How to Tender – A Jargon-Free Guide to Help You Win Public Sector Business
Learning how to tender is essential if you or your company is to sell to the public sector. This article will give you a clear idea of what tenders are, how to respond to a tender, what factors you ought to consider, and how to put in an effective bid. The aim is to cut out the jargon, and give you the confidence to look at tendering as a viable means of securing work for your business.
Please bear in mind that the article is designed to meet those bidding for contracts in the public sector, though many of the issues involved are applicable to the private sector as well.
Which Organisations Use the Tendering Process
The public sector marketplace is far bigger than most people are aware. It pervades all aspects of national life and includes many organisations barely known to those outside them. A simple breakdown can be given as follows:
- Education sector – schools, colleges and universities.
- National Health Services – hospitals, regional structures, research and governmental bodies
- Ministry of Defence – army, navy and air, numerous project teams with technical specialisms, educational and housing organisations, medical, research and administrative arms.
- Local and Regional Government – councils, parish, district, borough, metropolitan and unified.
- Regional governmental structures.
- Central Government – Government Departments (includes Ministries, such as Department for Work and Pensions), Executive Agencies (smaller bodies under the responsibility of the Government Departments, some of which are nevertheless extremely big), and Non-Ministerial Public Bodies (organisations that may have a specialist technical role, eg Nuclear Decommissioning Authority).
- Housing Associations
- Utility Companies
- Transport organisations (such as Network Rail Infrastructure)
- Public Corporations (example: Nuclear Liabilities Fund). Includes independent trading entities set up by public bodies – these can be commercial enterprises on a local, regional or national level. [Public Service Mutuals are private businesses set up by the public sector to deliver public services; though tenders are issued in relation to these it should be noted that once established they are no longer in the public sector.]
Size of the UK Public Sector Marketplace
The latest figures from the Government Procurement Service say that the public sector market is worth £84 billion.
The pipelines show over 1,700 potential contracting opportunities across 18 sectors including construction, clinical and medical, police services, energy and utilities, vehicles and now financial services and waste management. For the first time, there are also pipelines for the NHS and Fire and Emergency Services.
UK Trade and Investment estimate that public sector ICT expenditure in the country is worth £18 billion (out of a nationwide total of £140 billion, which is one of the largest in Europe).
In 2010 the expenditure for the Ministry of Defence with UK industry alone was £14 billion. Details for total expenditure for MOD are given here:
To put it succintly, the public sector spends an enormous amount with suppliers every year and will continue to do so, even as the country’s fiscal problems are dealt with, because it needs to in order to function.
Why do Business with the Government?
It’s a stable market. It will never go away. During a recession it offers a reliable source of business, and during a boom it offers ever expanding opportunities. But one thing is certain, it will still be a gigantic multibillion pound marketplace no matter what happens in the future.
The payment terms can be extremely good. Payment within 30 days is normal. The Prompt Payment Terms of HM Government are actually very generous to suppliers as they recommend quick payment so they don’t have problems with cashflow and it helps maintain a stable supply chain.
The Government wants to deal with more companies so it can have a diversity of suppliers and thus receive better products and services at a better price. For the past 10 years it has taken repeated steps to encourage more and more SMEs into the public sector marketplace.
There’s a vast amount of money to be made! Working with the government can be the difference between prospering or going to the wall.
Common Misconceptions About Public Sector Suppliers
It’s true that the public sector is an extremely lucrative market for some of the biggest companies in the world. However, they do not dominate all of it, and in fact the vast majority of suppliers are small to medium sized businesses. Any comprehensive list of tender and contract awards will prove this is so. There has been a concerted attempt to introduce more and more suppliers to the public sector over the past 7-8 years and these efforts have recently been increased by expanding them to the realm of IT by use of the Cloudstore in Central Government Procurement. But, though massive opportunities exist, if a company lacks the knowledge of how to tender, then it will not be possible to secure business. It is necessary to learn how to tender in order to compete successfully in the public sector marketplace. Having said that, picking up the requisite skills is not as difficult as is sometimes presented – it can even be said that once the basics are learned, dealing with the public sector can often be a matter of using one’s commonsense to put forward the best case for the products and services one’s company provides.
What Level of Business is Being Targeted?
Does your company want to bid for low, medium or high level work? Are you a small company operating on a local basis, or a large corporation operating across the entire country? Or something in between? The bidding process is different for different types of business. A Request for Quote worth £1500 may only require the completion of a couple of sides of paper, asking the simplest of questions. A £5 million tender may require completing a questionnaire first, followed by extensive supporting documentation just to be considered for the work.
One of the first steps any company needs to take is to assess its abilities and decide what type of business it wants to compete for. Even a big company may only want to start off small. However, it is best to be clear about one’s objectives to compete effectively, so that one has a realistic chance of securing contracts. If one isn’t going to try and win it’s best not to try at all.
What is a Tender?
A tender is a contract opportunity. It is a notification of work or services required, for which bids are invited. In official terms, it is a contract opportunity valued at a particular level, which must then be advertised in the Official Journal of the European Union, according the rules first set down in the Treaty of Rome. Apart from in exceptional cases, any company from across the world can choose to put in a bid for a tender. Usually, the supplier has to complete written documents which demonstrate it can meet the requirements set out in the tender, with an offer enclosed for the specific work or services for which the tender was advertised. It is often the case that more than one supplier may produce a winning bid, because a tender may need to have multiple suppliers to fulfil its objectives.
Using a looser definition, a tender may simply mean a contract opportunity for which written bids are required. This article will deal mostly with tenders in official terms – that is, a high level contract valued at a set amount defined by the European Union. However, potential suppliers will find the information directly relevant to low and medium level contracts, as these are often simplified versions of the normal tendering process. Don’t get over-awed by tenders – when all is said and done they are just the means by which the public sector buys products or services. If you offer something the public sector wants at a reasonable price with good value for money, and can communicate that in the tender documents you have a realistic chance of winning the business.
What are the Tender Thresholds?
All contracts above the following thresholds must be advertised in the Official Journal of the European Union:
Works: £4,348,3503 (€5,000,000)
Services: £173,934 (€200,000)
Works are anything construction-related. Services more or less include everything else. There is a slight difference in the threshold for Central Government (in that it’s lower) but as a general rule any tender above £113,000 has to be advertised in the Official Journal of the European Union. As you are probably aware, the Official Journal is the authoritative source for the advertising of high level tenders. All high level tenders must be listed in the Official Journal, according to European Law.
Different Categories of Tenders and Contracts
High Level Tenders above the thresholds previously listed
Tenders with several lots whose value rises above the thresholds when the lots are considered together. This means that the individual lots may be less than the sum value of the tender – e.g. a £1 million website contract may be divided into 10 lots of £100,000, which means that for the company bidding the contract they are trying to win is £100,000 but the overall size of the contract is £1 million. A £100,000 contract may be divided into lots of £20,000, £30,000 and £50,000. Because of this it is extremely important that tenders from the Official Journal are monitored and checked.
Standing Lists of Suppliers
Also known as Approved Lists – these may be advertised because the total value of work over 2, 3 or 5 years may exceed the European thresholds. Sometimes Standing Lists have an uncertain or undefined commercial value and the tenders are advertised to increase publicity for them.
Occasionally these are advertised to increase awareness of the contracts. They are advertised on a voluntary basis, and do not actually have to placed in the Official Journal at all. Typical examples might be for contracts costed at £30,000, £50,000 or £70,000.
Tenders for multiple suppliers to provide comprehensive services over a set term of years – e.g. building and maintenance to a council for 3 years.
Private Finance Initiative – tenders in which some of the commercial risk is shared between the public and private sectors. These may be for building and operating a hospital over a 20 year period – they are always multimillion pound tenders.
Different Types of Tender Advertisements
Prior Information Notice
This is an indication that a tender is due to be advertised during the next 12 months. It expresses an intention to advertise a tender. It may be used just to forewarn suppliers so they can consider bidding for it when it is officially advertised, or it may be used as a market testing exercise. It may state there will be a Supplier Information Day at a particular date, at a particular place. Attendance at Supplier Information Days may be extremely important, and may even be crucial to securing a tender, because the buying organisation will communicate directly with its potential suppliers in more extensive ways than it will do simply in a tender advertisement. The supplier can then gain a more in-depth knowledge of what is required, and can accurately gauge if it’s possible to win business. The buying organisation may often change its specifications according to the feedback it receives from the marketplace. If you want to learn how to tender I would strongly recommend going to Supplier Information Days; it’s one of the methods by which your company can move from the ‘outside’ to the ‘inside’.
This is the actual tender advertisement. It doesn’t provide the tender specifications. These will be contained in the Invitation to Tender documents, which may be obtained by contacting the buyer whose name and contact details will be listed in the tender advertisement. It is often the case that the supplier will be instructed to visit a particular website to download the Invitation to Tender documents.
There are usually two main ways to express an interest in a tender:
Read through the tender advert. At either the top or near the bottom you will see something like: ‘Further information can be obtained from’, and then either a name and contact details, or ‘The above mentioned contact point(s)’. Or, the information may be lower down and say: ‘Who to Contact’, followed by the relevant contact details. The contact details may include name, address, telephone, fax and email address. Of course it’s possible to call or to write, but most of the time – to keep their workload to manageable levels – it’s best to email them. You should write something akin to: “I would like to express an interest in (name of tender), reference number (include reference number, if one has been assigned), could you email me the relevant documents?” Your name, job title, company, telephone and email address should be included. You will then have officially registered an interest.
The other method is to express an interest directly on a website. This will entail registering and logging in. You may be asked to express an interest prior to downloading documents. It is also the case that sometimes tender documents may be downloaded without the need for registering on a website or logging into one; they may simply be freely available. Note: If you do express an interest online and are requested to register with the online tender please remember to keep your login details safe; don’t forget them, or you could run the risk of expressing an interest twice, which could cause confusion.
A Contract Award notice is essentially another advertisement, only this time stating which organisation or individual has won the tender. By law it has to be published no longer than 48 days after the tender has been awarded. Normally it will have contact details included, which can be useful if you’re considering offering your services as a subcontractor. The type of information it contains will how many companies competed, and the minimum and maximum prices put forward by the different bidders. It’s optional on the part of the awarding body to include all of this, though as a rule of thumb it’s usually freely available (exceptions being in the case of MOD tenders, which may be governed partly by the Official Secrets Act, or an equivalent rule).
Different Tendering Procedures
There are several different tendering procedures, each of which have slightly different requirements.
This type of procedure is open to any organisation that can supply the products or services indicated.
Companies have to qualify first before being invited to tender. After an expression of interest has been made, the bidding organisations are supplied with a Pre-Qualification Questionnaire, which is then assessed to determine which ones should progress to the next stage. Those that satisfactorily meet the criteria are then sent the Invitation To Tender documents.
Restricted Procedure is used when there is a specialist requirement – when particular skills are needed that not every company possesses. The PQQ (Pre-Qualification Questionnaire – you’ll hear that phrase a lot of you start bidding for work) is a means of checking that prospective suppliers can do the work they’re bidding for. It will have emphasis on technical abilities, past experience, company profiles, internal resources, etc – it’s usually more about the company that wants to put in a bid, than they the tender of the buying organisation.
I should mention that successfully completing a PQQ is very useful. If you go through the process you may often find the same organisation will come back and invite your company to bid again for future work. It happens even if your company didn’t actually win a tender. It also has a knock-on effect if you want to pursue business below the official tendering level.
This is a procedure normally used only in exceptional cases, in which the buyer invites pre-qualified suppliers to help negotiate the terms of the tender. Once a tender specification has been fully defined, the suppliers are then judged by. Complex high level tenders are often characterised by the negotiated procedure, when the specific requirements can’t be defined without supplier input, or when there are only a very small number of companies in the marketplace that can meet the needs of the tender.
Competitive Dialogue is a fairly new procedure introduced in 2006 as an alternative to Open and Restricted Procedures. It is a means by which the buyer and its prospect suppliers can discuss all aspects of a tender prior to awarding it, which is why it is so fundamentally different from the other procedures. It was designed to compensate for some of the limitations of the other methods. When a buyer doesn’t have all the technical answers to questions relevant to the tender it needs to consult with the market to define its requirements, and then to be clear about the solutions that will satisfy those requirements. Competitive Dialogue is normally only used for very complex, high level tenders.