Advantages of tendering make it such that most organizations, as they grow, find the process appealing since it helps with the negotiations and transparency, if done properly.
Say your organization needs new laptops, you can send someone to go and shop for such or you can invite suppliers to make you offers regarding such. The latter option seems to make sense if you are a big organization with a procurement department that understands the advantages of tendering methods.
But before we get all focused on the pros and cons of tendering it only makes sense to start by understanding what it is that we are talking about.
What is tendering?
Tendering can be defined as: ‘The public release or public communication by an organization of the requirement of goods or services for a project in order to allow formal bids to be made to supply these goods or services’ this is according to CIPs.
A simpler way to look at it, if for some reason you find that definition too academic is;
The process by which an organization, in this case the client or employer, invites contractors to place a bid for work on a construction project, supply of goods or even provision of services.
In short, a company has a problem they need fixed, they ask potential suppliers to make them offers and the process begins. So if you are a supplier of some sort when you see a company publishing invitation to tenders (ITT) it is the companies way of saying, “go on make us an offer”.
What are the advantages of tendering?
The purpose of tendering is mostly for the organization to know what the suppliers market is like and how that market can give the organization value for its money. This is seen in the bids presented, which is why you need to be careful to avoid bid rigging. Truth is there are various ways of initiating offers from suppliers, such include:
- Request for pricing
- Request for quotation
- Basic inquiries
All of which are complex in their own way, and present various advantages and disadvantages of tendering. But when dealing with high value or high risk purchases in which transparency is key then tendering becomes the most appropriate choice
Why is that? Coz of the following advantages of tendering:
- Transparency
Depending on the nature of the organization or the image it would like to portray to the public, being transparent when dealing with suppliers helps create goodwill and tenders do that because all competent suppliers are given an equal platform on which to compete in supplying goods or services to the organization.
- An established, accepted and generally understood process
Organisations don’t just wake up and say “hey let’s send out an invitation to tenders” they work on a process that will show how suppliers will be evaluated and who will be in charge of any given process, in case of problems how will such be dealt with, etc. So once the tendering process is in place everybody knows and understands the process, which in turn saves a lot of time and money.
- Its allows for an audit trail
In case of any issues to do with financial resources there is a “paper trail” that explains what was spent on what and why as well as who authorized it. This helps with accountability in procurement
- It encourages of competition
Competition is not always a bad idea if it is healthy. With tenders the suppliers know that they have to bring their best otherwise they will not be awarded a contract. This in turn means the client organization is guaranteed of the best results.
- Safe guards against verbal contracts
Whichever tendering method used always has some written material be it e-tenders or just traditional tendering. The process allows for the production of a written quotation, along with relevant supporting information against prescribed needs. These will help with the contract management, and managing contractual risks.
- Allows for easier way to compare offers
- Both parties benefit
The one thing you have to understand about contracts is that all contracts have a price. The price you pay will mostly depend on the risks you are talking or how you negotiated the deal and the law doesn’t care about what you pay as long as you pay and are ok with it. Tender means as a buyer you are getting value for your money and as a supplier you are being paid because your bid was the best, hence both parties benefit.
- It’s the easiest way to comply with the organization’s procurement policies
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