What is Tender?
Tender refers to the process of inviting bids or proposals from contractors or suppliers for a construction project. The process is typically used by government agencies or private companies to select a contractor or supplier for a project based on criteria such as cost, quality, and experience.
The process usually begins with the issuing of a tender notice, which provides information about the project, the scope of work, and the requirements for the contractor or supplier. Interested parties then submit their bids or proposals in response to the tender notice, and these bids are evaluated by the tendering authority based on the specified criteria.
The purpose of the process is to ensure that the project is completed at a reasonable cost, on time, and to the required quality standards. By inviting competitive bids from multiple contractors or suppliers, the tendering authority can compare prices and select the most suitable candidate for the project.
Necessity of tender
The tender process is an essential part of procurement in many industries, including civil engineering, because it allows organizations to select the best contractor or supplier for a project based on objective criteria such as cost, quality, and experience. Here are some reasons why the tender process is necessary:
- Fairness and transparency – By inviting bids from multiple contractors or suppliers, the tender process ensures that the selection of a contractor or supplier is fair and transparent. This helps to avoid bias or favouritism in the selection process.
- Competition – The tender process encourages competition among contractors or suppliers, which can result in lower prices, better quality, and more innovative solutions.
- Cost-effectiveness – By comparing bids from different contractors or suppliers, the tendering authority can select the most cost-effective option for the project.
- Quality assurance – The tender process allows the tendering authority to evaluate the experience and qualifications of contractors or suppliers, which can help to ensure that the project is completed to the required quality standards.
- Risk management – The tender process can help to mitigate risks associated with procurement by ensuring that the selected contractor or supplier has the necessary skills and resources to complete the project successfully.
Overall, the tender process is essential for ensuring that procurement is conducted in a fair, transparent, and cost-effective manner, and that the selected contractor or supplier can complete the project to the required standards.
Types of tenders
While the competent authority sanctions the estimate, the Engineer in Charge will decide the method of execution of work. Generally civil works are executed on contract by inviting tenders. In case of emergency works, directly affecting the production in the mines or involving safety of workmen, the requirement of open tenders can be relaxed, and the work can be executed by direct negotiations with the working contractors or by call of limited tenders amongst the working contractors with the approval of the competent authority as per the delegation of powers. In case of limited tenders, the tender notice is sent to limited number of contractors who are considered suitable for undertaking the job within the time frame set for the urgent works.
Press publication for emergency works can be avoided to save time. However, such notices should be sent to all working contractors of the Area and displayed in the notice boards to encourage competitions.
Following are the types of inviting tenders: –
- Open tender
- Limited / Selected tender
- Local tender
- Turnkey tender
- Global tender
Open tenders – An open tender is a type of procurement process where all interested bidders are allowed to participate in the bidding process, and the tendering process is open to the public. The open tender process is transparent and fair, and it is usually used for projects where there is a high level of competition.
In an open tender process, the tendering authority publishes a notice of the tender in a widely circulated newspaper or on a public procurement website. The notice provides information about the project, the scope of work, and the requirements for bidders to participate in the tender.
Interested bidders are then required to submit their bids by a specified deadline. The bids are evaluated based on a set of predetermined criteria, such as the bidder’s experience, technical capability, financial stability, and the proposed price.
After the evaluation process, the tendering authority selects the most suitable bidder based on the predetermined criteria, and the contract is awarded to the successful bidder.
The open tender process is designed to ensure that the procurement process is fair and transparent, and that all qualified bidders have an equal opportunity to compete for the contract. It is an effective way of promoting competition and achieving value for money in the procurement of goods and services.
Advantages of open tender
There are several advantages of using an open tender process for procurement. Here are some of the main advantages:
- Transparency – The open tender process is transparent, which means that all bidders have an equal opportunity to participate and compete for the contract. The process is open to the public, and all interested parties can access the tender documents and observe the evaluation process.
- Competition – The open tender process promotes competition, which can result in better quality bids and lower prices. When there are multiple bidders competing for the contract, each bidder is incentivized to submit their best offer.
- Fairness – The open tender process is fair because it is based on a set of predetermined criteria that are applied equally to all bidders. This ensures that the contract is awarded to the most qualified bidder, rather than being influenced by subjective factors.
- Value for money – The open tender process is designed to achieve value for money by ensuring that the contract is awarded to the bidder who offers the best combination of quality and price.
- Wide range of bidders – The open tender process allows a wide range of bidders to participate, which can increase the chances of finding the best supplier for the project. This can be particularly useful for large or complex projects that require a high level of expertise.
Overall, the open tender process is an effective way of promoting competition, transparency, and fairness in the procurement of goods and services. It is a widely used procurement method in many jurisdictions around the world.
Disadvantages of open tenders
While there are several advantages to using an open tender process for procurement, there are also some potential disadvantages that should be considered. Here are some of the main disadvantages:
- Time-consuming – The open tender process can be time-consuming because it involves advertising the tender, evaluating bids, and selecting a supplier. This can result in delays in the procurement process, which can be a disadvantage if the project has a tight deadline.
- Costly – The open tender process can be costly because it requires resources to advertise the tender, evaluate bids, and select a supplier. This can result in higher procurement costs compared to other procurement methods, such as direct contracting.
- Limited supplier participation – In some cases, the open tender process may not attract enough bidders. This can be a disadvantage because it reduces the competition and may result in higher prices.
- Lack of innovation – The open tender process may not always encourage innovation because bidders are required to comply with the predetermined criteria. This can limit the ability of bidders to propose innovative solutions or approaches.
- Complex evaluation process – The evaluation process for the open tender can be complex, and it may require significant expertise to evaluate the bids. This can be a disadvantage if the procurement agency does not have the necessary expertise or resources to conduct the evaluation.
Overall, the open tender process is a widely used procurement method that has several advantages, but it also has some potential disadvantages that should be considered. Procurement agencies should carefully consider the specific needs of the project and the available resources before deciding on the appropriate procurement method.
A limited tender is a type of procurement process where a limited number of pre-selected bidders are invited to participate in the bidding process. The limited tender process is typically used when there are specific reasons why only a limited number of bidders are considered suitable for the project.
The limited tender process is usually used in the following situations:
- Urgent requirements – When there is an urgent need for goods or services, and there is no time to go through a full tender process, a limited tender process may be used to expedite the procurement process.
- Proprietary products – When the goods or services required are proprietary and can only be supplied by a specific supplier, a limited tender process may be used to invite bids from those pre-selected suppliers.
- Sole source suppliers – When there is only one supplier who is capable of providing the required goods or services, a limited tender process may be used to invite bids from that supplier.
- Technical expertise – When the goods or services required require a high level of technical expertise, a limited tender process may be used to invite bids from pre-selected suppliers who have the necessary expertise.
- Small projects – When the project is small in scope or value, a limited tender process may be used to simplify the procurement process and reduce administrative costs.
The limited tender process can be advantageous in situations where only a limited number of pre-selected bidders can provide the required goods or services. However, it is important to ensure that the selection of pre-selected bidders is done in a fair and transparent manner to avoid any appearance of favouritism or bias.
Advantages of limiting / selective tender
The limited tender process has several advantages, including:
- Time-saving – The limited tender process is generally quicker than the open tender process because there is no need to advertise the tender and evaluate many bids. This makes the limited tender process a suitable option when there is a tight deadline for the project.
- Cost-saving – The limited tender process can be cost-saving because it reduces the administrative costs associated with advertising the tender and evaluating a large number of bids. This is particularly useful for small projects where the cost of running a full tender process may not be justified.
- Focused evaluation process – The limited tender process allows the procurement agency to focus its evaluation on a select group of bidders who have been pre-selected based on specific criteria. This can make the evaluation process more efficient and effective.
- Expertise – The limited tender process allows the procurement agency to select bidders who have the necessary expertise and experience to deliver the required goods or services. This can ensure that the project is delivered to a high standard.
- Flexibility – The limited tender process is flexible and can be tailored to suit the specific needs of the project. This means that the procurement agency can select a limited number of bidders who are best suited to deliver the project.
Overall, the limited tender process is a useful procurement method for projects where there are specific reasons why only a limited number of bidders are suitable. It can be timesaving, cost-saving, and can help to ensure that the project is delivered to a high standard by selecting bidders with the necessary expertise and experience. [Security Deposit]
Disadvantages of limiting / selective tender
While there are several advantages to using a limited tender process for procurement, there are also some potential disadvantages that should be considered. Here are some of the main disadvantages:
- Lack of competition – The limited tender process may result in a lack of competition because only a limited number of bidders are invited to participate. This can reduce the potential for the procurement agency to obtain the best value for money.
- Limited supplier pool – The limited tender process may restrict the supplier pool because only a limited number of pre-selected bidders are invited to participate. This can limit the potential for the procurement agency to find new suppliers or to obtain goods or services from a wider range of suppliers.
- Perception of favoritism – The limited tender process may create the perception of favoritism because only a limited number of bidders are invited to participate. This can lead to criticism and accusations of unfairness if the pre-selection criteria are not transparent or if the pre-selected bidders have close relationships with the procurement agency.
- Reduced transparency – The limited tender process may result in reduced transparency because only a limited number of bidders are invited to participate, and the reasons for pre-selection may not be clear. This can make it difficult for other suppliers to understand why they were not invited to participate in the bidding process.
- Risk of collusion – The limited tender process may increase the risk of collusion between the pre-selected bidders because they are a limited group. This can lead to a lack of competitiveness and potentially higher prices.
Overall, the limited tender process is a useful procurement method for projects where only a limited number of bidders are suitable. However, procurement agencies should carefully consider the potential disadvantages and ensure that the pre-selection criteria are transparent and fair to avoid any perception of favoritism or bias. Additionally, the procurement agency should consider implementing measures to ensure competitiveness and prevent collusion between pre-selected bidders.
A local tender is a procurement process where the invitation to bid is restricted to suppliers who are located within a specific geographical area. Typically, this geographical area is defined as a certain radius or distance from the location where the goods or services are required.
Advantages of local tender
The advantages of a local tender include:
- Supporting local businesses – A local tender can help to support local businesses by giving them an opportunity to bid for and win contracts. It boosts the local economy and job creates.
- Cost savings – A local tender can result in cost savings because the distance that goods or services need to travel is reduced. This can lead to lower transportation costs and potentially lower prices for the goods or services being procured.
- Quicker delivery – A local tender can result in quicker delivery of goods or services because suppliers are located nearby. This can be particularly useful for urgent or time-sensitive projects.
- Environmental benefits – A local tender can have environmental benefits because it reduces the distance that goods or services need to travel, which can reduce carbon emissions and other environmental impacts.
- Increased accountability – A local tender can increase accountability because local suppliers may feel more invested in the success of the project and may be more responsive to the needs of the procuring agency.
Disadvantages of local tender
However, there are also potential disadvantages to using a local tender process. These include:
- Limited supplier pool – A local tender may restrict the supplier pool because only suppliers located within the defined geographical area are eligible to bid. This can limit the potential for the procuring agency to find new suppliers or to obtain goods or services from a wider range of suppliers.
- Reduced competition – A local tender may result in reduced competition because only a limited number of local suppliers are eligible to bid. This can reduce the potential for the procuring agency to obtain the best value for money.
- Perceived bias – A local tender may create the perception of bias because only local suppliers are eligible to bid. This can lead to criticism and accusations of unfairness if local suppliers are perceived to have an advantage over non-local suppliers.
Overall, a local tender can be a useful procurement method for projects were supporting local businesses and reducing transportation costs are important considerations. However, it is important to carefully consider the potential disadvantages and ensure that the tender process is transparent and fair.
A turnkey tender refers to a type of construction contract where the contractor is responsible for the entire project, from design to construction and final commissioning. In other words, the contractor takes full responsibility for completing the project to the satisfaction of the client and delivering a “ready-to-use” facility.
The term “turnkey” comes from the idea that the client only needs to “turn the key” to start using the finished facility. This type of contract can be beneficial for clients who don’t have the expertise or resources to manage the various stages of a construction project. By entrusting the entire process to a single contractor, clients can save time, reduce costs, and minimize risk. However, it’s important for clients to carefully evaluate potential contractors to ensure they have the necessary experience and qualifications to deliver the project successfully.
Turnkey tender has several advantages and disadvantages that clients should consider before deciding whether it is the right type of contract for their construction project. Here some of the key advantages and disadvantages:
Advantages of turnkey tender
- Single point of responsibility – With turnkey tender, the contractor takes full responsibility for the entire project, from design to construction and final commissioning. This means that clients only need to deal with a single point of contact, which can simplify the project management process.
- Reduced risk – By entrusting the entire project to a single contractor, clients can reduce the risk of delays, cost overruns, and quality issues that can arise when multiple contractors are involved.
- Faster completion – Turnkey tender can be faster than other types of contracts because the contractor has control over the entire project and can implement changes more quickly.
- Cost savings – Clients may be able to save money by using turnkey tender because the contractor can optimize the project design and construction process to minimize costs.
Disadvantages of turnkey tender
- Limited control – Clients may have limited control over the design and construction process with turnkey tender. This can be a disadvantage for clients who have specific design requirements or who want to be more involved in the project.
- Higher costs – Turnkey tender can be more expensive than other types of contracts because the contractor assumes more risk and responsibility.
- Lack of transparency – Because the contractor is responsible for the entire project, clients may have less visibility into the construction process and may not be able to monitor progress as closely.
- Potential for conflicts of interest – The contractor’ s interests may not always align with the client’s interests, which can lead to conflicts of interest that may affect the quality of the project. [Refund of security deposit]
Overall, turnkey tender can be a good option for clients who want to simplify the construction process and reduce risk, but it’s important to carefully evaluate potential contractors and weigh the advantages and disadvantages before making a decision.
A global tender is a procurement process in which an organization or government entity solicits bids from suppliers or contractors worldwide. In other words, it is a tender that is open to bidders from any country around the world.
The main advantage of a global tender is that it can increase competition and provide access to a larger pool of suppliers and contractors. This can result in lower costs, better quality, and more innovative solutions.
However, there are also some potential disadvantages of a global tender. For example:
- Language and cultural barriers – Working with suppliers or contractors from different countries can create language and cultural barriers that may need to be overcome to ensure effective communication and collaboration.
- Legal and regulatory challenges – Different countries may have different legal and regulatory requirements that need to be considered when selecting suppliers or contractors. This can add complexity and increase the risk of non-compliance.
- Logistics and transportation – Shipping goods or transporting personnel across international borders can be more complex and costly than working with suppliers or contractors in the same country.
Overall, a global tender can be a good option for organizations that want to increase competition and access a larger pool of suppliers or contractors, but it’s important to carefully evaluate the potential challenges and risks before proceeding.