Negotiated tendering
A 'tender' is a submission made by a prospective supplier in response to an invitation to tender. It makes an offer for the supply of goods or services. In construction, the main tender process is generally the selection, by the client, of a contractor to construct the works. However, as procurement routes have become more complex, so tenders may now be sought for a wide range of goods and services.
Irrespective of the nature of the goods or services that are being sought, securing tenders generally follows one of a number of basic procedures:
- Open tendering.
- Selective tendering.
- Negotiated tendering.
- Serial tendering.
- Framework tendering.
Negotiated tendering occurs when the client approaches a single supplier based on their track-record or a previous relationship and the terms of the contract are then negotiated.
Negotiating with a single supplier may be appropriate for highly specialist contracts (where there may be a limited number of potential suppliers), or for extending the scope of an existing contract. It can give the client the confidence of working with a supplier they already know, can reduce the duration and costs of tendering and can allow early supplier involvement.
However, unless the structure of the negotiation is clearly set out there is the potential for an adversarial atmosphere to develop, even before the contract has been awarded. Carrying out negotiations in the absence of competition so that both parties feel the outcome is fair can be complex and time consuming.
Negotiated tendering can be seen as anti-competitive and exclusive, with the potential for ‘cozy’ relationships to develop between the client and the supplier. Negotiated tendering may not be permitted by some organisations due to the perceived lack of accountability. On public projects, or projects that include a publicly-funded element it may be necessary to advertise contracts. This is a requirement of the Public Contracts Regulations, intended to open up public procurement within the European Union and to ensure the free movement of supplies, services and works (see OJEU for more information).
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