02 Oct Guest Blog – Tenders – What are They, What Types are There, How do They Work and What are the Benefits?
What are Tenders?
Commercial Tenders can be issued by both private and public sector organisations as a means of procuring or working towards procuring products or services or both. Tenders are typically prescriptive in nature, specifying exactly what product and or service is required, and how the product is required to perform or how the service is to be delivered and over what timeframe. This Blog primarily focuses on public sector tenders, although tenders issued by the private sector follow similar lines.
Tenders are designed to allow easy comparisons and evaluations of the various offers (responses to tenders) in a standard format so that the best commercial offer can be identified and selected.
What are The Different Tender Types?
There are several tender types, but not all of them will be seeking a price for a product or service. The following is a description of the names and types of the most common tenders.
|RFP||Request for Proposal||A document specifying a product or service and inviting responses from suitably qualified organisations. An RFP is looking for pricing information, but it may not require firm pricing, rather an indication of what the final pricing might be - usually for budgeting purposes.|
|RFQ||Request for Quote||Similar to the above but where the issuing body may be looking for a firm price for a particular product or service.|
|RFI||Request for Information||Usually a precursor to the issue of an RFP or RFQ. The issuing body is attempting to identify interested parties and potential suppliers, as well as whether the proposed product or service is actually available.|
|RFE||Request for Estimate||Similar to an RFP. RFEs are not very common and only occasionally seen in the market.|
|EOI||Expression of Interest||Similar to RFIs. A document designed to elicit responses and information from interested parties and confirm (or deny) that there are enough organisations and skills available to meet the potential and proposed requirement(s).|
Tender formats differ depending on the issuing body and the dollar value of the tender. Tender response formats can be in Excel format where you are required to respond to specific questions in the tender about the product and service, including pricing details, in the corresponding Excel columns. Other formats can include Word documents, which are free flowing, but you are still required to follow a specific response format. Both types typically require the responder to supply reasonably detailed supporting information about the responder’s organisation with the tender submission.
There are also different types of tenders in terms of who is provided with details of the tender and how. Two of the most popular types include where an RFx may be distributed to the open market, which means it’s open to everyone who wants to respond. They can also be by invitation only, where prospective tenderers, capable of providing the product or delivering the service, and known to the issuing body, are simply sent the RFx to respond to.
Responding to Tenders
RFPs, RFQs and RFEs can look overwhelming and complex. They can be very time and labour intensive to complete, especially for newcomers embarking on the Tender process as a means of seeking and winning new work/projects. Depending on who is issuing the RFx, there are typically very stringent requirements that must be met for the potential supplier to qualify and before the RFx is awarded. This is particularly the case for Government issued RFx tenders, whether issued by Federal, State or Local governments. They are all looking for and must have in place, assurances that any potential supplier can provide the product or service and will be able to support the product or service into the future.
Assurances range widely, but typically Tender issuers will want to know and want proof of:
- Company details – years in operation, key personnel, etc.;
- Financial health of the company;
- Insurances to cover the product or service being supplied (product liability insurance, professional indemnity etc.); and
- Intention to use and details of any sub-contractor(s) who you may engage to help deliver the product or service.
Are There Benefits in Utilising Tenders to Win New Business?
Utilising Tenders to potentially win new business can provide many benefits. These include doing business with a large entity, which makes follow-ups and enquiries easier and stability in terms of invoicing payments.
The Government has well defined mechanisms for making payments to suppliers and generally recognizes the importance of paying on time to keep suppliers liquid. Payments are triggered when the supplier meets certain agreed or negotiated milestones. Once an agreed milestone has been achieved, and where that milestone is tied to a payment, the supplier can issue and send the invoice. Government will then pay the invoice in 30 days. This can help to smooth a business’s cash flow and provide some payment certainty.
However, simply responding to a tender does not guarantee you will be successful. It is a competitive process designed to secure the most appropriate supplier who most closely matches the requirements and offers the best value for money. Additionally, you may go through the tender process and feel you have supplied a strong tender response, only to find the tender issuer postpones or cancels the tender. Tenders should be a component of other business activities which are aimed at securing new work.
To find out more or to get assistance with a tender contact Strategy Australia: