Bidding and Tendering: International Trade Bidding Procedures

Bidding, tendering, and auctions are two common methods in international and domestic trade, where buyers and sellers do not directly negotiate transactions. Bidding and tendering involve competition among sellers, while auctions involve competition among buyers. Open bidding, transparent competition, and swift transactions are the characteristics of these two methods.

A. Basic Concepts

Invitation to Tender and Submission of Tender are two aspects of one trade method. This trade method is applicable to both the procurement of materials and equipment and the contracting of construction projects.
Invitation to Tender is a behavior where the tenderee (the purchaser or project owner) issues a tender notice, specifying the details of the goods to be purchased or the project to be contracted, inviting tenderers (sellers or contractors) to submit bids at a specified time and place, and then entering into a contract with the tenderer whose proposed terms are most favorable to the tenderee.
Submission of Tender is the behavior where the tenderer (the seller or contractor), in response to the tenderee's invitation, submits an offer to the tenderee at a specified time and place according to the conditions set by the tenderee, in order to secure a deal.
Due to the fair competitive nature of bidding and tendering, many large and medium-sized projects and material procurements, especially those financed by international government loans or international financial institutions, stipulate that procurement or contracting must be carried out through International Competitive Bidding (ICB) to ensure the effective and lawful use of funds.

B. General Procedures of Bidding and Tendering

Publishing the tender notice. International open tenders are usually announced in authoritative newspapers or relevant professional publications, such as China's "People's Daily" distributed overseas or the World Bank's monthly publication on aid project tenders.

Prequalification. Tenderers shall fill out the "Prequalification Form" prepared by the tenderee, including the tenderer's business scale, personnel and facility overview, project records, etc., and provide relevant supporting documents and materials. The tenderee confirms whether the tenderer has the capability to bid. Prequalification is a key step to ensure the smooth progress of the tender process.
Preparing Bidding Documents. At the beginning of the tender, the tenderee organizes relevant personnel to prepare the tender document, specifying the technical and trade conditions for the goods to be purchased or the project to be contracted.

Preparation work for bidding. After obtaining the tender document, the tenderer must strictly calculate, based on the tender conditions, the quality, technical standards, delivery deadlines, project volume, and schedule requirements for the goods or project, and combine these with their own capabilities and market competition conditions to assess whether they can fully meet the tender requirements and offer a competitive price.

Preparing the bid and securing the guarantee. The bid is an irrevocable offer from the tenderer to the tenderee. Its main content includes confirmation of the tender conditions, relevant indicators and project progress for the goods or various items, technical descriptions and drawings, the responsibilities the tenderer undertakes, as well as total price and unit price analysis tables. To prevent the tenderer from refusing to sign a contract after winning the bid, the tenderee usually requires a bid bond, typically 3% to 10% of the total price. A bank guarantee or standby letter of credit can also be used instead of cash as security. Therefore, the tenderer should arrange for the guarantor before submitting the bid.

Submitting the bid documents. The bid documents include the bid, the bid bond or standby letter of credit, attachments explaining individual items in the bid, and other necessary documents. The bid documents must be sealed and delivered to the designated location within the specified time, either by personal delivery or by registered mail.

Bid opening. The tenderee publicly opens the sealed bid documents at a pre-announced time and place, reads out the contents, and allows tenderers present to take notes or record. After the bid opening, tenderers are not allowed to modify their bids. Bid opening is a procedure to publicly disclose the contents of the bids, ensuring the fairness of the tender process, but it does not immediately determine the winning bidder.

Bid evaluation and award. In addition to price conditions, factors such as technical quality, project progress or delivery time, and services provided will all affect the evaluation of bids. The tenderee must review and compare the bids, then select the best bidder for the award. Its main tasks are as follows:

(1) Review the bid documents. Check whether the content meets the requirements of the tender document, whether the calculations are correct, and whether the technology is feasible.
(2) Compare the transaction conditions of the tenderers, which can be done by scoring item by item, collective evaluation, or voting, to determine the winning bidder. The preliminary winning bidder can be one party or several qualified alternatives.
(3) Conduct a qualification review of the winning bidder. If the first-ranked winning bidder passes the review, they become the winning bidder of the tender. Otherwise, the alternative winning bidders are reviewed in order. If any of the following situations occur, the tenderee may declare the tender unsuccessful and organize a second round of bidding: too few participants making it non-competitive; all bids fail to comply with the tender requirements; or the bid prices significantly exceed the average international market price.

Award and contract signing. After determining the winning bidder, the tenderee notifies the winner in writing to sign the contract at the tenderee's location within a specified period, and to provide a performance bond or a bank guarantee as performance security.