Tender (Supply Contract) - Definition
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What as tender in a Supply Contract?
Tendering is a formal process of soliciting bids for a project that involves sending written documents to potential suppliers of goods or services, specifying the requirements of the project and inviting them to provide estimates within a specified deadline.
The tender process is usually initiated by the buyer by issuing a tender document and culminates in the selection of qualified and interested suppliers based on criteria such as price, availability and proposed terms of delivery.
A Little More on What is Tendering
Tendering is an essential part of most projects or procurement initiatives. Institutions and organizations incorporating the tender process are required to have certain procedures in place in order to administer the initiation of the bidding processes, evaluation of tenders received, and selection of the most favorable tender. Such procedures the applicants of the fairness and transparency of the selection process.
Tenders can originate from both public as well as private sources.
Components of a Tender
There are usually three primary components of a tender:
- A Request for Tender (RFT), which is published by the organization that is looking for responses from businesses who can do the work. The RFT is an official request to suppliers to submit competitive offers or bids to carry on project work, supply raw materials or provide finished products. Requests for tender are meant to be public and transparent processes and as such, such processes are governed by specific laws that seek to ensure that there is fair competition among bidders and that the most eligible bidder is selected. RFTs usually contain documents such as:
- The conditions of tender,
- The form of tender,
- The conditions of contract to be signed in case the tender is awarded, and
- The scope of work to be performed.
- A Response to Tender is issued by a potential supplier or tenderer in response to an RFT. A response to tender should be structured and formal for it to be considered. There are a range of tender services that assist suppliers and other tenderers in formulating acceptable bids, coordinating the various tasks involved in the process to ensure that deadlines are met, and ensuring that the response to the tender is compliant with the laws in effect.
- The acceptance of the tender, which usually results in the signing of a contract between the organization and the supplier.
Apart from the Request for Tender (RFT), there are several other types of tender requests such as:
- Approach to Market (ATM),
- Request for Proposals (RFP),
- Invitation to Offer (ITO),
- Invitation to Respond (ITR), and
- Request for Quote (RFQ).
Moreover, it should be noted that although Expressions of Interest (EOI) are often used to initiate the tendering process, they are not typically considered tender requests.