Open tender

From CEOpedia | Management online

Open tender - is the process of involved stakeholders making an proposal, bid or offer, or expressing concern in response to request or an invitation for tender. For instance developers will pursue building contractors to reply to their individual building or development and select an tender offer that will achieve their requirements. Moreover, an offer should provide the best possible value for money (Forlee R., 2015, p.246).

Types of requests in tender process

Tender may be issued through different requests such as (Forlee R., 2015, p.247):

  • Expressions for interests (EOI) which is used before seeking exact offers.
  • Second possibility is request for information (RFI) used in the first phase which concerns planning stage to support in defining the project, but not used to pick suppliers.
  • Third way is request for proposal (RFP) used when flexible or innovative solution is needed
  • Finally request for tender (RFT) which is open to all contractors and concerns an invitation to bid by public advertisement.

Types of tender process

Types of tender process are (Forlee R., 2015, p.247):

  • Selected tender which is open to a limited number of contractors which could be shortlisted from suppliers recommended by project manager or from an open bid.
  • Second possibility is invited tender when the developer connections a picked number of suppliers directly and also requests them to execute the contract. It is mostly used for emergency situations, specialist work, low-risk, low-value or off-the-shelf opportunity.
  • Further option is open tender which is an invitation to bid via a public advertisement. Contractors are obligated to submit required information and moreover, there are no limitation who can submit a bid.

Open tender in simplified form

One of the case to carry out in the contracts first phase is the option by which the potential contractors for the exact project are to be picked. It is a planning stage. The most commonly used method is open tender for the contract price by an advertisements. Open competitive tendering is one of the methods for public performances contracts which is described by the European Directive. Open tender is a process at which everyone who wishes submit their offer could do this, but in some procurement organizations just only representatives of tender process could attend (Marsh P., 2015, p. 37).

The main Tendering principles

The main Tendering principles concerns for instance:

  • Individuals could use limited tendering procedures or open tendering procedures.
  • In the open tender process parties may publish an invitation to take part in such a way as to be easily accessible to any supplier of the other entity.
  • Terms and conditions for participation in open tender process may be publish in proper time.
  • The tender process should be non-discriminatory and fair and should also have a method to eliminate potential conflicts between suppliers participating in the tender process and persons administering the process.
  • Also crucial principle is that confidentiality at each stage bidding is required.

Additonal information

Open tendering permitting tenders from any contractor interested, might be unwanted because it involves too many potential contractors in abortive bidding that is inefficient and waste resources (Telfrod T., 2000, p.3). Tender procedure concerns contracts for the realization of projects. The idea of open bidding has developed into more elaborate form in respect of huge projects, particularly where works have to conduct overseas (C.K.Haswell, 2013, p.136).

Examples of Open tender

  • The most common example of an open tender is the procurement of goods and services by governments and public sector entities. Governments often use open tenders to purchase goods and services, such as construction work or IT equipment. The process involves a competitive bidding process, where potential suppliers submit bids. The government or public sector entity then reviews the bids and selects the most suitable and cost-effective one.
  • Another example of an open tender is the acquisition of a company or business. Companies often use an open tender process to identify potential buyers and evaluate their offers. This involves the company issuing an invitation to tender and inviting interested parties to submit their offers. The company then reviews the offers and selects the one that provides the best value for money.
  • Open tenders are also used in the private sector, for example when a company is looking for a contractor to carry out a specific project. The company issues an invitation to tender and invites potential contractors to submit bids. The company then reviews the bids and selects the most suitable one.

Advantages of Open tender

Open tender has several advantages that make it an attractive choice for many businesses. These benefits include:

  • The ability to receive competitive bids from multiple suppliers. By allowing multiple suppliers to compete for a contract, open tender ensures that businesses get the best possible deal. This can result in significant cost savings as suppliers will be willing to offer competitive prices in order to secure the contract.
  • Transparency and fairness. By inviting multiple suppliers to submit bids, businesses can ensure that the process is fair and transparent. This increases the chances that the best supplier for the job is chosen, and it also helps build trust between businesses and suppliers.
  • Increased competition. By opening up the process to all potential suppliers, businesses can ensure that the most capable and qualified supplier is chosen. This helps create an environment of healthy competition between suppliers, which can lead to better quality services and products.
  • Access to a larger pool of suppliers. By allowing multiple suppliers to submit bids, businesses can access a larger pool of suppliers than they would if they were to use a more traditional method of procurement. This can help businesses find the right supplier for their needs.

Limitations of Open tender

Open tender has a number of limitations, including:

  • Limited competition - Many times, only a few suppliers are aware of an open tender, thus limiting the amount of competition and potentially resulting in higher prices.
  • Increased paperwork - Open tender requires more paperwork and documentation than other methods, leading to higher costs and more time spent.
  • Lack of transparency - Open tenders are sometimes used to obscure the details of a project and make it difficult for outsiders to understand its scope or potential.
  • Time consuming - Open tenders take a long time to complete as they involve extensive research and preparation of bids. This can lead to delays in the completion of the project.
  • Risk of favoritism - Open tenders may lead to favoritism as stakeholders can be influenced by personal relationships or other factors.

Other approaches related to Open tender

In addition to open tender, there are several other approaches that can be used to select the right contractor for a project. These include:

  • Limited tendering - this is a process that involves selecting the best contractor for a project from a limited number of vendors. This approach is usually used when the project is complex and requires specialized expertise.
  • Negotiated tendering - this is a process that involves selecting a contractor through negotiations with a shortlist of pre-selected vendors. This approach is used when an organization needs to tailor the project to meet specific requirements and desires.
  • Single-source tendering - this is a process that involves selecting a single contractor for a project without involving any other vendors. This approach is usually used when an organization has a specific contractor in mind for the project, or when there is a limited number of suitable contractors.

Overall, each approach has its own merits and drawbacks, and organizations should assess the requirements of their projects before selecting the right tendering approach.


Open tender — recommended articles
Make-Or-Buy Decision — Request For Information — Selective tender — Design bid build — Need for approval — Types of procurement — Bid documents — Sales techniques — Government procurement

References

Author: Aleksandra Jóźwik

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