You want to select the best supplier without the hassle of lots of meetings with suppliers that might not be the right fit for you.
Maybe you’re wary of not getting the right deal or have had experiences with suppliers trying to sell products that are not right for you, which almost always results in you having to buy the right products when the ones that were not the best fit for your organisation inevitably fail you. This can be an enormous waste of time and resources, and at the end of it, you are no further forward than when you started.
That’s why nearly all public sector companies tender for the requirements through online portals; their requirements are stated clearly and suppliers can only submit responses if they can meet those requirements with their products and services. Slowly, other private sector companies are following suit.
LION has over 30 years of experience working with companies either competing for their business through the tendering process or being a sounding board for those who need some expert help.
So, what is the best type of tendering for you?
Below, we’ve broken down the top three tendering types we see frequently so that you can weigh up the pros and cons and decide which tendering type is better suited to your requirements:
- Open Tendering
- Restricted Tendering
- Negotiated Tendering
Open Tendering
With open tendering, you allow any business to bid for the contract. Typically, this process will begin with an invitation to tender (or ITT). Once the ITT is published, any business can respond and bid for the work. Even though there are several types of tendering methods, this is the most popular for government projects.
Government bodies will often use an advertisement with the details of the scope of the tender, the timeframes for the award, the full details of what the tender involves, what the tenderer requires and any other relevant information. Then, those suppliers who are willing to accept it will apply for the advertisement.
There are two types of open tendering:
Single stage – using only an ITT and final response to push through the tender quicker.
Two-stage – using two stages to cut down the number of suppliers with a final bid response.
This type of tendering procedure will include the following steps:
- The buyer releases a pre-qualification questionnaire (PQQ)
- An ITT is issued to successful businesses under the PQQ requirements
- The contract is awarded to the successful supplier under the ITT requirements
Pros
- Allowing more suppliers to bid opens up your tender to more (and potentially better) bids
- Creates more opportunities for suppliers, especially those who may not be able to supply you with an innovative bid under restricted tendering.
- Creates more competition, thus encouraging suppliers to bid with lower pricing for you
Cons
- You open yourself up to selecting a supplier who has no, or little, experience.
- There is a lot more admin time for you to conduct the tendering process
- Not all bids could be or will be, fully completed.
Restricted Tendering
You are more likely to use this method if you require specific or specialist services and products. With restricted tendering, only suppliers you have invited directly can tender for the work. This means that you can shortlist the suppliers by filtering out any that don’t meet your requirements.
A limited number of suppliers will be selected by the buyer. The buyer could have a short and approved list of suppliers if they are utilising a framework unless they can use ad hoc lists where the names of the contractors are mentioned who have proved their abilities and competency.
Pros
- You are more likely to select a reliable, experienced supplier
- Your time spent on admin is lower because fewer suppliers are selected
- Your organisation’s requirements are more likely to be guaranteed
Cons
- Less competition between suppliers means potentially less innovative ideas and suggestions from suppliers
- You could be biased toward suppliers that are popular or have more market share, instead of focussing on the most effective supplier for the requirement.
Negotiated Tendering
This follows a very similar process to the restricted tendering method, but with the added stage of “negotiation”, sometimes known as “bid discussion”.
Stage 1: This step includes selecting a suitable supplier and establishing the price levels using the collected information. Those details should be strong enough to make such decisions. This is done by using the ITT, or the combination of PQQ/ITT.
Stage 2: The selected suppliers who are successful in the first stage are invited to negotiation meetings, where certain aspects of the supplier’s bid are discussed in more detail. The supplier then has the opportunity to present their “best and final offer” to you.
Pros
- You have a much higher chance of selecting a reliable, experienced supplier who can fulfil your requirements
- Allowing a negotiation stage allows suppliers to put forward ideas and opinions that benefit your company, which wouldn’t typically be discovered using tender documents alone.
Cons
- This method is more time-consuming than the rest and requires a commitment from both you and the supplier(s) to follow the tendering process through.
- Your company may have to give up some requirements to make the contract more feasible for the supplier at the negotiation stage.
The factors to consider when choosing the tender type for you
When it comes to choosing which type of tender is best for you, there are 3 big factors that you should consider before making a decision.
We’ll go into each factor in more detail below but at a high level, the factors you should consider when choosing which type of tender to go for are:
- How much time can you realistically invest in the tender process?
- Is this a regular contract renewal (e.g. every 2, 3, 5 years)?
- How complex are your requirements?
How much time can you realistically invest in the tender process?
Ask yourself honestly: how much time do I have for this tender?
If you don’t have much time to spare for this due to workload or need products urgently (this may be because of service issues with a current supplier or long lead times), your best bet is to choose a restricted tender. A restricted tender allows you to choose suppliers you know or have heard of rather than looking at various frameworks, which means you can work through the entire process more quickly.
If you don’t have much time but service and price are high qualifiers for you, you may want to look into a negotiated tender.
If you have more time to spare and a focus on competitive pricing, an open tender is for you.
Is this a regular contract renewal (e.g. every 2, 3, 5 years)?
How often will you need to revisit this tender?
If you want to revisit this regularly, an open or single-stage tender is the best option for you. The market changes quickly and suppliers that you haven’t worked with before could be providing you with the service you need. A long contract period could allow your chosen supplier to become complacent when servicing your requirements. For this reason, recommended time scales are between 2-4 years.
A longer contract period allows you to commit to a supplier and work with them to develop a service level that works for both parties. Changing suppliers too regularly (i.e less than 2 years) could cause instability in supply, not to mention the admin time needed to change suppliers.
How complex are your requirements?
If your requirements are not very complex and your product list is not long (for example, less than 50 products), then a restricted tender is the best option for you, because you can work with the suppliers you already know/know who can hone in on how to help you best.
If you do have complex requirements, lots of products and added service levels, then a negotiated tender will be the best option to ensure your requirements are met, as you have more control over the process. Examples of a complex requirement are; if you want a bespoke product, such as a specific colourway for your protective clothing; or if you have 100 sites based all over the UK in remote areas (highlands/mountains/islands) which require a specific delivery schedule.
So, which tender method should I choose?
Like safety workwear, there is no “one size fits all” when it comes to picking the correct tender method for your organisation. The below scenarios will help you figure out what camp you might be in:
I have little time to spare for this and know exactly what I want:
A restricted tender is for you: you don’t have the time to sift through lots of responses, you know the products you want and probably have an idea of which companies you would be happy to work with too. A restricted tender will save you time and safeguard against the risk of getting a ‘wildcard’ supplier bid that may waste your time in the long run.
I have time to dedicate to this, but very niche requirements:
A restricted or negotiated tender is for you: avoid wasting time with an open tender and go directly to suppliers you know have experience with your requirements.
I have time to dedicate to this and my requirements are not specialist – my motivator is price:
An open tender is for you: the bidding culture for open tenders will drive more competitive pricing and with general, non-specialist requirements, you allow more suppliers to come through with solutions for you.
I have time to dedicate to this and my requirements are not specialist – my motivator is good service:
An open tender may be good for you for the reasons listed in the option above.
You may also want to consider a restricted tender, focussing on suppliers who are renowned for good service. You may not get as competitive pricing with this option, but you will get a better understanding of what level of service a supplier can offer and whether it is worth the different pricing.
LION has gone through the tender process thousands of times so if you’re still undecided about which tender type is right for you, one of our team members would be happy to help!
To find out if LION is a fit for your company check out our blog about what LION sell and what services we offer.
If you have identified LION as a fit for your company, we would love to participate in your tender process. Request LION joins your process today.
If LION is not a fit for your company please look at our list of recommended alternative suppliers.
To get further help on your tenders and to identify the right tender process for you book a meeting with Wade Lewis, Director of Business Development at LION.
