Open tendering is the most widely used form of competitive process within the public sector, less so within the private sector, and is used for procuring products, works or services. An organisation’s requirements are detailed in a document advertised within the open market for all suppliers to consider.
An open tender follows established procedures typically set out within the organisation’s procurement guidelines. The process can be undertaken in several diverse ways, each with its increasing level of complexity. Such methods include:
- Request for Information: the simplest form of open tender, where an organisation is searching what is available from a specific market sector, with the simplest of requirements and a broad element of sample pricing requested.
- Request for Pricing: a more formalised form of open tendering, which is generally undertaken for simple procurement requirements, often requesting bespoke pricing.
- Invitation to Quote: an informal method of open tendering, where the requirements are a little more complex, requiring a more detailed and in-depth specification, often requesting just pricing, although quality questions may be asked.
- Open Tender: is the most complex form of open tendering, where there is an element of quality to be considered. In the final supplier selection decision, quality questions will be asked along with a robust schedule of rates and charges, and the final supplier selection decision will utilise a scoring method based on a price/quality ratio.
The fundamental
requirements of open tendering are that tenders should:
- Be open to all suitable suppliers and bidders.
- Be advertised within a reasonable geographical region.
- Have objective supplier selection criterion.
- Have neutral, transparent, and unambiguous requirements specifications.
- Have an objective and straightforward evaluation process.
- Be awarded to the least-cost supplier without further contract negotiations.
There are many advantages to open tendering being used, some of which may include:
- People Involvement: the people responsible for the products, services, or works are directly involved with the selection of the supplier within an evaluation panel.
- Due Diligence: due diligence criteria can be standardised, reducing the commercial, operational, and legislative risks of supplier selection.
- Service: service levels can be considered by an evaluation panel, and specific service KPIs can be incorporated into the tender documentation. Suppliers will be aware of the standards the organisation wishes to achieve, and can price the level of service accordingly.
- Quality: it is essential to stipulate the quality of products, works or services required to be able to evaluate the balance between price and quality accordingly.
- Competitive Value: the open market offers the most significant level of price competition. As suppliers compete for the award of the tender, they are unaware of who is bidding at what price.
- Market Awareness: open tendering allows organisations to review what a market has to offer and to ascertain an understanding of what alternatives are available.
- Control: organisations can periodically review their requirements to suit the prevailing market conditions in terms of service, pricing and quality based on specific requirements. The open market is the most significant source of innovation.
- Best Fit: tendering is the best way for organisations to test their pricing against the market to source best-fit suppliers for various spend categories.
- Service Level Agreements: an organisation can establish its key performance indicators, quality standards and service levels from the outset to better position itself to negotiate terms with suppliers to reduce any pricing, operational or legislative risks.
For many public and private sector organisations, open tendering is the preferred method to procure products, works or services that exceed a value of £100,000.00 per annum at the most competitive level. Different requirements for quality and price may govern each tender project.
The open tender remains the most popular among the diverse types of tenders (restricted, negotiated competitive dialogue, open). However, participants have cited several disadvantages of this kind of procedure, such as it:
- Takes time to complete the procurement project.
- Restricts the supplier from determining the technical specifications.
- Limits supplier participation due to its excessive formalism.
- Requires strict adherence to compliance procedures.
- Limits the building of long-term relationships with suppliers.
- The decision-making part of the open tender process is often the most challenging stage.
Decisions will invariably be caught up in politicism, uncertainty, lack of knowledge, and people not wanting to be accountable for decision-making. However, writing the requirements down is often an excellent start to the decision-making process.
Once the requirements specification has been decided and agreed upon, the open tender provides a smooth path to select a supplier who can fulfil the requirement, because of its formality.
Although there are disadvantages to open tendering, many organisations utilise the process as it brings people together to consider the exact requirements for the products, works or services.
Within the open tender
procedure, the decision-making process is formalised. It is made by the tender
evaluation panel, whose auditable decision takes out bias, personal feelings,
and sentiments and ensures openness, probity, and transparency.
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