What is a Tender?
by Anshul on November 26, 2021
The Government of India spends a huge amount on the procurement of resources and services to initiate and accomplish numerous governmental projects for the country’s infrastructure and economic development. The Government fulfills these procurement processes by inviting tenders from contractors in the form of bids to supply goods or provide services, and the complete process is strictly maintained transparent as the amount being invested or spent is public money. A tender is an invitation from a client to contractors to execute some specific work in a stipulated time and budget. It is published as an Invitation to Tender, in newspapers, websites, etc as per the type and cost of the project. The tender applications assist the client to compare the quotations from the prospective contractors. The best-suited contractor is chosen based upon the cost quoted by the contractor and his expertise. Tendering eliminates favoritism and corruption by awarding works to deserving contractors.
The Government or a Client offers a tender by defining its requirements, qualification criteria, and the modes or process of application. After this process, bids are invited from the prospective contractors, usually in the form of budget estimates, and transparency is maintained through this elaborate bidding process. The bids after being assessed and compared as per the requirements of the clients and the rates provided by the contractors are shortlisted to choose a final contractor, who will be awarded the project contract who is also known as ‘L1 Bidder’. The contractor is not only chosen on the sole criteria of the lowest bid that is certainly important for comparison, but also another basis such as experience, reputation in the market, service capabilities, etc. The entire tendering process depends on the type of tendering(and further in the subsequent stages involved) that has been chosen by the client due to its suitability.
These tender documents can be prepared for a range of service contracts like demolition, construction, material or equipment supply, etc. Tender documents should be segregated into a number of packages if possible, every package having its own set of plans and designs, objectives, conditions, and required specifications, that may assist the contractor in directing the sub-contractors to perform individual tasks. While doing this, it should be kept in mind that the connection between these packages should be defined clearly and the existent interdependencies properly established.
This breaking up of tender documents into several packages not only helps the contractor in taking off the project cost but also makes it easier for the client to compare the submitted bids based on these packages. Bear in mind, segregation should not be done in excess because this might increase the number of definitions for the connections between the packages that in turn will be a mess and create problems.
Types of Tender
There are mainly three types of Tender which are:
- Limited Tender-As the name implies that this tender is open only to a specific number of contractors either chosen by the client or fulfilling certain requirements. It is not open to the public at large and only shortlisted firms or contractors are invited to quote the project. The purpose of limited tenders is to improve the quality of applications or bids received by the clients to ensure that the participating entities are experienced and qualified enough to accomplish the objectives of the project in consideration while maintaining prescribed standards and regulations. The client sends Notice Inviting Tender(NIT) to shortlisted parties. A minimum of three bidders is invited to participate in this tender and especially those contractors who have either been in business with clients or impaneled with it. This tender is employed when the estimated budget for the goods is up to 20,00,000 and the estimated value for work is up to 5,00,000.
- Open Tender-Open tender is the principal tender procedure that is invited by both private and government organizations. This type of tender is typically advertised in newspapers and online websites so that the public at large within the country can participate in it. This tender is employed when the estimated budget for the goods is more than 20,00,000 and the estimated value for work is more than 5,00,000.
- Global Tender-As the name suggests this type of tender is employed when the client allows contractors from across the globe to participate in the tender process to supply the required services or goods.
The above-mentioned tenders can be issued through :
- Expression Of Interest(EOI) is issued to select prospective service or goods providers before seeking detailed offers.
- Request For Information(RFI) is not used to shortlist potential suppliers but is used to define the project in the planning stage.
- Request For Proposal(RFP) is issued when an innovative and flexible solution is required at a later stage in a project and the project requirements have already been defined.
- Request For Quotation(RFQ) is employed to invite parties to quote an estimate for a specific project.
- Request for Tender an invitation to tender through all public advertisement sources for all contractors.
Contents of a Tender
The tender becomes a type of contract between the client and the contractor when his tender has been accepted to complete the construction project. This is why the contractor needs to keep a copy of the tender documents to himself for future reference. Tender documents usually consist of :
- A letter of 'invitation to tender'
- The 'form of tender' prepared by the client party has to be signed by the contractor
- Preliminaries describing the project's goal
- The 'form of contract' prepared by the client's party which are agreements with non-negotiable provisions(take it or leave it) for the contractor.
- A tender pricing document is the estimated cost of the project presented by the contractor that is used for comparison with other proposed tenders.
- Employer's Information Requirements(EIR) specify the information required by the Employer. More specifically a plan of the project designed by the contractor.
- Design drawings and project models if possible.
- Specifications define the resource requirement of the project is executing the project
- A tender return slip is fixed to the tender that states the tenderer's address for it to be returned to the tenderer in case his tender has been rejected.
All these documents have to be duly filled or signed as directed by the client and are to be submitted in a sealed package for bidding.
Important Terms in a Tender Document
A tender cannot be complete without the terms of a tender that play an integral part in conducting the bidding process of a tender. It provides details about the tender that allows interested bidders to take part in the bidding process. The important terms are:
- Terms and Conditions- The terms and conditions of the tender document define the important terms of the contract which has been formulated as per the contract laws of the country. The terms and conditions explain the method adopted and the fashion in which the bidding process will take place. Therefore the terms and conditions of a tender document act as a representation of the technical qualification requirement and warranties or an escalation clause for the future.
- Documentation Requirements-The bidding contractors need to present the documents that have been listed in ‘NIT’ to meet the project requirements. An Earnest Money Deposit(EMD) has to be deposited as part of the documentation process, which is a kind of security deposit and ranges between 2-5% of the total bid amount. All these documents have to be filled and submitted, carefully and cautiously otherwise the bids may be considered to be ‘non-responsive' which may lead to forfeiting of the EMD amount and ultimately a rejection of the bid.
- Evaluation of Submitted Bids-The process of submission of bids from the prospective contractors and its evaluation depends upon the stage of bidding that has been adopted due to the technical and financial aspects of the tender. How the bids have to be evaluated is also defined in the tender document which directs that the bids will abide by a single-stage bidding process or a two-stage bidding process. The bids of only those suppliers are opened who have qualified to participate in the tendering process.
- Single Stage Bidding-The participants have to place a single bid while specifying their qualification and eligibility(as mentioned in the tender documents) in the tendering process. The qualifications are nothing more than the technical and financial that have to be fulfilled by the bidders.
- Two Stage Bidding-In a two stage bidding process, the technical and financial qualifications of the bidding parties are evaluated in two separate steps. In the first stage, the technical qualifications are evaluated whereas in the second stage, the financial qualifications. In both these stages, the bidders have to submit relevant documents to assert their qualification status.
- Client Rights-The rights of the tenderer have already been explained in detail during the process. Generally, the client gives itself certain rights concerning the bidding process, wherein they have the sole right to reject a bid.
- Scope and Responsibility of the Bidder-The scope and duty of the bidder during the bidding process and also during the execution phase are clearly specified in the tender documents. The bidders have to assure that they will accomplish the scope of the bidding process and project, and will perform the duties that are expected of them. Only if they fulfill these requirements, they stand a chance at getting shortlisted for executing the project.
- Eligibility of Bidders-This term is also mentioned in the tender document which has been drafted as per the client’s discretion The eligibility criteria can be based on the technical and financial aspects of the project, experience, operation capabilities, etc.
Be it any kind of construction project, it has to be managed for timely completion and under a fixed budget. Without proper management, any construction project small and large-scaled may go haywire during any stage of the project. To aid contractors and owners in managing construction projects, many software has been developed to be used as management tools for construction projects.
Powerplay application is one such tool that can perform all functions related to construction management right from managing workers’ attendance to equipment and material management until the completion of the project. It can be used easily by almost anybody due to its easy and user-friendly UI.