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Generally, new entrepreneurs get confused on how to start tendering for their businesses. There are many myths around the tendering process too. This article will explain how you can participate in tendering process if your business is new, common terms used in tenders and debunk myths regarding government tenders.
How to start tendering for new business
- Registering on GeM or CPP portal: In order to find a relevant tender for your business, you need to register on Central Public Procurement portal (CPPP) or Government e-Marketplace (GeM). While CPPP only lists tenders from various government departments, GeM is also a marketplace where you can buy and sell goods.
- Udyam registration: Benefits of having an Udyam registration are immense. Without having the Udyam certificate, your business does not qualify as an MSME. This will limit the opportunities for your business. For example, if a particular tender is open for MSMEs, businesses need to provide a copy of MSME registration certificate along with other mandatory documents. This will not only exempt you from paying EMD fees (unless otherwise) but also get your application rejected for non-submission of required documentation.
- Find a relevant tender: Once you register on your preferred portal, you can browse through several listed tenders. You can search for a tender by applying various filters provided in the search option. Check eligibility criteria of given tender before shortlisting it for response submission.
- Understand the requirements: If you are doing it for the first time, read through the tender documents thoroughly for couple of times. If you do not understand particular requirement, take help of colleagues, peers and other business owners who have been participating in the tendering process consistently. Alternatively, it is a good idea to appoint a bid manager, if you plan to participate in tenders regularly.
- Analyse your capability: Once you understand the requirements, verify your internal capacities and capabilities. Ensure that you will be able to fulfil the order if you win the contract. In case you find it necessary, take your suppliers into confidence.
- Start preparing response document: Once you decide to participate in a tender, start preparing your tender document. To start with, make a checklist of all the things/documents you require, so that you do not miss out on any document. You can seek help of an experience industry peer to prepare your document.
- Quote it right: Quoting the right price in tender is essential. Quote price in such a manner that the buyer perceives it as affordable while it is sustainable for your business too. As you are tendering to grow your business, it needs to be sustainable for you. Else, you can drop the idea of participating in tender. For example, if you know the tender contract location is far away from your region, there would be significant transportation costs involved. If you choose to bid, ensure you list all components of transportation and warehousing in your final quotation so that you can still offer value-for-money without losses.
- Review your response document: After filling in all the details and attaching required files, review your response document. Check for any errors and mistakes and also review it from the buyer’s point of view.
Some of the common terms used in government tenders
The government of India uses few terminologies in the tender that you may not know as a new business owner. Here are some of the common terms used along with their meanings.
- Earnest money deposit (EMD): It is a sum of money that the bidder needs to deposit while submitting the tender response. Generally, it is a fixed amount that is refunded in case you don’t win the contract.
- L1, L2 and L3: It means the lowest bidders. L1 is the lowest bidder while L2 and L3 follow.
- Request for proposal (RFP): It is nothing but the announcement of tender. It includes all information with regards to the tender.
- Mobilisation advance: Once you win the contract, you can ask for advance funds before starting the production. It is called mobilisation advance.
- Consortium: Sometimes scope of the tender is such that no single MSME will be able to fulfil it. In such cases, two or more companies come together to bid tender, the alliance is called as consortium.
Myths and facts about tendering when your business is new
Many a times, new businessowners and young entrepreneurs have negative notion towards tendering because of myths. We are debunking some of the myths to encourage budding entrepreneurs to participate in tendering process.
You cannot participate in tenders if your business is new
Every tender has different eligibility criteria. While there are few tenders that require established supply chains and specified capacities and capabilities, the government also provides equal opportunities to new businesses. Many tenders do not have such criteria. Hence, you can check the eligibility criteria and if you fit into it, you can participate in the same.
You need prior experience to participate in government tenders
It is not mandatory to have prior experience or track record for tendering. Startups can also participate in tenders. If your business is registered with the Department for Promotion of Industry and Internal Trade (DPIIT) as a startup, you do not require prior experience to participate in tenders that are marked as open for startups.
Your business is too small to participate in tenders
Government encourages all businesses to participate in tender. For fostering growth of MSMEs and startups, some eligibility criteria are exempted. For example, startups do not require to have previous track records. Additionally, turnover criterion is lowered for MSMEs in some tenders. Hence, it is a good idea to participate in a tender.
Also Read: MSME Business Ideas
Lowest bidder always wins the contract
It is not the lowest bidder who wins the contract. If you learn the tender evaluation process, the bidder who offers the most value for money quote, wins the contract. Hence, make sure that your quote is value for money for the buyer.
Why should new businesses participate in tenders
Here are some of the reasons why new businesses should participate in the tendering process.
- You can build your track record: Once you participate in tenders and win, you can build your track record for future projects. Better the track record, better the growth of your business.
- Building reputation: Along with the track record, it can also help you build your reputation. Timely deliveries and good business practices can reflect your professionalism. Another example would be the use of eco-friendly material can help you build your image as environmentally conscious company.
- Assured business: Tender winning gives you assured business for the contract period. That means you have guaranteed business for the period. In other words, it helps your business to be sustainable.
There is no reason to have a negative notion or afraid of the tendering process. In fact, it only adds up to your experience and knowledge. You may find the process tedious in the initial stage, however, as you fill in more and more tender response documents, it can help you to grow your business.