Last edited 28 Sep 2020

Competitive tender

Competitive tendering is a common method of procurement in the construction industry.

A tender is a submission made by a prospective supplier/contractor in response to an invitation to tender. It makes an offer for the supply of goods or services.

Those tendering for a contract are often competing with others, and generally, none of the tenderers are aware of the quotes provided by each other; therefore, they are incentivised to submit their most competitive tender. In this way, it is believed that competition in procurement can add value for the client.

Competitive tendering became increasingly common in the UK in the 1980s, when it was seen as a way of making public organisations open themselves up to bids from a number of different firms. This was intended to increase transparency, drive down costs, and improve the efficiency of state-funded organisations such as central and local government departments.

However, it has been criticised for placing too much emphasis on cost, and not necessarily achieving best value for the client. Competitive tendering can be seen as a 'race to the bottom' and can lead to disputes later in the project as suppliers seek mechanisms to increase their price.

Methods of assessing tenders which consider criteria other than the lowest cost include:

For more information see: Tender evaluation, and Procurement route.

NB The UN Procurement Practitioner's Handbook, produced by the Interagency Procurement Working Group (IAPWG) in 2006 and updated in 2012, defines competitive bidding as: 'A procurement method in which offers from competing suppliers are invited by open advertisement and provided with the scope, specifications, and terms and conditions of the proposed contract as well as the criteria by which the offers will be evaluated. The objectives of competitive bidding are to obtain goods or services at the lowest cost or best value through open and fair competition.'

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