Invitation to tender should not be confused with Invitation to treat.
An invitation to tender (ITT, also known as a call for bids[1] or a request for tenders) is a formal, structured procedure for generating competing offers from different potential suppliers or contractors looking to obtain an award of business activity in works, supply, or service contracts, often from companies who have been previously assessed for suitability by means of a supplier questionnaire (SQ) or pre-qualification questionnaire (PQQ).
Unlike a request for proposal (RFP), which is used when a company sources for business proposals, ITTs are used when a government or company does not require the submission of an original business proposal and is looking solely to award a contract based on the best tender submitted. As a result, whereas ITTs are often decided based on the best price offered, decisions on RFPs may also involve other considerations such as technology and innovation. Both are forms of reverse auction.
At the same time, variants may be requested in an ITT, which allow suppliers to offer proposals which differ in non-essential terms from the supplies or services requested. The European Commission has suggested that requesting variants is one way in which suppliers can be asked to offer more socially responsible solutions to meeting public needs.[2]
Public sector organisations in many countries are legally obliged to release tenders for works and services. In the majority of cases, these are listed on their websites and traditional print media. Electronic procurement and tendering systems or e-procurement are also increasingly prevalent. The European Union states that 235,000 calls for tender are issued annually using its Tenders Electronic Daily system, including those issued by countries in the European Economic Area and beyond.[3]
The term "notice inviting tenders" (NIT) is often used in India.[4] The European Union's institutions often use the terms "calls for tenders" and "calls for expressions of interest".[5]
Open tenders (also known as open calls for tenders or advertised tenders) are open to all vendors or contractors who can guarantee performance.
Restricted tenders (also known as restricted calls for tenders or invited tenders) are only open to selected pre-qualified vendors or contractors. The tender stage may form part of a two-stage process; the first stage comprises issuing an expression-of-interest (EOI) tender call,[6] [7] resulting in a shortlist of selected suitable vendors. The reasons for using restricted tenders differ in scope and purpose.
Sole source tenders involve only one potential supplier being invited to submit a tender. A sole source tender may be used where there is essentially only one suitable supplier of the services or product.
Supplier questionnaires or pre-qualification questionnaires ensure that potential suppliers are all asked the same information when assessing their suitability to be invited to tender or to have their tenders evaluated. Some organisations issue a standard pre-qualification questionnaire, for example the UK government has developed standard core PQQ questions which have been revised several times and are mandated for use across government, and has also stipulated that PQQs should not be used by central government contracting bodies when procuring goods or services valued less than the threshold values set by UK procurement legislation.[8]
A tender box is a mailbox used to receive the physical tender or bid documents, or a digital equivalent.[9] The tender box is not implemented in every country around the world.
A tender validity date is the date where an ITT is closed, after which no more tenders can be submitted.[10] [11]
Post-tender negotiation involves negotiation between an intending buyer and seller after a seller's tender has been submitted.[12]
Tenders have a bidding period available to prepare and bid. Research has shown that the length of this period might affect the number of bids and as a result competition among renderers [13]