What is Bidding/Tendering?

Welcome to the “How to Win Tenders in Namibia” online course. In this course, a basic understanding of what bidding is and why companies or government agencies engage in competitive bidding will be an added advantage. However, this course is designed with a new market entrant in mind. So don’t worry if you have never done any bidding in the past.


You will also realize the interchangeable use of the words “tender” and “bid”, “tendering” and “bidding” or “bidders” and “tenderers”. So if you come across any of the words listed above, they are meant to mean the same thing.


Until recently Namibian companies and government agencies used the term “tender”, “tendering” or “tenderer” until the introduction of the new Procurement act 15 of 2015 this word has been replaced with “bid”, “bidding” or “bidders”. Whether “tender” or “bid” is used depends on company to company, but for the sake of progress, “bidding” will be the preferred term in this course. However, be mindful that the term that holds popularity amongst the general public is “tender” or “tendering”.


Now before we begin we need to understand what bidding is and why companies or government agencies use bidding as a means of procurement.
To understand what bidding is we are going to list and dissect 3 definitions

Definition 1: Bidding is a form of solicitation (invitation) that is used in the procurement (buying) of goods and services. It is used by companies and government agencies that require the delivery of products or services on a large-scale basis. The agency or company must issue a form of solicitation(usually via newspapers), commonly referred to as a Request for Proposal (RFP), which details the products or services that they require vendors(suppliers/bidders) to show interest in supplying through a competitive process.

Definition 2: When an organization wants service from another organization, it creates an open Request For Proposal with the details of the expected services and invites bids on it. Organizations that are interested to offer their services bid on the projects with their cost, deadline of the project, and other details. After receiving sufficient bids after the due date, the organization which is asking for the services decides whom to allocate the project based on their multiple criteria.

Definition 3: It is the process of selecting suitable suppliers to fulfill projects or to acquire goods;


To understand the definitions above we need to further explore the difference between bidding, bid, and bidders:


Bidding refers to the process undertaken by a company or government agency when they invite, receive and evaluate proposals/quotations for the supply or provision of products and services equally a company submitting a proposal for the invitation is bidding
A Bid: This is a response from a supplier, contractor, or service provider to a solicitation request that, if recommended for award, would bind the supplier, contractor, or service provider to perform in accordance with the contract.
Bidder: The company that submits a bid to a purchaser to offer or declare their willingness and ability to provide a product or service at a particular cost or conditions.

Summary:
To summarize and simplify the above definitions we can refer to bidding as the process that companies undertake in the procurement of goods and services in order to select the ideal supplier for that particular product/service.
The set of documents consisting of the conditions and price submitted by the supplier to the purchaser in response to a bid invitation is referred to as the bid and the bidder is the company or individual who expresses their interest to supply goods or render a service by submitting a bid to the purchaser.

Purchaser/Buyer/Procuring Entity: the Company, institution, or organization that requests the submission of bids for the supply of goods or rendering of services
Supplier/bidder: The company/individual that submits a proposal to supply goods or render services at a price.

I trust that we are on board with what bidding is, now let’s look at why companies engage in the bidding process. We look at it from the purchaser’s point of view and subsequently from the supplier/bidder’s point of view.

Why do institutions in Namibia, more specifically in the public sector engage in competitive bidding?

Why not go ahead and purchase products and services directly from known merchants?

There are several reasons for this, but we are going to look at why public entities in particular engage in competitive bidding:

  1. They are required by law to do so. The Procurement Act 15 of 2015 stipulates that all public agencies requiring a product or service should source this product by means of competitive bidding. This is to ensure that:
  2. They get the best quality at the best price. The competition that takes place in competitive bidding ensures that the public entity has a variety of product options to choose from, at competitive prices. Typically, a bidder’s objective is to submit a product that meets the specified quality at a lower price than the competitor.
  3. Acquire products or services as per specifications: Undertaking a competitive bidding process also ensures that the public agency gets a customized product or service that solves the specific needs. This means that public entities are not forced to purchase standardized commercial products made to satisfy the needs of the mass market. Instead, they can source a product or a service as per their specific needs. This solves the wastage issue in the public sector and also improves service delivery.
    • Create fairness and transparency in how the government undertakes its purchasing decisions. Competitive bidding has a paper trail of documentation and reports that ensure that all Namibians are included in the bidding process and that such a process is undertaken in the prescribed manner. This means that any company, big or small. Known to the procuring entity or not known to the procuring entity stands a chance to bag big contracts. The Procurement Act 15 of 2015 stipulates the processes that should be undertaken at every instance and this in turn help to curb corruption.
    • Ensure competitiveness in the local economy and promote innovation. The competitive nature of public sector procurement ensures that companies are constantly working to improve their service/product offerings to meet the stipulated standards. The race to give the lowest price means that bidders have to come up with innovative ways to improve efficiency in their operations to ascertain that they still remain profitable.
    • Competitive bidding ensures that public agencies only do business with companies and individuals who follow the laws of the country. This could be provisions of the labor act, such as the paying of fair wages, or the provisions of the Financial Act in the payment of taxes. As we proceed in the course you will become aware of the various documentation that public entities request in order to measure a bidder’s compliance with specific laws of the country.
    • To ascertain the uninterrupted supply of the product or service in the desired quantities and specified lead time.  Some of the products or services that the institution may require may not be readily available on store shelves in the quantities required. Competitive bidding allows the entity to appoint a supplier who has the capacity to deliver the product or service when needed or in the quantities required. This allows bidders to plan ahead in order to meet the volume and lead time stipulated.
    • To ensure that some of the objectives of the procurement Act 15 of 2015, such as the stimulation and growth of the local economy, and support of SMEs and previously disadvantaged persons are achieved.

    Why do companies compete for private and public sector tenders?

    The bid preparation process is not only complex but costly too. It is highly competitive and requires targeted and consistent effort in meeting all of the requirements set out by the procuring entity. In as much as it has to proven to be a challenging task and one that is overwhelmed with administrative irregularities and suspicion of corruption, companies in Namibia still submit bids. Competitive bidding is popular due to the following reasons:

    1. Public Sector is the biggest buyer of goods and services in Namibia, therefore if we are to remain profitable in the local economy. All businesses, big or small should sell to the government by means of competitive bidding as per the provision of the Procurement Act 15 of 2015.  This means that if you are to sell any product or service to any public entity, you must do so via tendering.
    2. Long-term contracts and large-scale orders: The majority of contracts advertised via competitive bidding are large-scale in nature and often long-term contracts. This guaranteed work is a great boost to business, especially in these volatile times.
    3. Ease of Access to Financing: Financial institutions in Namibia have a higher appetite to finance purchase orders or invoice discounting as opposed to normal business loans. By winning a tender, a company without significant financial resources or collateral can easily access financing to undertake the specific project. This has proven to be a great financing tool for companies engaged in competitive bidding.
    4. Promotes efficiency and innovation: The constant need to beat your competitors’ prices arouses innovation in a bid to run an efficient operation. This can come in the form of sourcing cheaper suppliers, reducing operating costs and overheads, etc. aspects that one might not seem necessary in the normal operations of the business.
    5. Reduced marketing & sales costs: The search for customers and brand visibility is a costly exercise. When a bidder responds to an invitation for a bid, that opportunity is made available to them at no cost. The bidder didn’t need to collect leads or undertake any form of marketing to become aware of the opportunity. The cost associated with acquiring the bidding documents, preparing and submitting the bid is also considerably lower than the cost of placing adverts in newspapers and television in search of clients.

    By the end of this unit you should be able to understand the following:

    • Difference between bidding, a bid, and a bidder
    • Difference between a Purchaser/Buyer/Procuring Entity and Supplier/Bidder
    • Why companies, institutions, and government agencies engage in competitive bidding
    • The benefits of bidding to the Purchaser/Buyer/Procuring Entity and to the seller/supplier/bidder

    Take the next quiz to determine your understanding of the topic before you proceed to the next topic.