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The business of tenders

Posted on Oct 29th, 2014
Business Skills & Planning Law and Taxes Starting a Business

The business of tendersMost SMEs looking to land a lucrative government or private sector contract will at one time or another have to undergo the tendering process.

According to Madoda Khuzwayo, founder of OPENTENDERS, a web portal publishing government and private tenders, the basics of tendering in South Africa are a lot simpler than they may seem. Khuzwayo sheds light on the tender process and how small businesses can be prepared.

What is tendering?
Tendering is the process of making an offer, bid or proposal, or expressing interest in response to an invitation or request for tender. Organisations will seek other businesses to respond to a particular need, such as the supply of goods and services, and will select an offer or tender that meets their needs and provides the best value for money. Once the tender is accepted, it is binding to both the government or private sector, and the person or company who won the tender.

Why are tenders issued?
The government or private sector companies issue tenders in order to get the best value for money and to ensure they are procuring goods and services in a fair and transparent manner. This means they must consider every supplier and pick, not just the cheapest supplier, but the supplier who offers the optimum combination or price and quality.

“Tenders allow small businesses to take the first step to sustainability”

How do you bid for a tender?
Once the tender is issued, interested suppliers will then prepare an application to bid for it. The documents outline the offer that they are making, and will include pricing, schedules as well as their eligibility for the project or procurement. They will outline their advantage over competitors, provide information on qualifications, competencies and experience. Furthermore they have to demonstrate how their bid offers the best value for money.
The submitted tenders are then evaluated with regard to a defined criteria. In a normal tendering situation, this process should be conducted fairly and honestly, and in a manner that is free from bias or favour. While the concept of tendering may seem daunting at first, it can be easily tackled by having the right knowledge of the tendering process.

What are the benefits of tendering other than profit?
Tenders allow small businesses to take the first step to sustainability.  A lucrative contract can assist an SME with creating a path towards a sustainable business in the form of income that can be re-invested in expansion activities. This could also be a valuable reference that may assist you to secure contracts in the private sector or overseas. The experience gained is a strong selling point to other public authorities and provides a reliable source of business.

What opportunities are there for small businesses?
Opportunities exist within multiple sectors. Small businesses of all types ranging from agricultural supplies to waste removal can participate in tenders across all government departments and State Owned Entities (SOEs).

“It is important to understand your business’ suitability for the project”

How can small businesses get involved in tenders?
Small businesses can get involved by registering as suppliers on the databases of all the various government departments. Once registered they are able to participate both in tenders and also receive Requests For Quotations (RFQs) for products and services they procure on a daily basis.

What are some of the common mistakes made when tendering?
Lack of compliance issues in terms of responding appropriately to the tender requirements. Common mistakes include omitting to include supporting documents such as Tax Clearance Certificates and BEE certificates with their submissions.

What are the downfalls of tenders?
Tenders are a lucrative source of income, however at the end of the day it is always a competitive bidding process, and with each tender multiple companies compete to secure the project. Decisions on who the winning bidder for a tender will be can take up to 60 days to be concluded.

Any advice when embarking on the tendering process?
When becoming involved in a tender, it is important to understand your business’ suitability for the project; whether your business’ current situation will allow for you to tender, as well as your ability to manage the contract if you are successful in winning the tender. By understanding these points and ensuring you can demonstrate that you are able to meet the criteria and offer a competitive bid, you will increase your chances of success.