There are two main methods adopted for Tendering:
- Open Tendering and
- Selective (or Closed) Tendering.
Open (Public) Tendering: While reading a newspaper one would have noticed advertisements (often by some government departments), calling for Tenders for Works and Services to be executed with a brief description of requirements. This type of Tender Invitation, to all those interested in the Contract, to submit a Tender in response to an advertisement is known as Open Tendering. There could be conditions by the Client in such a request, is another matter. A large amount of Clients time and effort is required to evaluate and award a Contract under this method.
Selective (Closed) Tendering: a method of Tender Invitation where a select group of Tenderers, selected normally thru a scientific process of prequalification, are invited to submit a Tender is known as Selective Tendering. Selective Tendering is widely used since it is proven to be effective and quicker to award Contracts to the right companies i.e. experienced and qualified companies. It is also effective when Clients have a pool of experienced contractors or where the Client expects a high level of interest from Tenderers.
Under Selective Tendering, Competitive Tendering has been found to be the most effective among all methods in getting best value for money and hence widely adopted.
A request for Tender from more than one Tenderer, in competition with other Tenderers, is known as Competitive Tendering. The Tenderers invited to Tender could either be selected thru a Prequalification Process or could be selected from a Client’s own internally developed list of registered companies. The factors that determine if a Prequalification is required or not varies from situation to situation.
Though competitive Tendering could be very effective, it could be potentially time consuming and expensive at the same time if a large number of Tenderers are invited. To ensure that the process is effective, one has to settle at an appropriate / optimum number of Tenderers to be invited to Tender. If the Tender list were large, it would consume a large amount of time for evaluation and if there were few, there could be a potential danger of loss of competition and value received perhaps not commensurate with the resources employed. The Contract scope also plays a major part in the selection of the list.
Single Source Tender/Tendering: a selective method where sourcing could be a conscious decision to contract from one among the many producers of Clients requirements, due to a special preference based on specialised knowledge or past experience, technical considerations, delivery duration or other such factors.
Sole Source Tender/Tendering: a selective method where there may not be a competition that is able to meet requirements. For example if one were looking to purchase a specific or proprietary software produced by “Microsoft”, or purchase a “Big Mac” hamburger one does not have much choice but to buy from the producers of such proprietary products and services.
In all Sole and Single Source Tenders cases, there should be a stringent Contract award approval process due to obvious reasons. Where relevant and appropriate, recommendations should be supported by strong justifications with appropriate benchmarking.