How does tendering work?
Besides finding current construction projects, Building Radar offers you the opportunity for a real-time search of requests for proposal (RFP) of thousands of sources with intelligent filters. Requests for proposal have always been an important source of orders within the construction industry and construction supplies. In the EU alone, several billions of Euros are generated by these types of contracts. These types of rfp s fundamentally differ from whole construction projects. In this article, we will explain what exactly a rfp is, why they are so important and why they can contribute significantly to your company’s business success.
What is exactly is a request for proposal?
Public tendering or submissions, in English often called “tenders” or “RFPs”, are requests to submit a quote. A request for proposal itself is not a quote but rather informs possible buyers about its requirements and therefore provides suppliers with the opportunity to adjust to the requirements of the customer. For the future customers, this has the benefit that they do not have to actively look for suppliers. For the provider, on the other hand, this makes it possible to source more orders. Overall, it aims to harness the potential of the free economy.
Why do we need RFPs?
RFPs help to make procurement more transparent. This makes it possible for the supplier to choose the best products. On the other hand, the customer is able to get a better price as he now has a better overview over the market. Another advantage for the supplier is that no secret arrangements can be made. Especially within the public sector this plays a major role. Public projects are not allowed to discriminate any supplier. Therefore, RFPs are especially popular as a means of procurement in this sector. However, even within the private and commercial sector, RFPs are of increasing importance.
What kinds of RFPs are there?
The European Union decided on separating RFPs into two groups. One consists of “public tendering” that become “open procedures” upwards of a given value. The second group consists of “limited tendering” that is called “restricted procedures” above a certain threshold value. The first group is the rule rather than the exception. Public tendering and open procedures enable many companies to apply for the desired order. Under certain conditions, however, the number of possible applicants is restricted. Is this the case, it is called limited tendering or restricted procedures.
Who writes these RFPs?
Normally, the request for proposal is written by the customer directly. The additional upfront costs are supposed to be compensated by the fact that it will not be necessary to actively request any more quotes afterward. The tendering party has an interest in describing its requirements as precisely as possible in order to not get inappropriate quotes. However, since there are no professional guidelines for a request for proposal, the amount of details included, as well as the content and look may vary immensely.
What does a request for proposal look like?
Every request for proposal – no matter how different the details – is basically divided into three parts: contact information, description, procedure requirements.
Contact information: This part describes who an interested supplier has to contact once he decided to submit a quote. Most times, there is more than one possibility e.g. via email or per mail. Often, a telephone number is included to clear up any uncertainties before the quote is submitted.
Description: The main part of the tender features the conditions. When do they need what, in what quantity and what kind for which price. With this general information, the supplier is expected to submit a quote.
Procedure requirements: For transparency reasons, the RFPs often include information on how the whole process is regulated. E.g. deadlines, decision criteria or exclusion criteria are mentioned at this point.
Who wins the request for proposal?
The decision is made by the entity issuing the request for proposal. However, the decision criteria should be based on a fair competition and communicated as such. Public tendering often only considers the price as a sole criterion. This approach may be easy but is rather problematic. In the past, decisions solely based on prices have often caused a lot of problems. Unrealistic pricing is often the reason for soaring costs and delays in public large-scale projects.
RFPs within the EU
The tendering procedures apply the rules of the Government Procurement Agreement (GPA). These have been summarized in the EU directive 2004/18/EG. Among others, the 2004/18/EG features rules for:
- The types of RFPs
- Groups of commodities with a compulsory tender process
- Threshold values for RFPs
- Special conditions
- Tendering procedures
- Transparency and processes
In addition to the EU directive, it further describes a common vocabulary for public tendering. This vocabulary is summarized within the 2195/2002 regulation and commonly known as CPV (Common Procurement Vocabulary). The CPV or the CPV codes feature a grouping of all commodities and services. Therefore, they represent a simplification of the handling of different economic performances within the EU.
As European regulations are nationally non-binding, these regulations are then implemented into national law. In Germany for example, this is the “Verordnung über die Vergabe öffentlicher Aufträge”. In law, it is referred to under the abbreviation VgV (Vergabeverordnung). Its content is identical to the European regulations.
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