Despite market headwinds such as geopolitical turbulence, a looming supply chain crisis (part two) and a tightening regulatory landscape, global B2B transactions are strong and steady, with revenue expected to grow from $83 trillion (USD) in 2024 to $124 trillion (USD) in 2028.
In other words, organisations continue to buy, but they must choose vendors carefully. In addition to pricing and product descriptions, buyers need to ensure regulatory compliance, the ability to weather changing market conditions and even “softer” requirements such as compatible company values.
Many companies and nearly all government agencies issue invitations to tender (or an invitation to bid) for large purchases. Let’s explore what that means.
What is an invitation to tender?
An invitation to tender is a highly structured document sent to multiple vendors to assess their abilities to meet a buyer’s requirements. These documents are usually called requests for proposals (RFPs) in the United States, but most of the world calls them invitations to tender (ITTs), requests for tenders (RFTs), or invitations for tender (IFTs).
Suppose a multi-national big box chain plans to install solar panels on each store. In that case, it may issue invitations to tender to a handful of pre-selected commercial solar panel suppliers. Or, if the chain wanted to receive bids from every potential vendor, they might use an open tender process, in which the company would publicly advertise their request.
What to include in an invitation to tender
Invitations to tender often contain hundreds or even thousands of pages. A typical invitation to tender includes an introduction, a summary of requirements, a scope of the project, specifications for submission, terms, etc.
It may include questions about:
- Pricing
- Experience with similar projects
- Availability and timelines
- Post-purchase support
- Company financial viability
- Future company plans
- Company values
- Regulatory compliance
Of course, this list is far from exhaustive.
Understanding the components of an invitation to tender
An invitation to tender is formal and complex, generally in an Excel, Word or PDF format. Issuing ITTs requires input from several key stakeholders, including multiple subject matter experts (SMEs), to ensure that all of the organisation’s needs, priorities and concerns are covered.
ITTs normally include:
- An introduction and background
- Instructions
- Specifications and requirements
- Evaluation criteria
- Contract conditions
- Legal and regulatory requirements
- Responding organisation’s information and qualifications
- Pricing and cost breakdown
- Submission forms and templates
- Confidentiality and data protection requirements
- Schedule and timeline
- Appendices and supporting documents
Introduction and background
In most cases, a tender issuer is looking for a long-term agreement. An introduction and background help responders decide whether the opportunity fits their long-term objectives. An introduction generally includes a high-level overview of the issuing organisation, the tender’s purpose and scope, and relevant background information.
Instructions
The instructions section should include when and how to submit the final tender, contact details for queries and format requirements (such as electronic or hard copy submissions).
Specifications and requirements
The specifications and requirements section is where the issuer provides details of the product or service they are looking to purchase as well as the technical specifications, standards and quality requirements. It should also include specific methodologies or approaches needed.
Evaluation criteria
Most buyers weigh or score and evaluate responses based on factors such as price, quality, delivery time and experience. Evaluation criteria will also include minimum requirements or thresholds.
Contract conditions
This section is where the buyer drafts the contract conditions for vendor approval. It sets out the legal and operational framework for the contract. Most include payment terms and schedules, delivery timelines and milestones, performance metrics and penalties for non-compliance.
Legal and regulatory requirements
The legal and regulatory requirements section assures the buyer that the vendor is compliant with laws, regulations and standards and has any mandatory certifications or accreditations.
Responding organisations’ information and qualifications
In the information and qualifications section, buyers will ask for company details such as how long they have been in business, a list of executives and board members, company status, references, etc. It will also ask for supporting documentation such as financial statements.
Pricing and cost breakdown
The pricing and cost breakdown section is where the vendor lists unit and total costs for various project stages and components plus taxes and additional charges. It should also include a breakdown of materials, labour, overhead, and other expences when applicable.
Submission forms and templates
The submission forms and templates section is self-explanatory. It will include the forms and templates vendors must complete before the tender is submitted. It should also include a checklist of required documents.
Confidentiality and data protection requirements
The confidentiality and data protection requirements section is also self-explanatory. Buyers will list their requirements.
Schedule and timeline
The schedule and timeline section outlines milestones like the submission deadline, evaluation periods and the contract award date.
Appendices and supporting documents
Vendors should add required documents to the appendices and supporting documents section. They may also add additional documents to help give them a competitive advantage.
How tendering works
Tendering involves a multi-step process. Skipping any of the steps could result in incomplete information and ultimately, business risks. Before issuing a tender, buyers should:
Align tendering requirements with organisational goals
Before issuing a tender, find out why the company is looking for the product or service now. What are the goals? How would the purchase advance business objectives?
Let’s go back to the solar panel example. Perhaps the company is simply looking to save money. In which case, the tender should prioritise short and long-term costs as well as projected electrical savings. The tender might include a budget. If, however, the company wants to promote its green image on top of saving money, the tender should also inquire about vendors’ environmental regulatory compliance, additional environmental actions, goals and more.
It is worth noting that the above example is an oversimplification, and compliance, etc. is usually a priority, even when cost cutting is the primary concern.
Factors impacting this stage include assessing:
- Organisational priorities and goals
- Available budget and resources
To assess goals and objectives:
- Conduct a needs assessment with relevant stakeholders to identify requirements
- Define the scope, objectives and desired outcomes
- Frame the tender in a way that aligns with the organisation’s budget and timelines
Stakeholders may include:
- Senior management for direction and approval
- A project manager to oversee the process and ensure objectives are met
- The procurement team to draft the tender
Tools that might assist include:
- Project management software
- Budgeting tools
- Strategic planning frameworks
Prequalification
Most tenders contain hundred or even thousands of pages. Responses, understandably, can be much longer. Save hours or even days of reading through responses by querying potential vendors with higher-level questions to prequalify them before issuing the full tender.
For example, some potential solar panel vendors might not have the experience, resources or track record to deliver on the big-box store’s needs. The buyer would send a prequalification questionnaire (PQQ) to determine whether or not a vendor can meet their key priorities. It’s far better to know that early in the process than inviting them to tender, only to rule them out.
Factors impacting this stage may include:
- Regulatory requirements
- Complexity and specificity of the criteria
To assess viability:
- Define prequalification criteria such as financial stability, capability and relevant experience
- Issue a prequalification questionnaire to potential vendors
- Evaluate responses to determine eligible vendors
Stakeholders may include:
- The procurement team to develop and issue the prequalification questionnaire
- An evaluation committee, which may include senior management
- The legal team to ensure regulatory compliance
Tools that might assist include:
- Prequalification software
- A content management system
Create invitation to tender
Once the buyer has narrowed down their options, it’s time to issue the tender which should include all of the selection criteria along with weights and scoring.
Factors that impact this stage may include:
- Requirement complexity
- Legal and regulatory considerations
- Internal approval processes
To facilitate complete and accurate bids:
- Include an introduction, instructions to tenderers, specifications, evaluation criteria and contract conditions
- Ensure clarity and completeness of the tender to avoid ambiguities
Stakeholders may include:
- The procurement team to draft the ITT
- Subject matter experts to provide technical specifications
- The legal team to review the terms and conditions for compliance
Tools that might assist include:
- Tender issuing software
- Document creation tools
- Collaboration platforms
Open bids
In some circumstances, buyers might want to ensure they get the most competitive bids by sending “open tenders,” which require advertising the opportunity so any qualified vendor can respond. There may also be times when open tenders are required, such as with many government contracts.
Factors that impact this stage may include:
- The number of submissions
- Stakeholder availability
To execute a bid opening:
- Advertise through various public channels, such as online portals, newspapers, trade journals, etc.
- Schedule a bid opening date and ensure all vendors and internal stakeholders are informed
- Register bidders
Stakeholders may include:
- A procurement officer to oversee the process
- An independent observer to ensure transparency and fairness
- Administrative support to record and document bidding parties
Tools that might assist include:
- Bid opening software
- Video conferencing tools for digital openings
Receive and evaluate submissions
Once the bids are in, it’s time to compare responses. Tools such as compliance matrices can help parse the bids to ensure apples-to-apples comparisons.
Factors that impact this stage may include:
- Complexity of evaluation criteria
- Number of bids to be evaluated
- Availability and expertise of evaluators
To execute the evaluation process:
- Form an evaluation committee and distribute the bids for review
- Score bids based on criteria such as price, quality and compliance
- Conduct clarification meetings or interviews if necessary
Stakeholders may include:
- The evaluation committee (often a procurement team) to review and score the bids
- A procurement officer to facilitate the evaluation process
- Subject matter experts to provide technical input
Tools that might assist include:
- Evaluation software
- Scoring sheets and matrices
Awarding the contract
Once the winning bid is chosen, there are still details to iron out.
Factors that may impact this stage include:
- Approval processes
- Negotiation outcomes
- Legal and regulatory compliance
To execute the contract process:
- Prepare a contract award recommendation for approval
- Notify the successful and unsuccessful vendors
- Negotiate and finalise contract terms with the selected vendor
Stakeholders may include:
- The procurement team to prepare the recommendation and notify vendors
- Senior management to approve the contract award
- The legal team to finalise contract terms
Tools that might assist include:
- Contract management software
- Communication tools
Manage and monitor the contract
Once the contract negotiations are finalised, the next step is to manage and monitor progress.
Factors that may impact this stage include:
- Vendor performance and reliability
- Changes in project scope or requirements
- Ongoing communication and relationship management
To execute this stage:
- Conduct regular performance reviews and progress meetings
- Monitor compliance with contract terms and conditions
- Address any issues or disputes promptly
Stakeholders may include:
- Project manager to oversee contract execution and vendor performance
- The procurement team to monitor compliance and serve as a mediator
- The vendor to deliver as per the contract
Tools that may assist include:
- Performance management tools
- Project management software
The importance of successful tendering
The procurement process plays a vital role in vendor management and more generally, in the company’s growth. Tendering helps:
Encourage high-quality bids
A meticulously prepared ITT provides clear, detailed specifications and requirements, enabling suppliers to submit well-crafted, relevant bids. Vendors understand the expectations and align their proposals accordingly, leading to higher-quality submissions.
Ensure competitive pricing
Competitive tendering promotes fair market competition, allowing organisations to receive multiple bids from different suppliers. This competition drives vendors to offer their best pricing, ensuring the organisation gets value for their investment.
Support fairness in procurement
A transparent tendering process levels the playing field for all potential suppliers. By adhering to standardised procedures and clear evaluation criteria, the ITT ensures that all vendors are assessed fairly, fostering trust and integrity in the procurement process.
Enhance efficiency and effectiveness
Specifically defining timelines, submission guidelines and evaluation criteria streamlines the procurement process, eliminating common sources of delays and unnecessary administrative burdens.
Mitigate risk
Risk mitigation is arguably the biggest advantage in tendering. By setting explicit contractual terms and conditions within the ITT, organisations can mitigate potential procurement-related risks, including legal, financial, and operational risks.
Strategies for invitation to tender success
Establishing and maintaining a successful ITT process requires a multi-pronged approach, adding modern technology to aid human-led projects. Tender best practises include:
Automating repetitive tasks
Automated tools can handle repetitive and time-consuming tasks such as document distribution, bid tracking, content deduplication prompts and deadline reminders to reduce the risk of human error, increase efficiency and provide more time for the procurement team to focus on more strategic activities.
Centralising company knowledge
Establish a centralised content library that includes past ITTs from similar projects, standard terms, legal documents and frequently used documents. This ensures consistency, brand adherence and a single source of truth for local and remote stakeholders.
Leveraging templates
Branded standardised templates ensure that all necessary information is included in an easy-to-follow format.
Collaborative tools
Collaborative tools enable real-time communication and document sharing among all stakeholders, helping facilitate more orderly processes and efficient decision-making.
Clearly defining evaluation criteria
Establish clear, objective evaluation criteria to assess bids effectively. Communicate these criteria to team members and all potential vendors to ensure transparency and fairness in the evaluation process.
Engaging subject matter experts
SMEs provide valuable insights that enhance the quality and relevance of the ITT and the evaluation process. Involve SMEs in drafting the ITT and evaluating bids to ensure that technical specifications and requirements are accurately defined and assessed.
Providing ample time
Give vendors sufficient time to prepare and submit their bids. Adequate response time ensures that vendors can thoroughly understand the requirements, seek clarifications, and develop high-quality proposals.
Example of a successful ITT
A typical ITT may include:
- Instructions
- Submission deadline
- Submission format
- Submission method (generally either via electronic submission, through a procurement portal or manually)
- Contact details
- A table of contents
- Project details and background
- Issuing organisation overview
- Purpose and scope of the project
- Relevant background information
- Specifications and requirements
- Security and compliance requirements
- Deliverable dates
- Support and maintenance requirements
- Scoring criteria
- Contract conditions
- Legal and regulatory requirements
- Confidentiality and data protection requirements
- Vendor information and qualification
- Pricing and cost breakdown
- Submission forms and templates
- Appendices of supporting documents
Read here for several real-life ITT examples.
The benefits of a tendering management system
The right vendor can be a complementary business partner that helps your organisation achieve its goals while maintaining compliance. Choosing the right vendor requires a thorough approach because even a single missed query can have unintended consequences.
Repeatable processes, supported by a tender management system, help eliminate the risk of errors. An advanced tender management system will include:
- Template library — Simplify and standardise ITTs with an up-to-date template library that includes past ITTs
- Project management and collaboration— Clarify roles and responsibilities, communicate with stakeholders and keep the project on track
- Dashboards and reporting — Gain historical insight and see ITT status at a glance
The Responsive approach to tendering success
Responsive facilitates a friction-free vendor selection process by enabling efficiency, accountability, consistency and clarity. Responsive ITT capabilities include:
- A template library — Add consistency to the ITT process with a library of standard and customisable templates
- Workflow and collaboration — Assign tasks, set deadlines and collaborate with stakeholders inside the application
- Evaluation and scoring — Collect, score and compare responses for objective buying decisions
- Dashboards and reporting — Quickly generate insight reports and track real-time ITT status
- Best-in-class integrations — Responsive integrates with nearly 30 of the top business applications
Final thoughts
If your tendering process is inefficient, difficult to track or your vendor quality could use improvement, see how Responsive can help you standardise and streamline your processes for better collaboration, workflow management, insights and ultimately, better and more secure vendors.
