Difference between Estimate, Quote and Tender (1.1, p. 2) - correct answer Estimate = has no legal standing, simply a 'best guess' by the supplier. *NOT
... [Show More] a firm offer*. should be avoided within a commercial contract
Tender / Quotation = *both are firm offers* to do something at a quoted rate or price. Tenders are more comprehensive / detailed.
Quotation (1.1, p.3) - correct answer - normally used when the only variable is price
- T/Cs are often NOT specified here
- Should only be used in the following situations: 1) low value/low risk purchases; 2) specification / delivery terms are fixed; 3) suppliers have been pre-qualified; 4) purchasing system has locked down the terms and price is the only variable
Tender (1.1, p. 3) - correct answer - measuring more than one variable (not only price)
- formal process, requiring sealed bids which are not to be opened before the specified date
- used in the following situations: 1) for complex projects; 2) for high value, high risk projects; 3) projects where quality AND price need to be assessed; 4) pre-qualification is required for new suppliers, using a two-stage process.
Request for Quotation (1.1, p.3-4) - correct answer - often misused (w/o terms or specifications).
- work well under framework agreements where the terms are already fixed
- main features (degree of formality, speed and relationship to contract docs), and the advantages/ disadvantages / controls are outlined on p.4)
***REMEMBER - RFQs are useful when they are quick/informal, but they cannot look at quality / may not be ties adequately to contract documents***
Invitation to Tender (1.1, p.5) - correct answer - formal sourcing exercise, where more thought is given to the suppliers / creation of the contract documentation.
- normally well documented process; can be regulated by law for the public sector
- detailed requirements are common, e.g., method statements, timescales or other quality aspects
- for open tenders, supplier vetting is common.
- main features (degree of formality, speed and relationship to contract docs), and the advantages/ disadvantages / controls are outlined on p.5)
Real world comparisons of quotes and tenders (1.1, p. 6-7) - correct answer Four real-life examples / issues:
- Process Admin costs
- Audit Trails
- Transparency of process (controlled opening of offers)
- Urgency and speed
1) Process Admin Costs - correct answer - sourcing is an resource-heavy activity: the amount of documentation required for an RFQ/ITT increases the cost for the supplier.
- *simplicity/clarity on documentation can reduce costs for bidding / accepting a contract*
- cost and risk are NOT the same thing; a relatively low-cost contract could bring business to a standstill, if it fails.
2) Audit Trails - correct answer are important for the following reasons:
1) reduce bribery/corruption/collusion
2) provide solid evidence of activities (e.g., bribery, etc) or facts of a situation when disputes arrive
3) improve accountability (even in the form of traceability
4) help trace errors, e.g., skills/knowledge gaps or procedural weakness
3) Transparency in the process: controlled opening of offers - correct answer - the tender process must be transparent (e.g., suppliers won't spend the time if they don't believe they have a shot at winning);
- e-tendering tools allow for fixed deadlines to be set, and all offers to be opened at the same time.
4) Urgency and Speed - correct answer - process for selecting a new vendor must be controlled.
- **REMEMBER: waiving the tender process requires 1) high level sign-off; and 2) business justification** [Show Less]