Some experts still debate the differences between procurement and tendering processes. It is impossible to consider these two definitions equal. At first glance, it seems that tendering and procurement are synonyms. Sometimes these two words may be used one instead of the other. But there are significant features that differ one process from another.
Procurement is a procedure with a number of stages that a company specifies and performs in order to receive raw materials, goods, or services for its purpose according to agreeing on terms, often via a tendering or competitive bidding process.
Tendering is an essential step in the process of procurement. But the last means more than just getting a price. Tendering is the bidding procedure (simple estimating software helps to make it easier), to define a price and determine how a contractor is assigned. The basic kinds of tendering processes.
More About Tendering in Comparison with Procurement in Construction
In summarizing, we can state that the procurement procedure is the range of preparation actions for accurate estimating of material, labor, and other costs. Tendering is more about the final construction stage while all the essential ones came to an end. It is worth noting that both procedures relate to the analytical background, predictions, forecasts, and budget planning.
Nevertheless, tendering is more about interactions with potential clients. Here, bid invites take place, and the final version of the budget plan matters (with no errors but accurate expenditure items and profits). Let’s take a closer look at the peculiarities of the tender process.
There are 4 basic kinds of tendering methods that are usual to the building segment.
- Open tendering. This kind of tendering is very popular for building businesses. It provides the biggest competition among the suppliers.
- Selective tendering. This type of tendering lets suppliers take part by invitation. Use construction tender estimating to avoid errors, human-factor imperfections in the reports, and risks concerning inaccurate forecasts and calculations.
- Negotiated tendering. It appears if the customer interacts with a single supplier in accordance with their previous interaction and the terms of the agreement are concluded.
- Single-stage and two-stage tendering. It is usually used for construction projects and involves engaging a contractor at a much earlier stage of a project.
The most usual kind of tendering method is the single-phase bidding process for determining a price for the whole of the building works. Invitations to tender docs are given to a number of contractors who are all given the opportunity to bid for the project.
The tender contractors are provided a predefined amount of time to give their tenders. Later they conclude a construction agreement to perform the tendered tasks. The two-phase bidding process has become more popular over the past several years. The technical proposals are opened at the date and time advised in the bidding document. The technical proposals are evaluated and discussed with the bidders.
Final Word: Procurement & Tendering
Sometimes there is a misunderstanding with the terms “tendering” and “procurement”. Procurement is purchasing of products, planning of the labor costs, and other expenditure items specifically for a project aim. It covers the whole procedure from the first step to the last one.
For example, if you are a result-driven contractor and are searching for a client, you need to run the whole procurement stage to be successful with your bidding performance and tendering outcomes. Start with multiple forecasts, deep analytical work, and accurate estimating to keep the balance between your predictions, planned spending, and the expected profit margin.
Tendering itself is limited to the procedure of going to the external market with the needed specification with the intent to gather, compare and nominate bids. So, tender in simpler words is a process where a government or a private company invites another company to work for them.