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Requests for tenders by public service entities and government departments like the Department of Defense, Department of Energy or NASA are highly sought after. That’s because public service contracts are usually for a longer duration and are viewed as prestigious in many industries. In 2016, the US government spent around $416 billion on such contracts. To ensure that all companies have a fair chance to secure a service contract, authorities must make a call for bids. Interested organizations can then apply for a tender by a set deadline. Public authorities procure services according to the proposals received that best match their requirements and available funds.
The US is part of the World Trade Organization’s Agreement on Government Procurement (GPA).
What’s a call for tenders and what types of tenders exist?
A call for tenders is the process whereby a government or private organization invites service contractors and suppliers to make an offer to execute a proposed project. This could include the supply of parts (e.g. in aerospace sectors) or the provision of services (e.g. marketing initiatives for an education department). Procurement notices are not only used by government or public sector authorities but are also frequently employed by private companies and individuals. However, contrary to private companies, public sector entities are legally required to tender, and procurement is heavily regulated.
Tendering for state-funded projects must be accessible to all companies. Calls for tenders are therefore usually published in specialist journals or online in dedicated portals. Authorities or companies may first release a request for proposals that allow service providers to discuss the methods and tools they would use to fulfill a contract. Pricing can also be discussed at this point. A tender is the procedure of bidding on the proposed project once the specifications and price ranges are established.
In many countries, government departments who receive tax or federal funding are legally required to publicly tender service projects. That’s because legislation states that public money should be used as efficiently and economically as possible. Strict procurement procedures also serve to minimize corruption and nepotism when awarding public contracts.
Increasingly, private companies are using tenders to obtain the most economical offer for their projects. This allows them to minimize costs and increase their profitability.
Contrary to public clients, commercial organizations aren’t required to adhere to strict procurement regulations set out in the Code of Federal Regulations. The Federal Acquisition Regulation is the main document outlining government procurement legislation.
There are four types of procurement procedures in the tendering process:
- Open tender: The majority of public tenders are procured via open procedures. This means that anyone can bid on a contract to supply services or goods in line with the contractual requirements. Open tenders are used where there are no special circumstances or requirements. The number of bids received is not restricted in an open tender. It provides the best opportunity for new companies and start-ups to secure government work.
- Restricted or selective tender: In a restricted procedure, a shortlist of suppliers is created. This may include a pre-qualification survey to determine suitable contractors. Selected companies are then invited to tender. Departments and companies use selective tendering to reduce the administrative costs that a large number of bids could burden them with, and to ensure that contractors match their requirements. Highly complex or secretive projects often involve restricted procedures.
- Negotiated tender: This type of procurement procedure is mostly used within the engineering and construction industry. A negotiated tender occurs once a company has selected one or two suppliers and negotiates with them on certain aspects of a contract. This may involve fee negotiations or could concern specific contractual obligations.
- Competitive dialog tender: Sometimes, a client may specify the desired outcome of a contract, but remain unsure as to how to reach their goal. For example, a public authority may require new software, but not know how to implement it. That’s where a competitive dialog can be useful. A hybrid of a restricted and negotiated tender, the first stage of a competitive dialog enables companies to discuss and negotiate individual aspects of a project. During the second stage, an invitation for tenders is extended.
The difference between national and international tendering
The US and the European Union are both participants in the WTO GPA which means that US companies can bid on European contracts and vice versa. However, certain restrictions apply. For example, US companies cannot bid on EU contracts within the water or urban transport sector, airport services or shipbuilding sector.
Nationally, the Federal Acquisition Regulation sets out threshold values for federal contracts. All federal procurements above $25,000 must be made public. Upper threshold values are $180,000 for goods and services contracts and up to $6.932 million for construction projects.
There are no minimum time frames for government procurement, but US agencies must allow enough time for bids to be made.
Where can you find calls for tenders?
Thanks to the Internet, searching for tender opportunities is now relatively easier. Multiple websites regularly publish calls for bids. Among them, GlobalTenders.com provides a list of contracts available for tender sorted by country. Federal procurement notices for the US are also published on Beta.sam.gov. Contractors and interested parties can specify the type of contract, length, service classification and location they are interested in.
There are also specialist portals such as Cwctenders.com which lists contracts for infrastructure civil works and construction projects. Similarly, Ittenders.com focuses on information technology contract procurement.
Procurement notices in the EU are published via Tenders Electronic Daily (TED).
How to bid for a tender?
If a company is interested in bidding for a tender, they can request the procurement documentation via the relevant authority or directly from the client. The details received should include information on the technical expertise and skills required. They should also provide an indication of the expectations from the client and specification of services required. Usually, bids will include information on the application procedure and deadlines.
In general, the following requirements apply to all participants taking part in a procurement procedure:
- They must have the necessary specialist knowledge or skillset and may be required to submit proof in the form of previous work contracts or registration certificates.
- The company must prove its operational or performance potential by supplementing a list of personnel and financial resources.
- A company must show that it is responsible and reliable by submitting certificates of conduct and proof of timely tax payments.
Tenders may call for additional requirements depending on the project or services required.
Where a company meets all requirements and is interested in securing the project contract, it needs to send off all completed and error-free documentation to the contracting authority or client. Once the deadline has passed, authorities will assess all applications.
When submitting tender offer documents, make sure you fulfill all formal requirements. Small errors such as envelopes that haven’t been sealed properly or missing signatures or dates may lead to your exclusion from the awarding procedure.
What information should you include in a tender?
When writing a tender, it’s important to focus on what the client wants and how your company may fulfill their brief most effectively. Some of the important points to cover when writing a tender are:
- Skills. How does your company meet the needs of the client? Propose solutions to the stated problems by focusing on your specialist skillset and experience.
- Qualifications. If a client has requested qualification documentation, make sure to include this information.
- Value. Discuss proposed fees and how your company provides value for money. It’s not necessarily the lowest bid that wins a contract. Often, contractors are chosen depending on what they can bring to the table.
- Resources. Demonstrate that you have the necessary resources to finish the project. This includes staff, facilities and tools/machinery. You can emphasize the strengths of your team and elaborate on why they are the most suitable for the project.
The stages of a procurement process
The following stages demonstrate the procedure for an open tender (i.e. a public invitation for tender). These steps apply to most tenders with the exception of restricted procedures and where no public invitation to tender is issued.
- First, a public sector authority or commercial company identifies a need and outlines the specific objectives to realize a goal. These can be summarized in a service description.
- Then, it creates the tender documents which detail the services expected. Special qualifications or skills required to meet the demands of the project as well as legal and contractual conditions are detailed.
- The award procedure is based on expected performance, applicant requirements and cost calculations. In the majority of cases, calls for tender are open. Other types of procurement procedures are only made where necessary.
- The call for tenders is published online or in special print media. Tenders must include contact information so interested parties can request more information or download the specifics.
- Interested applicants submit their completed offer and all necessary documentation such as certificates, references, fee calculations, service descriptions, and other explanations.
- The awarding body securely stores the applications until the deadline has passed. Applications are only viewed once the deadline has been reached.
- Tenders are subject to a formal review upon opening. Documents containing formal errors are automatically excluded.
- Appropriate offers are evaluated. Clients will pay attention to a company’s qualifications and experience. Proposed costs are assessed against competitive offers.
- Where an offer is deemed suitable and economical, the awarding authority decides which company to award the contract to. In rare circumstances, for example, where none of the tenderers are deemed eligible to fulfill a contract, the call can be canceled.
- Unsuccessful bidders are usually debriefed. According to US regulations, they are entitled to a brief explanation for why they did not win a bid.
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