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Every organisation requires to procure goods and services from other manufacturers to run its business. This involves formally making an invitation, followed by an offer to purchase goods and/services from another organisation. This formal invitation and proposal are conveyed in the form of a tender. This is where open tendering comes into play as this is the most used process by government bodies and PSU units to procure goods and services from suppliers in a transparent manner. However, before we get into the details about open tenders, let us first understand what is a tender.

The tendering process, in its simplest meaning, refers to the process by which an organisation that needs certain goods or services invites other businesses to submit a proposal or a bid to supply the required goods or services. This proposal or bid is conveyed in the form of a tender.

What is a tender?

By definition, a tender is a request which invites suppliers to bid for a project or a part of a proposed project. This bid could involve providing certain products or services. Government tenders usually follow a tendering process to create a level playing field for all registered dealers/manufacturers to become suppliers for a business requirement. It also ensures that the buyer gets the best possible price and quality.

Tender meaning: A tender is a request which invites suppliers to bid for a government or private sector project.

Most tenders in India that are released these days are online tenders. They operate via electronic/digital procurement modes. Electronic tender or e-Tendering has made the procurement process more streamlined and efficient with better access to a quality vendor community.

As mentioned, a tender is an invitation to bid for a project. Most government and private institutions initiate bids for larger projects. Eligible bidders are required to respond to the bid within stipulated timelines and the bidder who cites the lowest rates (L1, L2, L3) and meets other tender specifications is selected to deliver the contract.

Apart from tender, another term that needs to be understood is a Request for Tender or RFT. A RFT is an invitation to bidders that requests them to submit their proposals to deliver goods and services.

Difference between a bid and RFT

While a tender and a RFT may look similar, there is a difference between the two.

An RFT refers to a document issued by the buyer to invite a seller to submit a response. It comprises a number of tender documents like the scope of the tender, the conditions applicable, the application form, the evaluation criteria, and the particulars of the legal contract for the supplier. Therefore, a tender is a document submitted in response to the Request For Tender (RFT) by the supplier.

The different types of tenders in India:

  1. Open tender
  2. Closed tender
  3. Negotiated tender
  4. Single-stage or two-stage tender

While there are four main types of tenders: open tender, closed tender, negotiated tender and single-stage or two-stage tender, in this article we will provide details on open tenders and why is it important.

What is an open tender?

Open tendering is a public procurement method used by both government and private organisations for acquiring goods, services, and infrastructure works at the lowest price.

It allows anyone interested to submit a tender to supply goods required. If a buyer has a requirement, he publishes the same to the market citing the requirement, the scope of work, budget, eligibility, and other specifications.  This type of tender is common mostly for the construction and engineering sector.

The purpose of an open tender is to create competition and minimise discrimination as it is a transparent process that facilitates fair play for suppliers. It also helps to create opportunities for emerging businesses to apply for new work.
Open tendering refers to the process of inviting offers (i.e., tender notice) to supply goods or services publicly by citing specifications and detailed documentation.

There are two types of bidding involved in open tendering

  • Open: Where the seal of the tender is open in full view
  • Closed: Where seals are open in the presence of selective audience

Open tendering is also known as open competitive bidding, open solicitation or open competition.

What is a closed tender?

Apart from open tenders, the second category of tenders is called closed tenders.

A closed tender or a limited tender is selective in nature and is open to only those bidders who are specifically invited to bid.

Difference between open tender and closed tender

Sr. No Open Tender Closed Tender
1 Open for bidding to the entire market Not open to everybody but only for selective people through invitation
2 An organisation releases RFTs and whoever feels eligible can bid for the tender An organisation asks for specific information from suppliers, and bidders are selected or rejected basis the information shared
3 More expensive as there are more participants Cost effective in comparison to open tenders due to the lower documentation cost
4 Suited for general requirements in construction and engineering sector Best suited for niche requirements that aligns with few firms

Why is open tendering important?

The reason why an open tender is important is because it creates equal opportunities to all suppliers. The intent is to minimise discrimination among the suppliers and create a competitive environment. Hence, the aim of this tendering process is to make available a specific product or services at the lowest possible price.

Remember, the key to winning a tender is in applying for relevant tenders that you are eligible for and at the right time.

What are the benefits of open tendering?

As mentioned above, an open tender enables any firm to submit their bids. Apart from being the most common form of tendering, it has several benefits. Here are some of the benefits of open tender:

  • Access to new suppliers: As open tendering is open for all suppliers to bid; it increases the chances of including sellers who can cater to the requirement with better quality and pricing. Open tenders also make it possible for the organisation to choose from a wider variety of options to accurately meet their needs. On the other hand, it provides individuals and organisations to get better employment opportunities and gain new experience to grow their business.
  • More competitive: Every bidder in an open tendering process tries to win the contract with better quality goods/services within the lowest budget. This has a larger impact on the manufacturing of high-quality end products and efficient project management.
  • No nepotism: There are very few scopes of nepotism and favouritism in an open tendering process as it is transparent, and the bids are compared based on quality and price. This ensures that only the best bidders can bag the contract and even newcomers get a fair chance to compete and win.

Benefits of open tendering:

• Access to new suppliers

• More competitive

• No nepotism

• Transparent

What are the limitations of open tendering?

While open tendering is beneficial to both the parties, there are some limitations of open tenders. Some disadvantages of the open tendering process are:

  • The cycle to complete the procurement process is lengthy as the number of bidders are more
  • It involves strict adherence to procedures
  • More expensive as more suppliers need to be catered to
  • Less scope of building long-term relationships with suppliers
  • Focus is limited to least-cost goods/services
  • Suppliers have no say in determining the technical specifications
  • The internal capacity of the supplier is assumed to be compliant for order completion
  • Excessive documentation is involved, and it may deter participation of deserving suppliers

What are the key requirements for open tendering?

There are some basic requirements that needs to be met for open tendering. The fundamental requirements are:

  • Made open to all eligible and interested bidders
  • Must be advertised both locally and globally
  • Defined qualifications criteria
  • Possess clear technical specifications
  • Clear evaluation criteria for bidders
  • Must be awarded to the bidder citing the lowest cost (when meeting other details as specified)

Steps to win an open tender

Whether you are looking at winning government contracts on GeM portal or through the CPP portal, these steps will ensure that your documents are in place and you are applying to the right opportunities.

  • Review your existing processes to ensure you have all the things in place to deliver a product or service effectively.
  • While continuous improvement is essential to deliver efficiently, it is always a good idea to take feedback from buyers on your shortfalls and rectify the same.
  • Plan and follow an effective tendering process. Invest time and resources to apply for open tenders. Most businesses who are successful in bidding follow a definite tendering process.
  • Ensure that you qualify for an open tender before you start your submission. Check that you have a unique proposition to present in your goods/services and at a competitive price within the buyer’s budget.
  • Seek to know about your buyer’s organisation and align, if possible, to their vision and values for more visibility. People like to do business with organisations who think in similar ways.

To sum up

Open tenders are the most used tendering process by government bodies and PSU units. To get information on active tenders and stay updated on the new tender releases, you can register on government portals like the e-Procurement and GeM portal.

You can also register on B2B platforms like Tata nexarc to get updates on the latest tenders (check Tenders and Quotations to find relevant tenders by industry, location, value and other specifications).