Tendering, whilst often seen as convoluted and complex with heaps of ‘red tape’ to boot, remains the go-to choice for public sector procurement at least. Tendering in the private sector is still popular, though, and there are benefits for both the buyers and sellers of the services, works or products in question.
In the public sector, tender procurement for government works, services or goods provides a formalised, regulated, transparent avenue to procuring business from providers. To win a contract of over £10,000 with a public sector organisation, a business must tender for it.
The Tendering Process
In the public sector, the tender procurement process is relatively linear and straightforward. The public sector organisation, which could be anything from a central government department, the NHS, Police or a Local Authority, will publish a contract notice with a request for tenders (RFT).
This will contain all vital and relevant information to the contract with a deadline for which suppliers will need to submit their proposals. Tendering contracts range from cleaning and stationery suppliers to builders and digital service providers. Anything and everything the public sector requires can go to tender, so businesses across all sectors and industries can get involved.
In essence, tendering is a competition, but businesses are obviously not expected to start any work before they are formally selected. This is the point of tendering - everything is exposed, in the same format, to all potential bidders. Everyone is working with the same subject material to the same ends.
Why Is Tendering Useful?
For buyers, tendering is useful as it permits a transparent, fair means to procure business that does not occlude any supplier that is best able to do the work, regardless of their size, market share or business stature. However, tendering is still a battle of the fittest - businesses that are operationally ready and able to take on the contract and meet regulatory criteria are most likely to win the tender, meaning smaller businesses have their work cut out when bidding for larger contracts at least. There is also social value to consider - public sector organisations must factor in the social value of awarding a contract to a particular business and not just the economic value.
This is critical to the involvement of SMBs and SMEs, though prior to the government pledging greater resources in procuring business from smaller businesses, it was still usually larger businesses that were best able to demonstrate social value eligibility. Today, the government is planning to increase public sector spending on small businesses to £1 in every £3 spent. Public sector spending with small businesses is already at an all-time high - the aim is to open public sector procurement to the wealth of small businesses that the UK has to offer.
The Benefits of Tendering
Transparency: Transparency benefits both parties in the tendering process. There is no back-and-forth of negotiation. Expectations should be made clear from the start, as is the pay. The payment process is also transparent given the role of the Prompt Payment Code that ensures payment within 30-days or 60-days in 95% of cases, depending on the size of the contract.
Rapport and Trust: Tendering creates goodwill. It’s a sort of matchmaking process that ensures due diligence between the two parties. Any potential hiccups or other issues will be rooted out during the tendering process, leaving a safe, binding agreement between the two parties which is not liable to much reproach.
Social Value: Social value plays a large role in public sector procurement for good reason. It is no longer enough to ‘race to the bottom’ in pursuit of cheap and cheerful services that fail to provide benefits in their wider social contexts. Tendering, in the public sector at least, encourages providers to place greater emphasis on what they can do for their local areas in terms of work experience, employment, mentorship, community programs, etc. It invites a more holistic form of business that is synchronous with the aims of both central and local governments.
Compliance: Compliance is paramount to public sector tendering. The awarded suppliers will be those that are legally compliant with all relevant procurement regulations and regulations regarding the delivery of the services or works. One example is health and safety. The tendering process will ensure that bidders have to submit rigorous health and safety information in order to be successful. This ensures that there is already a plan in place to carry out the work in a compliant fashion.
Tendering for Small Businesses
Tendering should be agnostic to the types of businesses that are awarded contracts and their size, so long as they are the most suitable for the task at hand.
Formerly, it was usually the largest bidders that triumphed in public sector procurement, largely because they’re operationally ready to take on the contract and have experienced bid writers who can demonstrate eligibility and due diligence. This is now changing and central and local departments and authorities are being encouraged to take a closer look at how small businesses can bring something new and innovative to the table.
Whilst larger contracts are still likely awarded to larger businesses, new rules, regulations and guidance help prevent small contracts from being ‘mopped up’ by larger businesses when smaller ones are at least as well-equipped.
However, smaller businesses will still need to be au-fait with the bidding and proposal process. There is little wiggle room for mistakes when it comes to tendering - businesses should be aware of how tendering works and how the tendering process progresses.
The main stages of tendering are:
- Advertising the requirements of the tender
- The Selection Stage / Pre Qualification Questionnaire (PQQ)
- Evaluation stage
- Invitation to Tender (ITT)
- Evaluation of submissions
- Awarding the contract
The purposes of the tender are usually established by a commission, but the commission process is distinctly different and legally separated from the tendering or procurement process.
Summary: What is Tender in Procurement and Why is it Important
Tendering is an important procurement method that is well-established in both the private and public sectors. In the public sector, in the UK at least, contracts above the value of £10,000 must go to tender.
Tendering ensures a transparent, robust and compliant procurement process that benefits both parties. It’s not as convoluted as many businesses assume and can provide an avenue to steady work from potentially lucrative public sector clients.
