Tendering is a complicated process that involves deep understanding of the public procurement process. It often becomes complex to understand the different tender terminology used in this process for companies when they are bidding to sell their products. In this guide, we shall explain in simple terms the basic meaning of these jargons and how companies must interpret them when it comes to bidding in a government tender. You can also check the glossary at the end of this article to find out the meanings of all tender terminologies used in the tendering process.
- Procurement:
Procurement is a term used for the process of buying a particular product/service. Procurement is a process that begins with the preparation of a request and ends with the awarding of a contract or payment to a contractor. Procurement is the complete process which comprises floating of a tender with the aim of selecting a contractor.
- Bid/Tender:
A bid or a tender is the process within the procurement cycle that aims at finalizing a contractor for procuring the goods/services required. The bid or the tender specifies the technical specifications of the product/service to be required along with the commercial and legal requirements that must be adhered to.
- RFQ:
An RFQ or a request for quotation is a formal invitation to quote floated by the authorities required to purchase a product/service. An RFQ is a subset of a tender and is floated with the aim of collecting proposals from qualified vendors.
- RFT:
An RFT or a request for tender is a request intimating all qualified suppliers about the requirement with the authorities. Usually, an RFT specifies the product/service technical aspects, deadlines for receiving the proposals and commercial and legal specifications of the required purchase. Tenders can be restricted to particular geography/ suppliers or even specific companies when authorities want to purchase something very specific. - RFI:
An RFI or a request for information is not exactly a tender but is a request floated to understand the market standards. Usually, a request for information is floated when the authorities are not sure about the purchase but want to plan a purchase in the future. It is floated with the aim of obtaining market knowledge about the product/service. In some geographies, it is also known as a Prior Information Notice or a PIN. The difference between a tender and an RFI is that an RFI does not necessarily lead to a tender but is a market consultation activity carried out to understand the needs of the institution who is purchasing the product/service.
- Supplier Registration:
Some authorities also use a supplier registration process to determine the qualified suppliers for specific use. In this case, suppliers are invited to register for tenders that will be released in the future by authorities so that they can exercise and invite more companies to make their purchase competitive. Supplier registration opportunities are also not a floated tender but its assurance that tenders for that particular category shall be released in future if need arises with that authority. Companies must ensure supplier registration opportunities are fulfilled so that they are invited for future opportunities with the authorities.
- Who is Who?
Within a tender, there are different stakeholders at position. It is important to realize the importance of each one in order to understand the procurement process.
- Buyer/Authority:
The buyer or the authority is the one who floats the tender. This is the company who requires the goods/services from the various vendors and is often the end customer. The term buyer can also include issuer or procurer or the issuing authority. It can also be a municipal corporation or a city that requires products/services in large quantities. In government tenders, a buyer is usually a government agency.
- Supplier/Contractor:
The supplier or the contractor is the company who will perform the required task. Supplier is often the winner of the bid and can also comprise a consortium of companies in a large tender. The contractor or the supplier necessarily is a company who is in business and is ready to supply the requisite products/services.
- Prequalified Firms:
Prequalified companies are those that are shortlisted by the authorities to perform a particular purchase. The tendering authority or the buyer may choose to select one or all amongst all the prequalified firms but will only engage with the prequalified companies when floating a tender. This is an activity that follows a prequalification or a supplier registration process as the authority has already decided on the firms competing in the tender. Prequalified firms stand a better chance to win more bids as they are shortlisted by the authorities and are away from most of the competition.
- Sub-contractor:
A sub-contractor is a company that is employed by the winning company to fulfill the task or a part of the task. It may or may not be a part of the tender and is commonly used in large infrastructure projects. The division of work may not be part of the buyer’s knowledge as the buyer lends responsibility of the entire contract to one particular firm or a group of firms in a consortium who then deploy sub-contractors.
What is a tender notification?
A tender notification is an alert of a tender that is released by the buyer/authority. It is always advantageous to know about upcoming tenders in order to prepare the company for the bid and stand good chances of competing in the tender. Tender aggregate or services such as Tender Impulse provides complete tender notification service of all tenders from all over the world. It is a global database that helps companies monitor bids effectively so that they do not waste time and energy in finding out the leads released by global authorities. It is a good idea to get a paid subscription to such databases for accessing government tenders on the day of their release and thus increasing chances of succeeding in international government bids.
The above article is a good reference chart for companies wanting to experience international tendering and gives an idea of all the possible tender terminology used in the public procurement process. Although it is a lengthy process, government procurement is a profitable venture for all businesses looking to expand in other territories and increasing their bottom line.