To tender is to invite bids for a project or accept a formal offer such as a takeover bid. Tendering usually refers to the process whereby governments and financial institutions invite bids for large projects that must be submitted within a finite deadline. The term also refers to the process whereby shareholders submit their shares or securities in response to a takeover offer.
For projects or procurement, most institutions have a well-defined tender process, as well as processes to govern the opening, evaluation, and final selection of the vendors. This ensures that the selection process is fair and transparent. Regarding tender offers related to takeover attempts, the conditions of the offer are clearly listed and include the purchase price, the number of shares requested, and a deadline for a response.
A request for tender (RFT) is a formal and structured invitation to suppliers to submit competitive bids to supply raw materials, products, or services. Because this is a public and open process, laws were created to govern the process to ensure fair competition among bidders.
For example, without laws, bribery and nepotism may flourish. Tender services are available for potential bidders and include a wide range of tenders from private and public sources. These services include crafting suitable bids, coordinating the process to ensure deadlines are met, and ensuring compliance with applicable laws.
The Process of Tendering
The process of tendering is very simple. But care must be taken while preparing it because it is considered as the official document. And thus, once it is submitted it becomes a legal document and you have to follow the terms and conditions of that tender.
The tenders should be submitted in the sealed covers. Specific date and time need to to be mentioned on the top. It should also be accompanied with specified enclosures like EMD which earnest money deposit. This is normally 2% of the estimated value in the tender.
This is done to make sure that there are no non-serious bidders bidding for the contract. The deposited money will be refunded once the bidding process is successfully over. The firm that gets the contract has to replace this EMD with performance guarantees and has to offer up to 10% of the estimated amount and the experience certificates.
Once the bidding process is over, the first thing done is the technical details that are mentioned by the bidders are taken up to the discussion by the bidders. If the bid is accepted and you are not signing the contract than the EMD is forfeited.
Usually, in the bidding process, the firm with the lowest bid gets away with the contract. In order to curb the fraud, the governing body can reject all the bids without giving any proper reasons. The court that is given the jurisdiction can also intervene in the matter of any dispute.