Tender System

The tender system is adopted procure materials at the most competitive rates and to eliminate chances of undue favour to any supplier. Buying should be as impersonation as possible and should foster a spirit of healthy competition so that the prices quoted are most competitive. Private sector normally uses this method 

for large value items. The disadvantages of this method are - the large lead time required for procurement, the probability of nepotism creeping through by inputting the specifications or terms & conditions favourable to a party. This can be avoided by loading objectively. Loading is the process by which the advantages/disadvantages which are not implicitly stated in the specifications/enquiry are also accounted for. For example, a machine may be more expensive than the other, but have four times the economy. Comparing on costs only is bad economics for the company. As a rule, however, the specifications should be detailed and loading conditions should be minimised if not eliminated altogether as they give source to a feeling of nepotism and take the objectivity out of the whole tendering process. 

There are following three broad tendering methods : 

(a)  Open Tender 

(b)  Limited Tender 

(c)  Single Tender 

Open Tender 

In an open tender, advertisements are placed in leading newspapers and the Indian Trade Journals. These are typically called NITS - Notice Inviting Tenders. The tenderers usually have to quote in the prescribed formats and deposit the earnest money (signifying earnestness to quote and fulfil contractual obligations). The tender documents are normally priced documents and contain the specifications, terms & conditions of supply and erection or commissioning, terms of payment etc. Sometimes, the offers are received as technical and commercial bids. The intent is to evaluate if all the people have satisfied the minimum desirable terms and conditions technically. Moreover, deviations in quantum of supply, terms & conditions etc. are noted and discussions and negotiations are held to arrive at a settlement. This also helps in loading the offer during the price bid opening. 

Global tenders are normally issued for very costly items requiring high technology inputs and normally being financed by international financing agencies like World Bank, International Monetory Fund etc. Since offers are expected from all over the world, the tender must involve simplicity in language and clarity and follow international guidelines. It is advisable to have an exhaustive checklist before starting the tender process of any kind. 

One of the major problems in the tendering process is the "rogue" bidder. The rogue bidder quotes very low (much below the known coststprices at times) prices. He knows that once the contract gets underway, he can arm twist the buyer into giving him a better deal as by then, both the parties would have made 

substantial investments into the project or supply. 

Limited  Tender 

One way of avoiding known rogue bidders is to limit the number of bidders by a set of pre-qualification rules. It is called limited tender. Care should be taken that the pre-qualification methodology does not eliminate genuine bidders or should not be misused to favour certain organisations only. Limited tenders also 

mean reduced lead time. 

Single  Tender 

For proprietary items, single tender systems are used. Since competition puts an organisation in a position to get the best value for money, single tender is at best avoidable and can lead to the price blackmail. However, single tender if used should be preferably for long term with repeat order facility to prevent undue lead times in negotiations.