This article provides a study note on tendering system.
Meaning of Tender:
A tender is an intention for procurement/import or for sale/export of specified materials and/or services under specific terms and conditions under specified payment terms.
The basic idea behind this form of procurement is to give equal opportunity to all that are interested to do business. It involves bureaucracy and a lengthy process of issue receipt processing negotiation and contracting involving numerous documentation.
Information Contained in a Tender:
Most of the governmental procurements and imports are based on specific tender systems and contain sufficient details so that prospective bidders can get sufficient information for making an offer.
A tender is expected to contain following general information:
1. Name of the organization and/or department/tender number and date.
2. Details of physical location (address, phone/fax/telex/e-mail) numbers.
3. Item to be imported, (specifications and other technical details).
6. Payment terms.
8. Validity of the offers.
9. Mode and source of foreign exchange required to meet the import requirements.
10. Due date and place for submission of the bids (offers).
11. Date for opening of the bids..
12. Whether there will be public opening of the bids.
13. Evaluation procedure and negotiations.
14. Award of the contract.
15. Force majeure.
16. Liquidated damages for late delivery.
17. Replacement of defective material.
18. Risk purchase conditions.
19. Period of the contract.
20. Cost of the tender documents.
21. Bid guarantee (if applicable).
22. Performance guarantee (if applicable).
Tendering System of Procurement:
(a) General Tenders:
These are generally for the local procurement. The first information is placed on the notice board of the department and advertised in selected journals.
Sometimes these tenders specify that no bids for imported material will be considered, and if a bidder opts for imported material that the bidder must make arrangements for import, payment of duties, and payment to the overseas exporters. As far as the department is considered they will make payment in local currencies only.
(b) Limited Tenders:
These tenders are not placed in any journal or national daily but are sent to those who are registered with the department.
(c) Global Tenders:
These tenders are issued purposely by the department/public sector organization for wider coverage/response. These are open to local and overseas bidders. Evaluation is done by giving some weightage to the local bidders.
(d) Tenders under World Bank Finance:
The terms and conditions including local component weightage and payment terms are governed by the bank’s regulations “International Competitive Bidding (ICB)”. In fact most of the governmental procurement is based on this document.
(e) Tenders under Two Bid Systems:
Most of the tenders under any finance and/or involving capital goods, process, and technology are based on two bid system. The tender announcement specifically mentions this aspect on the body of the tender notice. Under such tenders the first bid is generally the technical portion of the requirements and the second part contains the price bid.
At first the technical bids are opened and only those bidders who meet all the technical requirements are declared as qualified bidders and their price/commercial bids are opened, others are disqualified and they do not take part in any further proceedings/evaluation.
Vendor Registration System:
Most of the governmental departments and public sector undertakings have elaborate system of vendor registration. The interested parties have to obtain necessary registration documents and submit with necessary details.
The criteria for selection of the vendor are based on the perceived and proven ability and minimum capability of the intending party to meet the financial and contractual obligations including the material/service requirements.
Once the registration is done then it continues till it is cancelled, the reasons for cancellation could be attributed to the actions of the vendor and/or the government department. The vendors’ actions include any default, fraud, criminal negligence, bankruptcy, non-conformity of the rules, and indulgence in unlawful means for getting business.
In the case of the World Bank they also follow the system of vendor registration and have a systematic evaluation technique for the vendors’ activities.
If they find the vendor is stepping out of their responsibilities of area of operations, due explicit or implicit means and their conduct do not conform to the standard conditions of contract, than such vendors are disqualified from doing any further business with the companies who are being funded by the bank.
The disqualification can be permanent or time bound. Bank also publishes list of the parties disqualified and circulates it to all the companies working and/or undertaking work under bank financed projects. As far as cancellation due to actions of the government department is concerned it could be only when the department is folded up on any account.
But in such cases the vendors retain the right to use the earlier registration to get fresh registration with another compatible department. If the registration is not automatic then at least such vendors are given due weightage for their past performance.
Sources of Information:
For tenders meant for wider publicity the sources are the National dailies, trade magazines, departmental notices, and specific web sites like the one operated by the World Bank and other similar institutions.
For the limited tenders though the practice is to issue direct brief notices to the registered vendors but sometimes the news may be published in the normal channels as mentioned earlier but with the rider clause that it is a limited tender and only the registered and/or qualified vendors can participate.
The notice gives minimum information on the item, quantity, specification, due date, tender document cost and how payment is to be made (cash, cheque, draft, local currency and/or foreign exchange etc) and where it is to be made.
Bid Document Collection:
This is perhaps the first step towards doing business on tender basis. Once a suitable tender has been noticed/identified/ notified, the next step is to procure set of tender documents. This is done as per the information contained in the tender notice.
Sometimes difficulty arises when foreign bidders try to collect tender documents through local partners in local currency; in such cases it is advisable to consult with the tender department and follow their instructions.
In many cases the receipt for the purchase of the tender documents has to be attached with the returning bid, so the vendor must keep the receipts in safe place for later use.
Also it must be noted that bids submitted without procurement of tender documents are liable to be rejected by the tendering authority even if the bid is highly competitive. This situation generally occurs with the foreign bidders who face a situation of not receiving the documents in time and or not aware of the consequences.
It is always better to enclose some evidence with the bid that fee for the tender document was remitted but documents were not received in time and hence the bid. Under such conditions it might be, repeat might be, possible that the authorities keep your bid sealed till they receive the formal bid against the tender documents. In any case it is in the interest of the vendors to stick to the conditions of the tender.
Preparation and Submission of the Bid:
The thumb rule of tender business is “not what you can supply, but what is required”. The tender conditions have to be followed strictly and wherever deviations occur the same must be pointed out at the required space as per the instruction of tender condition for such purpose.
The steps to be followed are:
Form a team that will handle the tender.
Name the team leader or coordinator.
Distribute the areas of responsibilities.
Make copies of the tender set
Distribute relevant portion of the tender to specified persons for further action. But the coordinator retains full set.
Make out the time schedule depending on the available time till the date for submission. Keep at least one week or so in safe custody for any emergency/contingency.
Keep the time required for submission of the bid in mind, if it is outstation or out of the country, keep time reservation for such transport and make journey arrangements, hotel reservations etc., for stay. It is always better to get feedback from the authorities for the local conditions.
Let each person finish his allotted work and submit to the coordinator. The coordinator reviews the bid and if necessary call for final meeting (the bidding strategy is not discussed here in this section). Finalize the bid in accordance with the tender conditions.
Seal and submit the bid as per the tender conditions. Retain one copy for future follow-up.
If the place of tender submission is out country or overseas, it is always safe to courier one set marked “duplicate advance set” well in time and if vendor is going to submit and attend the bid opening (if tender conditions permit) then hand carry the other set marked “original set”.
However if no such conditions exist then better make foolproof arrangements for bid submission in time keeping enough grace period to meet any contingencies.
WTO Guidelines on Governmental Procurement:
WTO has done commendable work on this topic and has issued various guidelines that are generally accepted and followed by the member countries. Like World Bank, WTO also has elaborated on the process of evaluation of the bids which forms part of the national government’s procurement process.
In addition WTO has recently been encouraging the national governments to use the potential of the internet for procurement. A demonstration on the application of information technology in Government procurement was organized on 24th June 1998 at WTO headquarters.
It was well accepted by both the developing and developed countries and since then many countries have been moving towards “electronic procurement system”.
The emphasis is on dispersion of procurement information on the net and then receipt of the bids as well through the electronic medium. This system is now called the “electronic tendering system”. It has the secured system in security and confidentiality of the bid submitted and opening process electronically.
The benefits of this system are:
1. Efficiency in procurement and supplies operation.
2. Time and cost effective.
3. Wider scope for usage.
4. All suppliers can track down quickly and efficiently procurement data.
5. Small and medium enterprises in remote locations but with Internet connection can have equal access to the procurement information.
6. The vendors can easily access the governing rules and regulation of procurement for specific case.
7. The tender documents can be electronically submitted.
8. The bids can be electronically submitted.
Though many developed countries are using it as pilot project but soon it might become the requirement in governmental procurement for all member countries.