TYPES OF PROJECT TENDERS
a) Open tendering
Open tendering may be national or international depending on the market supply capacity. In open tendering, any willing supply source is free to treat the offer. Open tendering whether national or international is characterized with the following features:
- All willing supply sources or contractors are free to apply or treat the offers.
- The offer will be advertised in newspapers of wider geographical coverage.
- The required works must be accurately specified.
- The information given in the tender documents must be uniform to all the tenderers.
- The criteria for awarding the contract must be clearly spelt out in the tender document.
- The deadline date and time for submission of the tender bundles must be clearly indicated.
- The tender documents may be obtained upon payment of a non- refundable fee set by the tender committee.
- Tenderers or their authorized agents are allowed to attend the tender open exercise.
- Tender documents delivered after the deadline date and time will be returned back to the owners unopened.
- Tender documents will be submitted in plain sealed envelopes.
- Tender documents must guide the tenderers on where to obtain and deposit completed tender documents.
- Any alteration in the information in the tender documents will be communicated to all the applicants.
ADVANTAGES OF OPEN TENDERING
- Earns the organization good reputation in the market for fairness, transparency and accountability.
- Increases supply sources for the selection of the best contractors.
- Sourcing expenses are recovered through tendering fee.
- Ensures that the contract terms and conditions are to the advantage of the
- Less involving in terms of cost, time and administration.
- Enables new contractors to gain a hold in the market.
- Prepares the potential supply source or contractor in advance on the expectation of the procuring entity or client.
- Loss of tender fee by tenderer incase of withdrawal or failure to win contract or failure to sign contract documents in time.
- Tenderer cannot vary contracting terms and conditions even when such terms are harsh.
- Some of the wordings in the tender documents may be too technical to interpret by the tenderer.
- Tenderer has no free hand to modify the information in the tender documents once submitted to the procuring entity.
- High possibility of appeals by unsuccessful tenderers leading to delays.
- The procuring entity may get many applications leading to high administration work.
- Good contractors in the market tend to shy off for fear of their trade secrets leaking to outsiders including their competitors.
It is a form of negotiation after receiving formal tender documents from applicants but before selecting the eventual winner of the tender. It is usually initiated to discuss some pertinent issues with a view to making improvements in some tender subject matter e.g. quality, costs, lead time etc.
b) Restricted tendering
Type of tendering where only few identified prospective profitable contractors are invited to submit their proposals or quotations for consideration unlike open tendering, each prospective contractor is handled individually with the discussed data remaining confidential.
After analytical comparison and contrast of proposals submitted, evaluation is carried out based on both technical and commercial benefits. Thereafter the most profitable contractor is awarded the tender.
Circumstances for using restricted tenders
- If the provisions required are unique.
- If there are only fewer contractors with required capacity.
- If there is need to maintain both client’s and contractor’s trade secrets.
- If the required provisions are urgent.
- If it is organization’s own policy that certain specific procurement requirements be sourced through restricted tendering.
- If there are only few approved contractors in market capable of meeting client’s requirements.
- If the client is a non- profit maker and not interested in commercial aspects but superior quality.
- If other tendering methods have failed before. If the client is an old player in the market and understands market conditions very well.
- Eases sourcing for contractors with unique service provisions.
- Ensures that organization’s trade secrets are maintained and kept confidential.
- Enhances urgent construction works.
- Ensures that organization’s policies are adhered to strictly.
- Reduces sourcing costs as only few contractors are handled.
- Improves confidence in the contractor relationship.
- Reduced administration cost.
- Reduced lead times.
- Motivates the supply source for having been recognized in the industry.
- Reduced competition hence compromised quality and total costs.
- Denies an opportunity to other would be better contractors.
- Difficulty in developing new and better contractors in the market.
- Encourages malpractices as tendering process is not open to ensure fairness, transparency and accountability.
- Client may end up not getting the right contractor thus resulting into delays.
- Gives the client bad history and reputation in the market.
- New clients in the market may not find this method practicable as they lack knowledge and information on contractors to restrict themselves to.
- Little known supply sources or contractors are denied the opportunity to participate in the tendering process as only the established ones have the advantage.
c) International Competitive bidding
Competitive bidding emphasizes direct prices rather than the total cost. Other added expenses apart from direct price are not given sufficient attention
It achieves the lowest price because of the following reasons:
- There is post tender negotiation which ensures that prices remain lowest all throughout.
- There are many bidding supply sources or contractors’ hence stiff competition and this leads to better offers.
- There are quality assurance schemes which assure and reassure quality by all contractors.
- There is true tight competition among the contractors with each one striving to offer the best to survive.
- There are up to date approved contractor lists which give guidelines on who is offering lowest prices are.
- The contracts are ever long leading to long term strategizing with low prices much more.
CAUSES OF COMPETITIVE BIDDING FAILURE IN ACHIEVING LOWEST PRICES:
Competitive bidding may at times fail to achieve lowest prices under the following circumstances:
- When the market is non- competitive i.e. presence of monopolistic and imperfect market conditions.
- When the contracting services are urgently required giving no room to source for many supply sources or contractors.
- When contractors are not technically competent and actually not willing to contract.
- When specifications are not clear to contractors making them not able to project true total costs, when the contract value does not justify the cost due to under evaluation.
PROBLEMS WITH COMPETITIVE BIDDING:
Common problems likely to arise with competitive bidding include:
- Quality is not given sufficient attention as criteria bases mostly on direct prices
- If it is a reactive provisioning approach instead of being proactive.
- Operating with wider contractor base is very costly.
- It conflicts with better contracting practices which advocate for total costs and quality rather attractive direct prices.
- It is not capable of posting substantial savings hence reduced profits or benefits.
c) Negotiated tenders
Negotiated tenders are obtained by the employer inviting a contractor of his choice to submit prices for a project. Usually this is for specialized work or when particular equipment is needed as an extension of existing works, or for further work following a previous contract.
Sometimes negotiated tenders can be used when there is a very tight deadline, or emergency works are necessary. A negotiated tender has a good chance of being satisfactory because, more often than not, it is based on previous satisfactory working together by the employer and the contractor.
When invited to tender the contractor submits his prices, and if there are any queries these are discussed and usually settled without difficulty. Thus mistakes in pricing can be reduced, so that both the engineer advising the employer and the contractor are confident that the job should be completed to budget if no unforeseen troubles arise.However, negotiated tenders for public works are rare because the standing rules of public authorities do not normally permit them. But a private employer or company not subject to restraints such as those mentioned in the next section can always negotiate a contract, and many do so, particularly for small jobs. Even when a negotiated tender is adopted it is usual to prepare full contract documents so that the contract is on a sound basis. Production of the documents also means they are available for open or selective tendering should a negotiated tender fail, or should the chosen contractor be unable to undertake the work.