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An invitation to tender (ITT, also known as a call for bids^[1] or a request for tenders) is a formal, structured procedure for generating competing offers from different potential suppliers or contractors looking to obtain an award of business activity in works, supply, or service contracts, often from companies who have been previously assessed for suitability by means of a supplier questionnaire (SQ) or pre-qualification questionnaire (PQQ).

Unlike a request for proposal (RFP), which is used when a company sources for business proposals, ITTs are used when a government or company does not require the submission of an original business proposal and is looking solely to award a contract based on the best tender submitted. As a result, whereas ITTs are often decided based on the best price offered, decisions on RFPs may also involve other considerations such as technology and innovation. Both are forms of reverse auction.

At the same time, variants may be requested in an ITT, which allow suppliers to offer proposals which differ in non-essential terms from the supplies or services requested. The European Commission has suggested that requesting variants is one way in which suppliers can be asked to offer more socially responsible solutions to meeting public needs.^[2]

Public sector organisations in many countries are legally obliged to release tenders for works and services. In the majority of cases, these are listed on their websites and traditional print media. Electronic procurement and tendering systems or e-procurement are also increasingly prevalent. The European Union states that 235,000 calls for tender are issued annually using its Tenders Electronic Daily system, including those issued by countries in the European Economic Area and beyond.^[3]

The term "notice inviting tenders" (NIT) is often used in India.^[4] The European Union's institutions often use the terms "calls for tenders" and "calls for expressions of interest".^[5]

Types

Open tenders (also known as open calls for tenders or advertised tenders) are open to all vendors or contractors who can guarantee performance. Restricted tenders (also known as restricted calls for tenders or invited tenders) are only open to selected pre-qualified vendors or contractors. The tender stage may form part of a two-stage process; the first stage comprises issuing an expression-of-interest (EOI) tender call,^[6]^[7] resulting in a shortlist of selected suitable vendors. The reasons for using restricted tenders differ in scope and purpose.

Sole source tenders involve only one potential supplier being invited to submit a tender. A sole source tender may be used where there is essentially only one suitable supplier of the services or product.

Tenders have a bid preparation period available to bidders. Research has shown that the length of this period might affect the number of bids and, as a result, the level of competition among tenderers.^[8]

Process

Pre-qualification questionnaires

Supplier questionnaires or pre-qualification questionnaires ensure that potential suppliers are all asked the same information when assessing their suitability to be invited to tender or to have their tenders evaluated. Some organisations issue a standard pre-qualification questionnaire, for example the UK government has developed standard core PQQ questions which have been revised several times and are mandated for use across government, and has also stipulated that PQQs should not be used by central government contracting bodies when procuring goods or services valued less than the threshold values set by UK procurement legislation.^[9]

Tender box

A tender box is a mailbox used to receive the physical tender or bid documents, or a digital equivalent.^[10] The tender box is not implemented in every country around the world.^[where?]

Tender validity date

A tender validity date is a date until which a tenderer commits to keeping their prices (and other tender details) open for acceptance (or otherwise) by the client. Such a date is usually included in a form of tender,^[11] either as a specified date or as the termination of a specified period from another key tender date. For example, in tendering for gym equipment in 2013, West Dunbartonshire Council required tenderers to accept that "Your tender shall remain open for acceptance for ninety (90) days from the date for return of tenders indicated above, or any subsequent date notified to you by us. Your tender may be accepted by us at any time during this period."^[12]

Tender evaluation

There are several different methods for available for tender evaluation, which are related to the proposition method asked by the procurement management:

Lowest price

This method is the simplest and oldest of all. Under this the procurement contract is awarded to the best price. Some relevant methods are these of examining the overall or in parts and in total discount in a given price list or on a given budget. One of the options available under rules applicable to government procurement in the European Union (EU).^[13]

Most economically advantageous

This is applicable to proposals of different quality within the limits set. Under this the proposals are graded according to their price for value and the contract is awarded to the one with the best grade. Similar to this is the grading of the proposals according to time, making the proposals needing less time of implementation seem more valuable. One of the proposed for public tenders within the EU.^[14]

Mean value

The contract is awarded to a bid close to the mean value of the proposals received. This may apply to procurements where numerous proposals are expected and there is a need for a market-representing value.^[15]

Exclusion of the extremes

Under this method the proposals that are deviating the most from the mass of the proposals are excluded and then the procedure continues with one of the above methods.^[15]

There are also many variants and/or combinations of these main methods. Upon completion of tender evaluation it is usual to award a contract.