What is a Tender in Business?
In the free-market capitalist system, we don’t always have the perfect information when buying or selling a good or service. This means we might not always have the best idea of the best or most ideal provider in a given situation. If someone wants something done and they know multiple people or companies would like the opportunity to do it, there’s little point in wasting time and resources going on a wild chase in the hope of coming across the perfect match.
Tendering helps to bridge this gap. It is a process where private or public sector organisations invite businesses to come and display their skills, goods or services for an ongoing project. It is a sort of auction where there is competition for a business to present itself as the best choice to fulfil a project, whether due to providing the lowest cost or performing the task to the highest standard. In most cases, there are several factors taken into consideration.
It is in the best interest of the organisation receiving the bid for the process to be transparent. However, things can often become murkier on the other side as bidders hope to outdo one another and, in some cases, even demand compensation from taxpayers if they do not get the outcome they desire. For example, in 2017, Richard Branson’s Virgin company sued the NHS (the public healthcare service in Britain) for an undisclosed amount after another bidder was given an £82 million contract. Since British taxpayers provide the NHS, this essentially meant working people in Britain had money taken by a billionaire because his company wasn’t given the right to operate a part of the NHS.
However, the tendering process has brought significant efficiency and matched the perfect organisation with the right task. It often is a part of public sector life without people even realising. Councils, universities, and government departments regularly use contracting services to help with tasks deemed too inefficient if done themselves.
There are two primary types of tender in business; restricted and open.
Open tenders allow anyone to bid and put themselves forward for considerations. Restricted tenders, on the other hand, require an invite, and so to get your foot in the door with many of these, you’ll need to have put in the legwork first to make sure your brand name is known and respected.
The practice makes up a core tenet of the neoliberal that has spread throughout the world since the 1980s and has brought a mixture of pros and cons to people whose everyday life it affects.
Tendering is used regularly by private-sector corporations, too, however. For example, many large companies specialising in finance or mobile technology will often desire large impressive buildings to flaunt their status or showcase their products. Can they be expected to construct these buildings themselves? Not if they want it done well!
This is the kind of situation where such a company will start a tendering process, and architecture firms or construction companies will come in and give presentations etc., to compete for the opportunity to build the project. They hope to do so because if things go well, they’ll make a handsome profit, and if they do a good job, they’ll be able to show off their track record at future similar auctions.
Finding contracts in many cases has become a very simplified process. In Britain, for example, there is a Contracts Finder service run by the government that displays any current or future public sector contract worth over £10,000.
You can apply a whole range of different filters to get a closer look at what suits you, such as whether the contract is suitable for SMEs, its location, value, or even just what industry. Other avenues are available, such as Tenders Electronic Daily (TED) for EU-based work, the Small Business Research Initiative (SBRI), of the Digital Marketplace for digital service providers. You can also become an approved supplier through your local council, and industry publications relevant to your business can be an excellent place to keep an eye out for notices.
Things aren’t relatively as easy in the private sector, and you’ll have to take a more proactive approach with networking, direct business contact, company events and things like that. Building a solid profile and getting your brand name out there allows others to make upcoming tenders known to you if they want to have you as an option.
Don’t just take any contract thrown your way, though. There’s rarely much point in taking on an arduous task if it only just manages to cover costs. It’s essential in a tendering process that the match goes both ways. The task must be right for you, just as you must be the proper organisation for the task.
You can find our more about what a tender is here.
Other useful links from our knowledge centre:
Can a Business Refuse Cash?
How Does Brexit Affect Business
What is Liquidity in Business?
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