding is competitive, several suppliers are likely to submit bids, which will be judged on their merits by the customer. Ultimately through this process the customer will select the winning bid.

The customer’s requests for an offer or proposal may require several steps and is has its own terminology which can be ambiguous and can vary country to country. I would always advise caution and clearly read any specific instructions and if necessary, seek appropriate expertise.

  • EOI – Expression of Interest, normally posted on ‘tender boards’, a form of pre-selecting bidders that may be invited to receive an invitation to tender
  • RFQ – Request for Qualification, the same or similar to and EOI supporting pre-selection of potential bidders
  • PQQ – Pre-qualification questionnaire, this is often a pre-cursor to receiving an invitation to tender. The same or similar to an EOI or RFQ

  • RFI – Request for information, similar to a PQQ, a request for specific information concerning the supplier, scope of product or service

  • ITT – Invitation to tender, a package that details the governance and the customers’ requirements
  • RFP – Request for proposal, the same as an ITT
  • RFQ – Request for quotation, similar to an ITT & RFQ but more likely to have a pricing bias and the customer may define the commodities to be supplied

What is the Difference between a Bid and a Tender?

Bid and tender have the same meaning. But suppliers tend to use the term “Bid”. Whereas, customers use “Tender” more.

Why companies go out to tender and bid for work

Tendering and bidding has benefits for both suppliers and customers.

For customers:

A cost-effective way of attracting and engaging several potential suppliers in parallel.

The bidding process can save time and speed up the procurement process.

The bidding process can save time and speed up the procurement process.

The bidding process can save time and speed up the procurement process.

The competition often helps to push prices down, this can be further encouraged with use of elimination stages.

Bidders often propose alternative solutions that can provide benefit and add value.

It helps to ensure governance and fairness.

Scoring mechanisms allow removal of weaker bidders and supports the decision-making process in the selection of the strongest supplier.

For suppliers:

Bidding is an opportunity for business growth.

Strategic bidding enables expansion into new segments and the development of relationships with suppliers. If a significant gap exists, your strategy may not to win on your initial bid, the experience gained and the relationships developed will help secure future success.

Increased certainty that the work will proceed as the customer invests time and money in the bid process.

The playing field is more likely to be level for suppliers because the success criteria is scored.

The act of bidding can test the fitness of your business and help to define new strategic objectives. Internal performance review, evaluation of customer scoring and debriefs is information that ought to be acted on:

  • What were we good at?
  • What could we improve?
  • Where do we need to invest?

In summary

If a customer has a demand for a product or service, launching a tender process can be a cost-effective way of securing a competitive offer.

For a suppler that wants to expand and generate new business, bidding can be an expedient means of getting products and services to market.

This article is 1 of 3 of our Bidding and Tenders series, a collection of articles helping explain aspects of bidding and bid management.

Article 2 is titled Questions to ask before bidding, and what does a bid response include (click the link to go straight to it)

If you have any specific questions, do not hesitate to contact Bid Catalyst, info@bidcatalyst.com

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