How the tender process works
Landing a tender and the tender process can be a time-consuming and costly exercise, especially if you don’t understand the tender process, or you don’t adhere to the necessary requirements.
A bid in the tender process is issued by a private company or government department when they need to obtain specific goods or skills. The advertised bid is a Request for Quotations (RFQ) in the tender process.
What should be included in the tender process
Each advertised tender bid should include information about the following:
- The RFQ or tender number
- A short description on the requirements and eligibility criteria
- Closing date, time and address to deliver your tender submission documents
- Information about compulsory meetings and special conditions of the contract
National or provincial tenders also require a number of forms which must be included in your tender submission. These required forms were formerly known as tender forms but are now referred to as bid documents. Bid documents for national tenders have the prefix of SBD.
You’ll find information on private company tender bids through adverts in newspapers and in trade and professional magazines. Major national and provincial municipal tenders are advertised in the Government bulletin as well as in local newspapers, on notice boards at various governmental departments and in post offices and police stations.
Tender process compliance
Even if you know where to look for tenders, your company must be legally compliant to take part in the tender process:
- Your business must be registered with a commendable banking history.
- You must have a good relationship with your clients and suppliers.
- Your company must have an excellent credit record and be registered with the South African Revenue Service (SARS).
- You company must be up to date with company tax and VAT payments.
- All your employees must be registered with the Department of Labour and must signed up to the Unemployment Insurance Fund (UIF) and Workmen’s Compensation Fund.
Pricing in the tender process
Now that you have a better understanding of where to look and how to bid for a tender, you also need to understand the economic aspects of pricing a tender in the tender process.
Remember that pricing a tender is different from the way you would normally price a product in your company. Why? As a bidder, you need to consider all the costs associated with undertaking the project to ensure that you calculate an optimum mark-up.
Imagine you get awarded a tender only to find out that it’s not profitable to start the project.
Oftentimes, bid documents in the tender process will state that you have to make use of SEIFSA’s Price and Index Pages (PIPS) (a data set that contains over 200 indices) with some of these indices dating back to the 1960s.
The idea is that you link a relevant index to each of the input cost components in the breakdown of your tender process application.
By including data from these indices in your tender application, you’ll be able to accurately calculate the changes in the costs of labour, steel, transport and other inputs that affect the final cost of manufacturing through the application of a Contract Price Adjustment (CPA).
The results from the CPA calculations allow the tenderer to adjust prices in line with unforeseen cost increases.
Furthermore, by using PIPS in your tender submission you can be certain that the cost increases you calculated are a true reflection of what happens in the market, thereby ensuring that you maintain and ultimately improve the profitability of your business.
THE LEGAL STUFF
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