Tender meaning in business: A practical guide for buyers and vendors

What is a tender in business?

A tender is a structured invitation that you extend to suppliers or contractors in your industry, asking them to submit a proposal (bid) to provide goods, services, or assignments at a specified price and under specific terms.

The word "tender" in business refers to choice and comparison. As a client, you don’t have to engage in private negotiations with just one vendor; instead, you can invite multiple bidders and select the most suitable option based on various criteria, such as affordability, potential, worth, and compliance.

Most tenders are put out by organisations that are:

• Part of the public sector
  
• Large companies
  
• Industries that are subject to regulation
  
• Companies that oversee long-term or high-value contracts
  

Why businesses use tenders?

There are several good reasons for businesses to opt for a tender to assign tasks to vendors. Here are some of them:

• As a business owner, tenders help to create a streamlined, open and efficient purchase procedure when obtaining goods or services for your business. You can invite multiple vendors to bid for level competition and best value, not just the cheapest option.
  
• By outlining scope, pricing, timing, and evaluation criteria upfront, tenders reduce your procurement and compliance risks. If your business is with government agencies or regulated sectors, transparency and audit trails matter.
  
• You can improve cost management, supplier quality, and long-term planning with bids by choosing suppliers that meet your technical, financial, and delivery needs.
  
• Tendering helps you make educated decisions, manage risk, and maintain business discipline.
  

What are the common types of tenders

As a business owner, you need to be aware of the different kinds of tenders you may have to apply for. Here are the primary categories of tenders:

• Open bids and offers: Most of these bids are for government projects that benefit the public. Any eligible vendor can apply.
  
• Selective Tender: To reduce due diligence in the entire process, only pre-qualified vendors can submit bids.
  
• Negotiated Tender: When dealing with specialised or time-sensitive projects, the buyer will frequently engage in direct negotiations with one or more suppliers.
  
• Request for quotation (RFQ): An RFQ is typically used when specifications are clear and standardised, and price competitiveness is a primary factor, while still requiring vendors to meet defined compliance and delivery requirements.
  
• The Request for Proposal (RFP): An RFP is used for more complex or outcome-driven projects, where evaluation focuses on solution design, technical capability, implementation approach, and value delivered, with pricing assessed alongside qualitative factors.
  

Key stages of tendering

When applying for a tender, here is the detailed process.

Application to bid

You apply for a bid or tender notice, which formally notifies prospective bidders of the chance. The scope of work, technical specifications, schedules, eligibility conditions, and submission deadlines are all covered in full in this paper.

Response from Supplier

This is also known as bid submission, and under this, you must ensure that potential vendors submit their bids according to the established format. This typically includes technical proposals, price estimates, dates, financial documents, and the required declarations.

Evaluation

Bids are evaluated using technical expertise, pricing, compliance, and risk factors. Organised reviews guarantee accurate comparisons and impartial assessments for your business.

Awarding of contracts

The successful bidder is notified, and a contract is issued. This stage finalises terms, pricing, deliverables, and performance obligations before execution.

SECTION A — For businesses intending to float/issue a tender (the buyers)

Things to keep in mind before floating a tender

Here are a few things to keep in mind before floating a tender for your business.

Check your intent

It’s crucial for you to clarify whether your objective is to save costs, enhance quality, build a long-term collaboration, or ensure compliance with regulations.

Provide a clear tender response format

Provide a response structure that is simple and easy to understand in a standard template.

Define the evaluation and selection process clearly

Provide a detailed analysis of how price, technical know-how, expertise, and timelines rank as per their significance for the project.

Set a reasonable price range/budget

Define a budget that reflects the project's financial requirements. You will get substandard bids with unrealistic pricing expectations.

Practice bid confidentiality

Only authorised evaluators should be given access to the bid.

Set a reasonable opening & closing period

Ensure that your suppliers have ample time to submit compliant submissions.

What to include in your tender document

Well-structured tender documents lay the groundwork for a seamless and competitive tendering process for your business.

Company and project background

Start with your company and project background to provide bidders with context about your organisation, objectives, and the nature of the project.

Invitation letter and scope of work

Include a clear invitation letter along with a detailed scope of work and turnaround time.

Technical standards

Clearly outline the technical requirements for compliance.

Participation and eligibility criteria

Clearly define all required criteria upfront to get bids from qualified vendors.

Deliverables and commercial terms

Clearly state your pricing structure, deliverables, and business terms. Mention applicable penalties as well as payment milestones.

Evaluation framework and scoring methodology

Outline the tender process, milestones, and framework with scoring methodology. This will ensure that bidders clearly understand how their submissions will be assessed.

When you provide clear documentation, there is less ambiguity, every vendor gets an equal opportunity, the quality of your bids is better, and you prevent disputes.

How to run a proper tender evaluation process

• Prequalification: Ensure that you verify compliance, financial viability, and your eligibility.
  
• Assessment of technical aspects: Evaluate the ability, procedure, expertise, and assets.
  
• Assessing your finances: Price evaluation is typically conducted using a weighted scoring model, where bid prices are assessed relative to the lowest compliant bid and combined with technical scores based on predefined weightings.
  
• Recognition and announcement: Ensure that you issue authorised acceptance notices in a professional manner and communicate with those who didn't win.
  
• Post-award contracting: Finalise your contracts, guarantees, and payment schedules.
  

SECTION B: For businesses bidding for tenders (vendors)

Key finance instruments bidders must understand

As you participate in tenders, you'll often need to provide financial tools that protect your buyer against poor performance or financial risk. Grasping these instruments is essential for you to price accurately and prevent cash-flow strain.

Bid bond or bid security

A bid bond ensures that you, as the bidder, will uphold the tender terms if you are chosen. This helps to deter non-serious bids and typically represents a small percentage of the overall bid price.

Performance bond or performance security

Once the bid is awarded, a performance bond protects the buyer if the supplier fails to meet its delivery or contractual obligations. The range usually falls between 5–10% of the contract value.

Advance payment guarantees

An advance payment guarantee protects the buyer by ensuring that any advance payments made can be recovered if the supplier fails to perform.

Retentions & final release

Retention is a contractual practice where the buyer withholds a portion of each payment—typically 5% to 10%—until the project is completed and any defects are rectified. Retentions protect the buyer’s interests but can significantly affect the vendor’s cash flow, especially for long or milestone-based projects, making retention tracking and release timing critical for financial planning.

Insurance & warranty obligations

Some suppliers may require liability insurance and warranties to address operational, accounting, and legal risks while executing contracts.

How to tender successfully (A vendor playbook)

To achieve success in tendering, focus on being competent, compliant, and credible rather than just bidding low. Here’s a practical guide for you as business owners:

Preparation & research

Understand your buyer's business, the context of their industry, their budget, and what they prioritise in their evaluations. If you get the option to review any past tenders, do it.

Document readiness and compliance

Make sure that all necessary documents, such as licenses, certifications, and declarations, are complete and current. Not adhering to regulations is the quickest route to disqualification.

Value proposition

When submitting your proposal, clearly articulate why your solution stands out. Specify your experience, delivery capability, risk mitigation strategies, or lifecycle cost savings.

Pricing strategy

Set your prices realistically by considering your costs, margins, and the impact on cash flow. Don’t underprice just to gain an edge over other bidders.

Teaming & subcontractor strategy

Consider collaborating when your internal capabilities fall short.

Risk and bond planning

Make sure to plan for bid bonds, performance guarantees, and insurance to avoid any delays in submission.

Presentation and clarity

Adhere to the format, keep it brief, and ensure your bid is simple.

Submission and follow-up

Ensure you submit before deadlines and keep your communication professional and focus on clarifications only when asked. Strictly avoid any lobbying.

Submission process & post-submission etiquette

Be sure to meet deadlines and steer clear of uninvited follow-ups.

Mobilisation and early delivery commitments

Demonstrating that you are prepared instils confidence in your potential customers.

How to price a tender (for vendors)

Finding the ideal balance between maintaining profitability, controlling risk, and remaining competitive in the market is crucial when pricing a tender.

Direct and indirect costs

First, you need to identify your actual cost base, which should include overhead charges, supplies, labour, vendors, fees for overhead, funding costs, taxes, and regulatory expenses.

Risk premiums

Assess any risks unique to your project, including delivery schedules, currency exposure, performance penalties, and payment terms, and then accurately incorporate risk buffers into your pricing.

Cash flow timing

Consider the project expenses associated with bonding, insurance, and how they affect your working capital, especially if milestone payments or retentions come into play. Keep a realistic perspective by researching market benchmarks and competition behaviour. Avoid a race-to-the-bottom pricing strategy that compromises delivery.

Retentions and delayed payments

Ensure that the price of your proposal aligns with the value you are providing. If you offer faster delivery, lower lifetime costs, or stronger credentials, for example, your prices should surely reflect that value while still being able to make money.

Currency and FX exposure (for cross-border tenders)

When dealing with cross-border tenders, ensure you carefully consider currency and FX exposure. Be aware that fluctuations in exchange rates can erode your margins between bid submission and payment.

Consider incorporating currency exchange buffers, pricing in a stable currency whenever feasible, or utilising forward contracts and multi-currency accounts to effectively manage volatility and safeguard your profitability.

Common pitfalls vendors should avoid

• Submitting last-minute, error-prone bids
  
• Presenting incomplete tender documents that do not meet compliance standards
  
• Overlooking mandatory qualifications or technical specifications
  
• Under-pricing to secure bids without fully considering your actual costs and risks.
  
• Neglecting the buyer’s evaluation criteria
  
• Overpromising on delivery timelines or capabilities.
  
• Inadequate cash-flow planning, retentions, or delayed payments can lead to significant challenges for your business.
  
• Insufficient pricing justification or ambiguous cost breakdowns
  
• Failing to clarify ambiguities during the Q&A window
  
• Making informal follow-ups or lobbying after your submission.
  

SECTION C — Shared guidance for both buyers & vendors

Tendering for government contracts in Singapore

GeBIZ (Government Electronic Business) serves as the official procurement portal for public sector organisations, and it is the primary tool in Singapore to manage government tenders. Here is a quick guide to refer to before submitting or awarding tenders.

• Your business should meet strict eligibility, financial, and compliance requirements, such as corporation registrations, track record disclosures, and, in certain situations, security clearances.
  
• Focus on fair competition, openness, and value for money in tenders.
  
• Combine technical merit and pricing in a structured framework for evaluation.
  
• Carefully consider bid bond requirements, obligatory declarations, and submission dates.
  
• Maintain strong financial and project management practices, so your vendors can comply with government payment terms, performance criteria, and audit responsibilities once they are awarded the tender.
  

Post-award project accounting and revenue recognition

• Once you receive a tender award, maintaining precise project accounting is essential for safeguarding your margins and ensuring compliance.
  
• Track project costs, milestones, variations, retentions, and payment schedules in real time.
  
• Understand revenue based on either the percentage of completion or milestone-based recognition, depending on your contract terms.
  
• Maintain a clear distinction between billed, unbilled, and deferred revenue to avoid unexpected cash-flow issues.
  
• Monitor retentions and change orders closely, as they directly impact your working capital.
  
• Implement strong post-award accounting for transparent reporting.
  
• Ensure timely invoicing and enhance your financial control throughout the contract lifecycle.
  

Metrics and dashboards every business should maintain

Well-designed dashboards transform your tendering data into actionable insights. As you bid for contracts or issue them, tracking the right metrics will help you improve outcomes, control risk, and protect your cash flow.

Metrics for your vendors

• Bid hit rate: This metric indicates how many tenders you win compared to those you submit. A declining hit rate could indicate potential pricing challenges, insufficient differentiation, or a misalignment with your target projects.
  
• Project margin: Compare the estimated margins at the bid stage with actual margins during delivery. This emphasises the challenges of cost overruns, scope creep, or under-pricing that you may encounter.
  
• Monitor outstanding retentions: Monitor the value of your money to prevent cash flow problems and to enquire about postponed releases.
  

Metrics to analyse your buyer behaviour

• Evaluate your vendor's performance by evaluating their quality, responsiveness, and compliance with contract terms.
  
• Ensure your delivery reliability by tracking on-time, in-full deliveries to minimise operational disruptions.
  
• Contract variance helps you measure deviations from the agreed pricing, scope, or timelines, enabling you to control budget and governance risk effectively.
  

Conclusion

A tender is more than simply a piece of paper; it is a representation of financial commitments, risk assessments, and prospects for growth. Learning how to master the entire process can provide you the ability to maintain profits, create beneficial alliances, and unleash long-term success for your company, regardless of whether you are bidding for the contract or putting out a bid.

How does Aspire help in managing your tendering process

At every stage of the process, whether you are issuing tenders or bidding for them, Aspire is here to support you with financial control. With Aspire, you can

• Safeguard the funds linked to your tenders in your business accounts.
  
• Receive payments in various currencies from international vendors
  
• Manage your expenses for bid preparation and project costs.
  
• Use corporate cards to effectively manage and control your spending on procurement.
  
• Get the current status of your cash flow and payments.
  

By consolidating your funding for tender-related expenses, Aspire enables you to keep your business compliant, avoid cash-flow shortages, and successfully carry out contracts.

Frequently asked questions

What is a tender in business?

A tender is a formal bid to provide goods, services, or works for a project, typically in response to a buyer's invitation for a fair and transparent selection process of projects.

What is a tender offer in business?

As business owners, you should be aware that investors often make tender offers to publicly traded corporate stockholders. This meaning of ‘tender offer’ is unrelated to procurement tendering and applies only to capital markets. You can sell your shares at a specified price and within a specified timeframe. A group of investors or another business might present the tender offer to you. Tender offers are common in firm acquisitions.

What is a tender contract?

A contract is a legal agreement that defines the conditions and rules under which your business interacts with another company. After you finish the bidding process and pick a provider, you will write out the contract. This document provides the important details for your task, project, or item delivery, such as the terms, deadlines, payment terms, and other important information.

What is a tender example?

Let's say you're a cloud service provider and come across a requirement for a government department looking for vendors for IT and cloud requirements for a new project. You place a bid for the same, which denotes applying for a tender.

Can I reject a tender offer?

Yes. When your standards are not met, as a buyer, you can reject any or all bids.