Introduction to Tendering

Overview

1. From grants to contracts
2. What is tendering?
3. What is a contract?
4. Is tendering for you?
5. Finding opportunities
6. Evaluating opportunities
7. The tender process
8. Further information

Voluntary sector organisations are increasingly seeking to diversify their income sources by incorporating strategies and techniques to achieve a sustainable funding base. Tendering for the delivery of goods or services under the terms of a contract is one of many options that can be considered to generate income.

This resource is intended to provide a brief overview of tendering and issues that voluntary sector organisations should consider before deciding to tender.

From grants to contracts

The funding environment in Wales has changed radically in recent years. There has been a strong drive towards increased public service delivery by voluntary sector organisations but due to pressures on public sector budgets, many traditional grants for service delivery are now being offered as competitive tenders.

The public sector market offers a variety of opportunities for voluntary sector organisations. Services delivered under contract might include:

• Community transport
• Respite or day care services
• Health treatment or therapies
• Recycling

What is tendering?

When a purchasing body, such as a local authority, wishes to appoint a third party to deliver a specific service under the terms of a contract, a strict procurement process is followed.

Procurement is defined as the purchase of goods or services from a third party that is delivered under the terms of a legally binding contract.

The procurement process followed by a purchasing body will involve issuing an Invitation to Tender (ITT) or Request for Quote (RfQ), inviting any interested parties to bid, or tender, for this work.

Tendering is the competitive process of bidding for the delivery of goods or services under the terms of a contract. It involves preparing a written tender to demonstrate your capability, as a potential supplier, of meeting the purchasing body’s requirements.

What is a contract?

If successful at tendering, you will be required to deliver the goods or services under the terms of a legally binding contract. A contract is an agreement between two or more parties which is recognised by law and enforceable through the courts. In general, there is no set form for a contract; contracts can be written, oral or implied by conduct.

Before submitting a tender you should carefully check all conditions of the ITT/RfQ. It may be the case that by submitting a tender you are agreeing to meet all terms put forward by the purchasing authority if successful.

Before entering into a contract you should conduct a thorough risk assessment to ensure that entry into the contract is in your organisation’s best interests, in line with your objects and always seek professional legal advice.

Is tendering for you?

Before considering tendering for the first time, you must have confidence in your organisation’s ability to:

• Compete with others
• Deliver services on time and to required standards
• Maintain a sound financial and commercial reputation
• Offer value for money

You should also consider the following points when deciding if delivering services under contract is appropriate for your organisation:

• Core mission – Does what you are proposing to deliver fit with your core mission and aims and charitable objects? Delivering services outside this remit may have implications for your organisation. You should find the balance between being driven by your mission and being driven by a financial incentive.
• Current activities – The services that you may decide to deliver will  be dependent on your organisation’s current activity, experiences and reputation. Are you able to deliver this service better or more efficiently than the competition?
• Capacity – The amount of work it can take to put together a successful tender and manage a contract once awarded should not be underestimated. Do you have the capacity to deliver?
• Organisational change – Is your organisation ready to adopt new ways of working? Tendering involves a high level of scrutiny, does your organisation have the policies and procedures in place to meet these demands?
• Financial impact – If the delivery of a particular service under contract does not contribute to an organisation’s primary purpose thus preserving tax exemption, it may result in the organisation having to register for and charge VAT where appropriate. Do you understand these regulations?
• Legal framework – Does your governing document allow you to trade  or deliver services? There are also many rules and regulations relating to charities delivering public services and trading. It is important to be aware of the legal frameworks and the extent to which they impact on your organisation.
• Insurance and quality standards – Depending on the type of contract some purchasing authorities may require professional indemnity insurance for example set at a minimum amount, you should check this before tendering. You may need to have certain quality standards in place or plan to achieve them, such as cyber essentials.

Finding opportunities

Tender opportunities are advertised in a wide range of places. Finding opportunities involves a combination of research and networking to make the right connections.

Depending on the size, scale and nature of these contracts, tender notices may be found through the sources listed below. The list is not exhaustive and is intended as a starting point only.

• Press – Advertisements in national, regional and local newspaper or trade journals.
• ‘Meet the buyer’ events – Organised by purchasing bodies or support agencies to bring together purchasers of services with potential suppliers. A useful way to find out about forthcoming opportunities and how best to engage with the relevant purchasing departments.
• Sell2Wales allows you to register free of charge to receive notifications of public sector contracts from across Wales.
• Contracts Finder– UK Government’s portal to find public sector contract opportunities.
• Tenders Electronic Daily – the Official Journal of the European Union (OJEU) publishes all public sector opportunities over a specified EU threshold.

The tender process

There is sometimes variation in a purchasers’ approach when putting the supply of goods or services out to competitive tender. Many purchasers develop their own procedures, standards and protocols however you will typically follow a process similar to that below.

1. Advert / Invitation to tender (ITT) / Request for Quote (RfQ) – A purchasing body advertises its tender notice in the appropriate media.
2. Expression of interest – Interested parties request further information or offer an ‘expression of interest’ by the required date, as stated within the advert. Some online tender notices will allow you to download tender documents directly from the advert.
3. Tender documents – The purchaser sends all interested parties a complete set of tender documents. Suppliers are asked to complete this paperwork and return all documents by the required date. In some cases suppliers have to pre-qualify before being invited to tender. They do this by completing a pre-qualification questionnaire (PQQ), supplying information about their financial status, previous experience, references etc.
4. Opportunity to clarify tender – Where appropriate, purchasers may offer an opportunity to discuss the tender at a clarification meeting. However nothing will be done at this stage which would give a particular supplier an unfair advantage in competing for a specific contract.
5. Submit tender – Suppliers then complete the tender documentation and return all paperwork by the required date.
6. Evaluation – At this stage the purchaser evaluates all submissions against the award criteria and minimum requirements (if any).
7. Contract award – The purchaser then awards the contract to the supplier whose bid represents best value for money or best meets the contract criteria. Everyone involved works together to put operations in place for the forthcoming contract.

Further information

Legalities

CC37: Charities and Public Service Delivery
The Charity Commission

CC37 Charities and public service delivery, produced by the Charity Commission, sets out the considerations for charities when entering into a contract.

VAT for Charities
HMRC

Queries on the tax implications should be directed to HM Revenue and Customs.

0845 302 0203