Tendering process in India and how it is its own Achilles’ heel…

Tendering Process

Tendering is a process followed by the government and many other organisations for procurement of goods and services. Tender process is good as it allows having quotations from multiple vendors thereby facilitating healthy competition and fair outcome. This process is followed in almost all the nations and is more or less similar all across.

The scope of work section in the tender generally lists the requirements of the organisation along with the specifications of the products or services expected. Depending upon the type and size of the organisation, it is a necessity that the certain set of criteria (generally known as “pre-qualification criteria”) in the RFP (Request for Proposal) limit the tender to be bid by genuine parties that have the capability to not only deliver but deliver without compromising the quality.

The 3 evaluation stages in the life of a tender:

  • Pre-qualification evaluation
  • Technical evaluation
  • Commercial evaluation

The bidder is required to thoroughly examine the pre-qualification clauses mentioned in the tender and if they meet all the required criteria, the bidder gets a green flag to move ahead in the tendering process. During evaluation, if the organization finds that the bidder has not furnished the required documentary proofs required for mentioned criteria’s, or does not have the required credentials, then such a bidder is deemed disqualified from the bidding process.

To ensure serious participation in the overall tendering process, EMD (Earnest Money Deposit) is taken from every bidder as part of the bid. EMD depends upon the size of the tender and ranges anywhere from 2% to 10% of the overall tender value. Bidders are generally asked to furnish the EMD in form of DD (Demand Draft) or BG (Bank Guarantee), while online payments are also accepted in many cases nowadays. This EMD stays with the organisation for a particular period that the organisation decides fit to complete the tendering process, which is generally seen to range anywhere from three to nine months.

`If any of the bidders does not follow the fair process in tendering and is found to have breached or deviated from the process then such bidders are disqualified and their EMD is forfeited. Also, such bidders/suppliers are barred from participating in any tendering process across the nation (commonly known as “blacklisted”).

The bidder who qualifies in all the three stages of the tender and has the lowest of all the prices is announced as the winner for that particular tender. While this is a very common practice (commonly known as L1), there is one more method that has been gaining popularity to select the bidder. This method is known as the QCBS (Quality and Cost Based Evaluation System).

In QCBS method, marks are allotted to every stage of RFP (say ‘x’ marks for Pre-qualification, ‘y’ for Technical evaluation and ‘z’ for commercial evaluation phase). In this evaluation method, it is very important for a bidder to score maximum marks in the technical bid as the evaluation is more focused on technical superiority of the solution than the commercial aspect. This also means that it is not necessary to be the lowest in commercials amongst the bidders to bag the tender. The bidder that scores maximum marks in pre-qualification and technical evaluation is supposed to be more capable to deliver the best quality.

While at the surface the tendering process mentioned above seems fool proof, the reality is somewhat different…

Present Situation

A specialised team (commonly known as “Consultants”) that can understand the requirements appropriately, and the corresponding market in question, are appointed to analyse, prepare and evaluate the tender. The team that is preparing the tender is supposed to be unbiased in order to benefit the organisation and enable them to have the right product with the best quality at reasonable commercials.

However, while preparing tenders, the consultant firms are assigning the tasks to teams that are not well-versed with either the organisation’s requirement or the market for the particular requirement. Thus, the consultants have to find the most appropriate supplier from the market to get in-depth details of the required products/services. This process takes a lot of time. While for purchase of regular items, it does not take much time to prepare and float the tender, when it comes to prepare a tender for solutions and big requirements, it takes time to do some research. In doing so, either two or three similar vendors are contacted and details are understood from them making it the basis on which tender is prepared. Major parts of the tender such as specifications, BoQ, commercial formats, etc. depend on this research.

Meanwhile, there are other vendors in the market who have the capability and capacity to offer the products/services against the tender requirement. However, since the tender is prepared based on details only from a few vendors, the tender that gets published has clauses that become hindrance for many vendors in the marketplace. Then starts the process to change/modify the Terms & Conditions in the tender so that vendors who are interested to participate in the bidding process and have the capacity to do so, get a fair chance. In this process of going back & forth, a lot of time and efforts put in by the prospective bidders who are qualified to bid are wasted. This is a huge loss to the organisation and to the nation.

To overcome the above-mentioned issue, it is necessary that the consultants who take up the job of preparing tenders should have proper knowledge of the subject. They should also have a team that understands the requirements on one hand and the market on another. The tender thus prepared will attract more number of bidders for participation.

There’s another factor in this tendering process that can be detrimental to progress of domestic organizations and the nation at large. Generally, the tender’s pre-qualification criteria are set in a way that only large organizations are able to participate in the bidding process. Sometimes the standards & certifications asked for in the tender are catered towards western standards, thereby discouraging participation of domestic organizations. What can be more ironic than the fact that the tenders for any nation be prepared by MNC’s headquartered outside the nation? For example, in technology tenders, a very common clause that is found is that the bidder’s product/services should be listed in leader’s quadrant of international benchmarking technology firms. When such clauses are present in the tender, how can growing companies in India who have all the other credentials participate? Wouldn’t it be better if the technology consultants helped in setting Indian standards?

It is a very sad situation when we come across Indian organizations themselves favouring foreign companies in the name of international standards while our leaders want to promote domestic products. It reminds me of East India company that I studied in history during my school days. To me it has started to seem like we are witnessing a new-age East India Company. This has to change, and domestic vendors should be empowered to participate in more opportunities and bigger opportunities with their product/service offerings. This will in turn, make our nation take a leap forward not only in global markets but also help in GDP growth.

Vivek Kharpude

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