Putting together a Tender Exercise

Assuming you have a large and complex enough opportunity to put to market which would be attractive for potential suppliers to bid for then to secure Value for Money, you may be best off looking to run a tender exercise. Tender exercises are one of the key functions of good business procurement, as it evokes competition in the market and ensures organisations bidding for the work “sharpen their pencils” knowing that to win, they will need to have a more attractive proposal than their fellow bidders.

When would a tender exercise be appropriate?

Tender exercises are considered the heavy artillery in the procurement war chest and the big guns are only really needed for the big battles. Running a tender exercise for a small, non-core spend would be overkill and it is unlikely to get any prospective suppliers excited to invest time into putting together a response.

There is no hard and fast rule to know which contracts you should run a full tender exercise on, but there are some key criteria that can point you in the right direction:

1. Value – The monetary value of the contract is always an indicator as to whether a tender exercise is appropriate. High value contracts need due care and attention and assurances that the supplier is offering exactly what you are requiring. Organisations tend to set a threshold spend in line with their operational activity, typically £25k+. From a value perspective, you also have to consider the bidders view. Bidding against tender documentation takes significant time and resource not to mention the opportunity cost (bidding for your opportunity means they are committing resource that could be used elsewhere). You may feel a £5k contract is a lot to you and your business, but running a complex tender exercise is unlikely to attract many bidders as it simply isn’t worthwhile them committing the resource to it.
2. Complexity – If what you are purchasing has a significant level of complexity that needs to be specified, then it may be a necessity to run a full tender to ensure your bidders offers are matching exactly what you require. With a tender you can go into granular detail of exactly what service/functionality/product you require and introducing a very detailed specification, service levels and evaluation criteria will allow you to quickly map which suppliers can deliver to your needs. This documentation will also allow unsuitable suppliers to quickly disqualify themselves and not waste their time bidding for something they would be unable to deliver
3. Importance – This is more of a catch all. If the contract is of great importance to your organisation, it is likely to fit with one or both of the above criteria already. However, there may be some relatively low value and not particularly complex contracts that are absolutely imperative to your function. In this case you will want to explore what the market has to offer and ensure the supplier you go with has the level of credibility and experience necessary to continuously deliver to an exceptional standard.

How to put together a tender exercise

Once you have identified a purchase that requires a full tender exercise you will need to plan your go to market strategy. For instance, you will need to know where/how you are going to advertise your tender, who will need to be involved from an internal standpoint (key stakeholders and subject matter experts) and what your key evaluation criteria is going to be.

Finding bidders for your tender exercise

One of the easiest methods of advertising out your tender exercise is by conducting some of your own research. Research will give you an insight in to what suppliers currently occupy the market and their respective websites and content will allow you to gauge how suitable their likely proposals will be. Participants in the market will always be glad to hear about a new opportunity and simply dropping them a quick call/email introduction to enable them to register their interest is a very quick and typically very successful first step.

An alternative method is to sign up to and advertise on a bid portal. Countries tend to have their own rules and portals for bid advertising so it pays to do a little bit of research to find which portal is best for you given the jurisdiction in which you will be carrying out your procurement exercise. This method is likely to reach a much wider pool of potential participants, however you will have to take due care shortlisting such an extensive amount of potential offers. You certainly don’t want to be diving into detailed analysis of hundreds of responses and therefore you will need some criteria (size, location, experience etc) to disqualify participants in a quick shortlisting phase.

Internal Stakeholders

Internal stakeholders are a key aspect in a successful procurement exercise and it is vital that they are aware of and engaged with the prospective tender exercise. Within your organisation there will be a number of departments that will be affected by the outcome of a supplier selection, for example if you are tendering for a new financial software, the IT department and the Finance department will be key stakeholders with a vested interest in the outcome. IT will need to be consulted to ensure that prospective supplier offers meet key cybersecurity requirements and that prospective solutions could seamlessly integrate within the current IT infrastructure. Finance would also be the key end users and therefore would need to be actively consulted and aware of the user interfaces, functionality and prospective training that will be offered. Such internal stakeholders can help you identify what is important which will enable you to put together appropriate evaluation criteria when analysing supplier responses.

Putting together the key documentation

Once you have an understanding of where you are going to advertise your tender and have consulted with your internal stakeholders to gain more insight into exactly what is required and what is important, you will be able to move on to drafting your documentation.

In order to do this you will need to outline the specifics concerning your tender exercise. The documentation needs to highlight areas from requirements and priorities to timelines and evaluation criteria. The below framework should provide a useful foundation to get you started.

1. Specification – What is the product/service you are looking to procure? What are the specifics? Necessities? Desirables?
2. Term – What is the term of any contract you wish to sign, would this be a tender for a short term 1-3 year contract for a product and/or service or a longer term?
3. Key contacts – Who are the key contacts in your business concerning the tender exercise in case of any enquiries or requests for clarification.
4. Timetable – What is the timeframe within which you wish to complete the tender exercise? You should be careful to outline areas such as when the tender was issued, a deadline for the receipt of clarifications should the supplier have questions, a deadline for receipt of completed tenders, a deadline for evaluation and a target commencement  date.
5. Method of delivery – How do you wish to receive the completed tender documentation from each supplier? Will this be electronically? You should spell out exactly how a supplier should go about submitting their completed documentation.
6. Tender evaluation model – How are you going to evaluate the tender? Will it primarily be on price or will it be on quality/suitability to specification? You should outline exactly what you are looking for in the tender and attempt to apportion your weighting between cost and suitability (quality,, service levels, innovation and continuous improvement etc)
7. Legal disclaimers – It is good practice to include some legal disclaimers within your tender documentation. For example prospective suppliers through the tender process may gain access to sensitive corporate data and/or Intellectual Property and therefore including some basic legal disclaimers to guard against misuse of this information is good practice.
8. Disclaimer of cost – It’s good practice to include a legal disclaimer to state that your company is not in any circumstances liable for any tender costs, expenditure, work or effort incurred by the tenderer including if the process is terminated or amended by you.
9. Draft terms and conditions – It is likely you won’t just have a standard supplier contract to pull up for the particular product/service you are looking to procure, but it would be important to have in mind and spell out some contract terms you wish to see included (e.g. no volume guarantees, required liability levels etc)
10. Your rights – For example if you wish to make changes to the timetable, disqualify a tenderer due to a particular circumstance (e.g. misrepresentation) or withdraw or amend the details of the tender then you need to stipulate this under a company rights section. If you do not do this, you leave the door open for potential legal recourse in the event you decide to make changes.

Tender clarification questions

It is always important to put an initial phase in your tender exercise that allows prospective suppliers to ask questions about the documentation that has been provided and seek clarifications on any area that may seem initially unclear.

Ensure that your documentation spells out exactly who these clarification questions should be directed and which communication channel they should follow (email, phone call etc). Typically clarification questions should be directed to the procurement manager and sent via email. This leaves a clear auditable trail and enables the procurement manager to seek any additional information from relevant stakeholders that may be required to answer the question.

Once the phase is over, all clarification questions along with respective answers should be posted to each participant. This levels the playing field and ensures all parties are participating in the exercise with no asymmetry of information and therefore no discernible advantage to one party over another.

Evaluating tenders

Tenders should be analysed and evaluated in line with the criteria you specified. It pays to get your relevant internal stakeholders engaged at this stage too. Such stakeholders are subject matter experts and/or end users and will want to ensure that the prospective supplier offer meets their requirements.

In the evaluation phase it is also key to give yourself enough time to ask questions about the prospective suppliers response and seek any necessary clarifications concerning their offer.

It often pays to condense evaluations in to a presentation which highlights the key areas of each suppliers’ offer. This will enable you and your stakeholders to quickly discuss the offers and highlight which one meets all requirements and offers the greatest value for money.

Identifying a preferred bidder

Once you have evaluated the tender responses, you should be able to shortlist down to two participants. One of these participants will be your preferred bidder, meaning should contract negotiations go well, they will be your future supplier. However it is also very important to have another supplier as a reserve should negotiations break-down in the contracting phase. Doing it this way also puts some pressure on your preferred bidder to make some concessions during the contracting phase in order to secure the work as they’ll know you have another capable supplier waiting in the wings.

Contract negotiations with your preferred bidder often requires a lot of legal back and forth with both parties making acceptable concessions concerning key legal battlegrounds such as liability, termination and Intellectual Property. The phase should be given a reasonable amount of time to complete (at least 3 weeks) to ensure you retrieve the best possible outcome. It often pays to get some legal consultancy in this stage dependent on the nature of the contract, unless of course you have some in-house legal counsel.

Contract Award

Following the contract negotiation phase, you should hopefully have reached an agreement with your preferred bidder and now it is time to formalise and sign. When signatures are obtained you will now have completed your tender exercise and secured your supplier. It is good practice to file your contract in a contracts register for future reference if needed and ensure that your new supplier is entered into a suitable supplier management process to keep on top of their performance and engage with them over future opportunity!

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