writing an invitation to tender

7/30/2019 Writing an Invitation to Tender

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Writing an invitation to tender.Publication Date: 01-MAR-06Publication Title: Chartered Management Institute: Checklists: Operationsand Quality

NOTE: All illustrations and photos have been removed from this article.

Introduction

This checklist focuses on the process of writing an invitation to tender by

detailing what should be included in the invitation document.

When purchasing capital plant or equipment, or goods or services, there

are various steps that you can take to ensure that a cost-effective solution,

matched as far as possible to your particular needs, is reached. Having

made sure that your objectives conform to your organisation's overall

strategy, that you have developed a business case for using an outside

supplier, and you have prepared a detailed specification of requirements,

you are then ready to invite suppliers to tender.

The nature of the contract--its value, size, whether of a scientific, technical

or constructional nature, level of expertise required, quality and so on will

determine whether to opt for an open public tender or closed tender from a

pre-selected list of preferred suppliers. Most public sector contracts over a

certain value have to be advertised as open tenders in the Official Journal

of the European Union (OJEU). Various other on-line resources are also

available.

The advantages of writing an invitation to tender (ITT) are that it clarifies the

issues involved ensuring that nothing is left out. An ITT also provides a

standard against which to assess the tenders received.

National Occupational Standards for Management and Leadership

This checklist has relevance to the following standards: E: Using resources,

unit 1

Definition
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An invitation to tender (ITT) is a formal document that asks potential

suppliers to demonstrate that they can meet your specific requirements.

Each supplier, if they wish to respond to the invitation, should respond with

a formal proposal.

A search on the Internet for "invitation to tender" brings up many real,

detailed specifications.

Scope the Overall ITT Process

It is important at the outset to scope the overall process of inviting potential

suppliers to put in a proposal for goods and services. It should not be seen

as a one-off event, but as part of a coherent business strategy that starts

with developing a business case for bringing in outside suppliers that fits

with the organisation's overall strategy. The minimum would include market

awareness of where the organisation is now and where it plans to be in the

future; what the internal processes are that will get the business to where it

is going; and how the new suppliers will fit into the overall strategy to drive

the organisation forward. This first step helps to ensure that the end of the

process--integrating the new supplier into the organisation's operations--is

as effective as possible and achieves the intended outcomes.

Action checklist

When drafting the ITT ensure that the following points are included.

1. Set the scene

This summarises the purpose and content of the document and defines the

objectives. Make it clear whether it is an open or closed tender. The

conditions attached to a response should be stated; for example, you will

probably stipulate that suppliers should keep the ITT document confidential

and should not pass on any costs incurred in replying to it. Enclose a label

and request that the envelope containing the quote does not identify the

supplier. Give clear instructions about deadlines, and acceptable methods

for delivery of the tender, for example, by hand, courier or registered post.

Explain whether there is an intermediate stage where you will expect an


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'Expression of Interest' (EOI) to be received. This stage is sometimes

employed to assist in defining a shortlist of suppliers and can be useful in

further defining your needs.

2. Expression of interest rules

Explain whether the Expression of Interest is a simple credentialing

exercise or do you expect more.

Indicate whether you require prospective suppliers to show how they would

approach your requirements.

Explain whether you are asking for prices at the Expression of Interest

stage. If the competitive process is in two stages which later involves a

formal tender, it may be better to save the price for the tender submission.

At this stage, your concept may be insufficiently developed so you may

value an indication from the prospective supplier as to how they would

approach the issues listed, mentioning factors that would be considered. At

all times you can expect prospective suppliers to communicate with the

assessment panel to ensure that they do not produce a non-conforming

submission.

Do not expect a prospective supplier to present all their key competitive

advantages. Information received from the Expression of Interest could be

used by you to help prepare the tender document. Suppliers will not want

their unique ideas to be used in the invitation to tender.

Suppliers need to convince you of their ability to deliver their requirements--

this is of utmost importance at this stage.

3. Provide organisation overview and background information

To give the suppliers a perspective on your organisation, a description of its

mission and activities should be included here. Explain the organisational

culture as far as possible. Details of any recent activities, such as a merger

or acquisition, that may have triggered the need for the project, should be

included. This section may also give additional, more specific information

such as physical / environmental considerations or constraints, and longer


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term objectives. The latest annual report and/or promotional literature,

including a corporate video can also be enclosed.

An invitation to visit the site should be extended where appropriate.

4. Estimate the size of the project

If it is an IT project, the amount of traffic or usage that the package will have

to cope with should be estimated and future growth predicted. The number

of present and future users should be estimated in order for suppliers to

provide quotes on any necessary licences. Think about long term

requirements; will there be an increase or decrease in the usage of the

capital equipment?

Equally, for other requirements, indicate how the organisation's needs are

likely to change over the period of the project.

5. List the main applications or functions required

More detailed or technical requirements should be placed in the statement

of requirements in an appendix. You must make clear what is essential andwhat is desirable. The evaluation process will be much more difficult if you

allow the tenderers to assume your needs.

Specific requirements should cover:

* the package itself--what is the outcome required from the supplier(s)

* delivery--whether phased or not; large construction projects, for example,

are often phased over several years

* training--for example, in the use of any complex equipment

* maintenance--for example, of buildings or equipment, or keeping a service

up-to-date

* performance, quality and reliability--for example, components must

conform to national or international standards.


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The statement of functional requirements should be the result of agreement

between users on their detailed needs. It should take the form of a

numbered list for ease of comparison between suppliers and should not

invite subjective evaluations or assertions. It is useful to specify that the

response to each requirement must be coded, for example:

A--meets requirement; B--minor modification required; C--major

modification required.

Explain that if the suppliers wish to give additional information, they should

accompany it with the requirement reference number. An indication of the

time allowed by the organisation to each supplier to discuss the ITT and

their response should be included.

6. Set time scales

This section should include the following elements:

* issue of ITT (and return date)

* clarification of any 'expression of interest' stages with key milestones

defined

* clarification discussions with short-listed suppliers

* presentations by short-listed suppliers on how they can meet your

requirements

* evaluation of responses

* final negotiations

* final presentation from preferred supplier to senior management

* contract awarded.

All suppliers should be given an opportunity to ask for clarification of any


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issue raised in the document. Copies of questions and answers should be

circulated to all suppliers.

7. Outline your framework for evaluation

A copy of the Rating Schedule Form should be issued and explained within

the Request for Proposal documents. (See Assessing Responses to an

ITT)

Explain that the evaluation process primarily focuses on scoring the

returned proposals against the initial evaluation criteria detailed within your

Project Brief. The objective of the evaluation process is to determine which

Tender represents best value for money, with regard to whole life cost and

compliance with technical, operational and commercial requirements.

Prospective suppliers need to understand that the underlying principles of

the evaluation phase are to ensure that the selection process is the most

cost-effective solution to meet your identified business needs. There are

three major areas for consideration when evaluating proposals:

* the solution itself

* cost of the proposal

* supplier from whom the solution will be acquired.

8. Suppliers' details

Details of the precise general and functional requirements of the tendering

suppliers should be included in appendices. The general requirements may

take the form of a questionnaire and will cover:

* registered and trading offices

* insurance details

* trading record, including examples of similar projects successfully

completed


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* employment data, including staff turnover and an organisational chart

* diversity and equal opportunities policies

* health and safety policies

* quality policies

* environmental policies.

Assessing responses to the ITT

In fairness to the suppliers, the timetable set in the ITT should be strictly

adhered to. Examine the written, formal responses to the ITT in conjunction

with evidence you have gleaned from demonstrations, discussions and

visits to other users. It may be helpful to speak to other organisations that

have issued similar invitations. Your evaluation framework should be

explained to prospective suppliers to enable them to respond accordingly.

A suggested framework would be as follows:

* First assign a weight to each criteria in your ITT based on its relative

importance. (For convenience, use a total weight of 100 so each weight is a

percentage.) The weights and the criteria may vary from contract to contract

depending on the nature of the work, except that price information is always

required. Include the assigned weights in a Rating Schedule Form issued

within the Request for Proposals. Every proposal must be evaluated using

the same weights.

* Then, using a separate form for each proposal received, enter a rating

score for each criterion according to the following code. Poor 1--3 points,

Fair 4--6 points, Good 7--8 points, Excellent 9--10 points.

* Multiply the individual weights by the individual scores and record the

products; add these products to make a total sum for each supplier.

* Finally, compare the total scores on each form. The highest total score


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should indicate the proposal which potentially will provide the best value to

your organisation.

It is important to note that regulations require public sector authorities to

state clearly in the tender notices whether the award process will be based

on the lowest tender or on the most economically advantageous offer. The

latter may take into account factors such as price, quality, technical merit,

and maintenance and support requirements. The criteria to be used must

be listed, if possible, in order of importance. The regulations also allow

unsuccessful bidders to request the awarding authority to explain on what

basis the bid failed, although at the moment it is unclear exactly what

degree of detail has to be provided.

The cost of submitting a tender can be high. With high costs involved in

preparing major bids, unsuccessful bidders are understandably anxious to

know exactly why a bid has failed.

It follows that the evaluation of all tenders, whether private or public sector,

must be fair and legal, and seen to be so, otherwise an aggrieved bidder

may decide to sue for unfair practices.

Invitation to tender--good practice checklist

Have you:

* Included copyright and confidentiality statements?

* Made the aims of the document clear?

* Provided a brief company background and strategy?

* Outlined the overall project objectives and deliverables for the project (i.e.

business case)?

* Included details of your anticipated budget?

* Provided a specification of your requirements?


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* Established and communicated your tender Evaluation Criteria?

* Included the information you require in the Expression of Interest (EOI)? It

is good practice to provide headings.

* Indicated a preferred method of response?

* Developed a system for logging questions and an agreed turnaround time

for questions?

* Arranged a central point of contact for dealing with those suppliers that

are tendering?

* Indicated a desired project timescale?

* Stated a date and procedures for the submission of the Expression of

Interest?

* Requested an indication of infrastructure requirements from the suppliers

that are tendering

* Requested details of suppliers' background and experience?

* Requested references from at least 2 of their existing or previous

customers?

* Included your terms and conditions of trading and an acceptance form that

they can sign and return?

* Requested a budgetary indication of costs, broken down into individual

elements?

Managers should avoid

* taking on trust the suppliers' answers to the ITT

* expecting a perfect solution--you may have to select the best compromise


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* getting bogged down in procedural issues

Additional resources

Books

The bid managers handbook, David Nickson

Aldershot: Gower, 2003

Bids tenders and proposals: winning business through best practice, Harold

Lewis

London: Kogan Page, 2003

Contract negotiation handbook, 3rd ed, P D V Marsh

Aldershot: Gower, 2001

This is a selection of books available for loan to members from the

Management Information Centre. More information at:www.managers.org.uk/mic

Internet resources

The Official Journal of the European Union (OJEU) is a gateway to

resources for purchasers who wish to publish tender notices and suppliers

who wish to search for business opportunities: www.ojec.com

Organisations

Chartered Institute of Purchasing and Supply

Easton House, Easton on the Hill, Stamford, Lincs PE9 3NZ

Tel: 01780 756777 www.cips.org

writing an invitation to tender

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