The Ultimate Guide to Different Types of Tenders
  • by Claris Zimbiti




tendertube | The Ultimate Guide to Different Types of Tenders



Table of Contents

  1. 1.   Request for Quotation
  2. 2.   Request For Proposal
  3. 3.   Invitation to Tender/ Invitation to Bid
  4. 4.   Framework Agreements
  5. 5.   Expression of Interest
  6. 6.   PreQualifications
  7. 8.   Conclusion

 


We all seem to get confused when we are faced with a new concept, a new subject or a new industry. It's the same thing when you are new to tendering.

There are quite a number of tendering terms that you need to understand. There are many different types of tenders, and you can easily become confused. For example, you may find out that one buyer is asking for an Invitation to Tender (ITT) and another one is asking for an Expression of Interest (EOI). So what do these mean? What's the difference?

In this guide, I will walk you through all the types of tenders that you may encounter when looking for tender opportunities, especially government tenders. For each type of tender, you will be able to learn what it is, their purpose and how your bids or proposals or offers are evaluated.

The three phrases, “bids” or “proposals” or “offers” are nothing to worry about. These terms basically mean the same thing and can be used interchangeably.

Now, let's dive in.



1.    Request for Quotation

It is a request for pricing and payment information about a very clear and specific solution or goods and services e.g. “Supply and delivery of Air Filters for ACO3 Compressor”. As you can see, the buyer knows the type of compressor that’s involved as well as the exact type and the number of air filters that he or she wants.

The purpose of an RFQ is to inform you as a potential supplier that: “Here is the solution that we want to pursue. We would love a cost breakdown of how much you can offer it for”.

A RFQ is typically used for :

★ Products/Services for day to day operations

★ Low value Purchase Orders or contracts

★ Standardized, off the shelf products/ services

In simple terms, a Purchase Order is a one page agreement with just a few terms. On the other hand, a Contract has many pages and detailed conditions outlining the agreement.

When it comes to evaluation, all your offers are evaluated based mainly on price since the goods or services may be standard in nature. Here you are only required to submit product price, a correct description of the technical specification of the product, payment terms and delivery period.

One good thing about RFQs is that the buyer is definitely committed to making a purchase. And these usually take less time to award a contract because the requirements are standard and not too detailed.

Here are some RFQs from Tendertube :

tendertube | Request for Quotation



2. Request For Proposal

Now, let's take a look at Request for Proposal (RFP).

It is a request for a solution from different vendors so that they can be compared based on merits, demerits and pain points they intend to solve.

The purpose is to inform you as a vendor that, “Hey, we are looking for a solution for this problem. Can you give us your offer? Tell us why your solution is the best for our particular needs? And why are you the right choice for the solution?” So, the Buyer is not looking for the cheapest price. Instead, they are looking for the most flexible or innovative solution to meet their organizational needs.

The information that is requested typically includes:

★ Basic Corporate information and company history (What is your reputation and past experience? Are you credible?)

★ Financial Information( Can the company deliver without any risk of bankruptcy?)

★ Technical Capability/ Methodology to deliver your proposed solution

★ Key personnel with experience and qualifications to deliver the offered solution

★ Implementation Schedule/Timeline to deliver the solution

★ Cost of the solution offered

In most cases, this type of tender is normally used for consultancy services or other intellectual services.

When it comes to evaluation, your proposals are evaluated against a weighted criteria i.e experience, understanding of the assignment, technical method, key personnel and lastly on price . Sometimes, making the right decision when you have a number of options can be tough. That’s why buyers use a weighted criteria as a tool to help them in the decision making process.

So what is a weighted criteria? It is simply a table with multiple options( consultants/service providers in this case) listed across the top and criteria (e.g., Methodology, Key personnel, Experience) listed in the leftmost column. The criteria are weighted relative to their perceived importance and then each consultant is scored against each criteria.

In addition, you have to know that once an organization issues out an RFP, it is definitely committed to make a purchase

In addition, you have to know that once an organization issues out an RFP, it is definitely committed to make a purchase

In addition, you have to know that once an organization issues out an RFP, it is definitely committed to make a purchase

The key idea here is that an RFP is more than a price quote. Detailed information is required. Why? Because a service is not touchable and the quality of the solution offered depends on the quality of the company and personnel delivering the solution. To add on to that ,consultancy tenders may involve large amounts of money which can even go up to millions.

Therefore the evaluation is very thorough and offers side by side facts based on vendor capabilities.



3. Invitation to Tender/ Invitation to Bid

The third type that you need to know is the Invitation to Tender (ITT). It is sometimes known as an Invitation to Bid (ITB).

It is a request to suppliers, contractors or service providers to supply goods or bid for works contracts. It is openly advertised to everyone in the newspaper or online tender portals such as Tendertube.

An Invitation to Tender can come in two types. The first one is Invitation to Domestic Competitive Bidding. With these Domestic Tenders, only locals are allowed to participate.

The second one is Invitation to International Competitive Bidding. With these International Tenders, locals as well as international players are allowed to participate. This type of tender is normally used in large value and complex contracts.

Just like the RFP, your offers are evaluated in two stages, first on qualitative factors and then lastly on price. The criteria for the first stage of evaluation is based around financial stability and trading history, previous experience, core competence, capability and process and quality standards.

Be sure to keep in mind that the evaluation criteria differs with each type of tender. There is no one size fits all. What this means is that the evaluation criteria for goods is totally different from that of works. And Buyers include the evaluation criteria in the Invitation to Bid.

When an organization issues an ITT, it is very intent on purchasing. So the more you understand the assignment, the better chance you have at winning that bid.

Once again, detailed information is required. The evaluation is very thorough.Why? Because we are talking about the complexity of goods and works required and that large amounts of money that may exceed millions is involved. It's a huge risk. Therefore more documentation is required to determine the supplier or contractor with the best technical capacity and capability.

Here is an example of an Invitation to Tender(Domestic):

tendertube | Invitation to Tender(Domestic)



3.    Framework Agreements

 

Now, let's move on to Framework Agreements.

It is an agreement between a buyer and a group of suppliers offering the same standard goods or services . It sets out the terms and conditions under which goods or services can be awarded throughout the period of agreement.

These terms might include price, quality, quantities and time scales. And the Framework Agreement can last for a period of about 1-5 years.

It is used when a procuring entity intends to acquire a series of standard goods or services over a period of time but before the details of the particular delivery time, place and quantity have been identified. The terms and conditions are agreed at the time of entering the Framework Agreement. You can have a Framework Agreement with unit prices already agreed or without unit prices.

When a specific quantity of goods or service is required, the suppliers under the Framework Agreement are invited to submit a quotation. This process is called a Mini Competition. Suppliers can even offer better prices than those that were included in the Framework Agreement.

The Buyer then issues a Call Off Contract to allow the supplier to proceed with delivery. Stay with us… we’re throwing another term in the mix but it's relevant. A Call Off Contract is an individual contract that falls under Framework Agreements. Simply, it is more like a Purchase Order.

The reason why buyers use Framework Agreements is to avoid issuing repeated tenders for the same goods/ services.They do not have to go through the tender process each time thereby reducing administrative burden in terms of time and costs. However, winning a Framework Agreement is not a guarantee of work. It's just an agreement that sets out the terms and conditions that would apply for an order or Call Off Contract.

To give an example of how the Framework Agreement actually works, let's say a government entity decides to use a framework agreement for the provision of accommodation and logistic services for its foreign diplomatic/business visitors.

During the first round of competition, a pool of service providers with experience in this type of service are selected and Framework Agreements are signed. This can be with unit rates or without unit rates.

And then, when the visits are scheduled, a second round of competition is used to choose one of the service providers with competitive rates to handle each specific visit.

So the first round will be evaluated more like an RFP to enter into a Framework Agreement and the second round will be evaluated more like an RFQ to issue an order.

Although some more work is required to win the contract, Framework Agreements are highly beneficial for small businesses in the following three ways:

1. It can provide you with the opportunity to work with high profile buyers

2. It can significantly enhance suppliers reputation and prestige/ profile

3. It can help build a long term relationship with the buyer

Here is how a Framework Agreement works:

tendertube | Here is  how a Framework Agreement works:

 



4.    Expression of Interest

The other type of tender that you should look out for is Expression of Interest.

It is a request that is used when searching the market for potential suppliers or service providers. After that the buyers will then go back to the market later with a detailed request. So it is the first stage before issuing out an RFP to shortlisted bidders.

EOIs are important especially for those who specialize in consultancy services. The purpose of the EOI is to shortlist suppliers who have the capacity to perform the contract.

This means that, it is your opportunity as a supplier or service provider to demonstrate your suitability, interest and availability in relation to the opportunity.You need to provide important information about organisational capability and resources, financial viability, sustainability principles and value addition.

However, winning an EOI is not a guarantee of work since it's basically the first stage in a bidding process. . Remember the general intent of issuing an Expression of Interest is not to immediately enter into a contract with the shortlisted companies. But rather it is a process to ensure that the RFP is only issued to suppliers who have the capability to provide the needed solution.

Plus, EOI often doesn't require a price estimate. For that reason, an EOI will involve a further request such as a Request for Proposal or an Invitation to Tender.

Here is an example of an Expression of Interest

tendertube | Expression of Interest



6.    Prequalifications

Last but certainly not least ,let's discuss Prequalifications.

This type of tender is used to ensure that eligible and capable contractors who are able to perform the works contract are selected. Prequalifications are important for those who specialize in large works contracts such as construction projects.

The reason why buyers use Prequalifications is:

1. To ensure experienced capable contractors or with qualified personnel and other resources will submit bids

2. To prevent unqualified bidders from incurring expensive bid preparation costs

3. To save time during evaluation of complex bids

This means that, it is your opportunity as a supplier or service provider to show your suitability, interest and availability in relation to the opportunity.

The evaluation criteria includes the following:

★ Past experience in similar works

★ Technical capability and resources

★ Financial strength

★ Management strength and availability of qualified key personnel

However, winning a Prequalification is not a guarantee of work. The general intention is not to enter into a contract Instead, it is to shortlist qualified contractors with technical and financial capacity. For that reason, a prequalification is likely to be followed by a further request such as Invitation to Tender to those shortlisted firms.

Here is an example of an Evaluation Report for a Prequalification using a pass or fail criteria:

tendertube | Evaluation Report for a Prequalification using a pass or fail criteria

 



7.    Conclusion

Whether you are a supplier, contractor, service provider or consultant, you now know the types of tenders that you should look out for, how they work and what is involved.

So what’s next? Now that you’ve got an understanding of some of the types of tenders that you can find on the market, you’re probably wondering where you can find these.

Well, we have developed a simple online platform where you can find all your tenders in one place. We give you a wide range of latest tenders from all government institutions, parastatals, local councils and NGOs in Zimbabwe.

You can try it to see if it's a good fit for your business. And the good news is it's FREE to get started. Click here to create a free account.