Companies, public authorities and government entities need to have robust processes when procuring work, goods and services through a tender process. The European Comission reports that every year, over 250,000 public authorities in the EU spend around 14% of GDP on the purchase of services, works and goods.
Using a competitive tender approach is becoming more prevalent as companies and government are under increasing pressure to achieve greater efficiencies and value for money. But as tenders become more complicated risks are emerging. An organisation can help mitigate these risks when issuing or responding to a tender by ensuring its documents meet certain rules.
Tender Methods and Processes
A company or a government entity issuing a tender will usually be referred to as the ‘customer’. The customer should select a tender method and process that suits the nature of the procurement, the level of risk it is willing to assume, any relevant timeframes, its budget and security and confidentiality requirements.
While different countries and jurisdictions have different laws and rules regarding public procurement and tendering, there are, broadly, three common tender processes:
- Open Tenders – require the customer to advertise an “Invitation to Tender” (usually in a newspaper or public journal) and invite public responses to the tender.
- Selected Tenders – require the customer to advertise an “Invitation to Tender” but only to select organisations that have the competence and ability to provide the goods and services.
- Pre-registered (Selective) Tenders – involves a two-stage process where the customer advertises to interested organisations and gives them an opportunity to respond to an “Expression of Interest” instead of an “Invitation to Tender”. The aim is to assess the ability of the respondents to provide the goods and services and to allow refinement of the specifications. Following this initial assessment, the customer issues the “Invitation to Tender” to select organisations who have demonstrated the ability and ability to provide the goods and services.
A useful guide to the tendering for public sector contracts in Ireland and the United Kingdom is set out here.
In Ireland, for example, a respondent will often have to register with eTenders Public Procurement to submit a tender response online. Once registered, a business can choose to receive email notifications of tenders in Ireland that are relevant to its business.
Tender Process Risks
As a general rule, the tender process should be transparent and all potential tenderers should be treated equally and fairly.
Disagreements over tenders can result in wasted resources, damaged relationships and adverse publicity. for both parties. A customer may also be exposed to financial and legal risk if they fail to establish and follow an appropriate tender process with clearly drafted tender documents that is in compliance with all legal and regulatory requirements.
Tender Terms & Conditions
The tender should contain a set of terms and conditions that specify appropriate disclaimers regarding the accuracy, completeness or omission of any information the customer includes, or does not include, in the tender. The terms and conditions governing the tender should be clearly visible to the respondent and should be the same for each tenderer.
I recommend that the terms provide the customer with sufficient flexibility in relation to the tender process. For example, the tender conditions should make it clear that the entity issuing the tender may:
- discontinue or suspend the tender process;
- acquire certain services / goods from the respondent or be free to seek offers from other suppliers outside of the tender process;
- negotiate at any given time with one or more suppliers without notice;
- accept or reject a response in whole or in part in the customer’s sole discretion without any obligation to provide reasons; and
- alter its requirements or vary any information contained in the tender documents, including changes to timetables.
The tender document bundle should be drafted as clearly and completely as possible. It should set out all of the tender requirements and criteria for tender evaluation and marking. This will include a complete copy of the proposed supply contract and other documentation, such as the criteria, specifications and pricing requirements.
The tender documents should specify the period allowed for tender responses, which reflects the complexity and value of the contract and the time and effort required for respondents to prepare a considered tender response. For more complex or sensitive tenders it is also a good idea for a customer to consider conducting a ‘pre-tender briefing’ for suppliers.
Unless intended, the tender documents should not create the impression that an ‘exclusive relationship’ will be created with a short-listed respondent. The customer should retain the right to conduct parallel negotiations with alternative suppliers without notice and this right should be expressly set out in the tender terms and conditions.
Amendments to Tender Documents
While it is useful for a customer to have the flexibility to change its requirements as part of the tender process, the customer should, to the extent possible, avoid making amendments to the tender documents. Despite this, it is important for a customer to promptly inform all tenderers of any errors, omissions, ambiguities or discrepancies it identifies in the tender documents.
Where amendments are required, they should be provided in writing in a timely manner to all respondents. In certain circumstances it may also be advisable to consider extending the tender period.
For more information on the legal requirements when responding to a tender contact me or have a look at Enterprise Ireland’s Selling to the Public Sector in Ireland and the UK website.
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