The Indian government issues various types of tenders to which eligible bidders may apply. Government tendering processes are an important aspect of procurement in many sectors. Whether you're a contractor, supplier, or manufacturer, precisely knowing their meaning can help you navigate the tender process. This reduces the danger of misinterpreting tender requests and creating errors in offers. In this article, we will look at crucial terminology like Bank Guarantee (BG), Letter of Credit (LC), and other important concepts that are frequently used in government contracts.
- Aboriginal and Torres Strait Islander business: An Aboriginal and Torres Strait Islander business is defined as one that is at least 50% Aboriginal or Torres Strait Islander owned.
- Accountable officer: Has the meaning conferred by the Financial Accountability Act 2009. For the purposes of the Queensland Procurement Policy, this term also includes Chief Executive Officers of government owned corporations, statutory bodies and special purpose vehicles.
- Agency: A department or statutory body as those expressions are defined in the Financial Accountability Act 2009. Any government-owned corporation recognized under the Government Owned Corporations Act 1993. Special purpose vehicles were established from 1 July 2010 and existing special purpose vehicles which are required to comply with the Queensland Procurement Policy by their respective constitutions.
- Arbitration Clause: An arbitration clause specifies the mechanism to resolve disputes between the contractor and the tendering authority, often without going to court.
- Bank Guarantee (BG): A Bank Guarantee (BG) is a promise made by a bank on behalf of the bidder to pay a certain amount to the government or the tendering authority in case the bidder fails to meet contractual obligations.
- Bid: A bid is a proposal made by a supplier or contractor in response to a tender invitation. It includes details about the price, terms and conditions, delivery schedule, etc.
- Bid Security Declaration: Instead of an EMD, some tenders require a Bid Security Declaration, where the bidder commits to fulfilling the terms without submitting monetary security.
- Bidder: A bidder is a person or organization that offers a bid or quotation in response to an invitation to tender. Bidders may be individuals, firms, or consortiums.
- BOQ (Bill of Quantities): It is a document used in tenders, containing the list of materials, parts, and labour along with their costs. It helps estimate the project cost and aids in decision-making.
- Consortium: A consortium is a group of companies that come together to participate in a tender. It enables pooling of resources, expertise, and financial capabilities.
- Corrigendum: It is an official update or correction issued in relation to a previously published tender document. It addresses changes in scope, deadlines, or other essential information.
- Earnest Money Deposit (EMD): A deposit submitted by bidders as a proof of intent and commitment to participate in the tender. It is refundable and helps eliminate non-serious bids. (The EMD is an initial deposit submitted by bidders as a security to demonstrate their seriousness in participating in the tender.)
- Financial Bid: Contains the cost proposal, evaluated after the technical bid is cleared.
- Force Majeure: A clause relieving both parties from liability for unforeseen events like natural disasters or political unrest.
- L1, L2, L3: These denote the rankings of the bids in terms of price: L1 is the lowest, followed by L2 and L3. Usually, the L1 bidder wins the contract, subject to meeting technical and quality criteria.
- Letter of Credit (LC): A Letter of Credit (LC) is a financial document issued by a bank guaranteeing payment to the seller (contractor) upon fulfilling certain terms and conditions.
- Limited Tender: A type of tender in which bids are invited from a limited number of suppliers or contractors. It is used when there are only a few capable suppliers.
- Liquidated Damages: Penalties imposed for delays in project completion beyond the agreed timelines.
- NIT (Notice Inviting Tender): A public announcement by the buyer organisation inviting bids for a specific contract. It contains the scope of work, eligibility, and submission details.
- OEM (Original Equipment Manufacturer): An OEM is a company that produces parts and equipment that may be marketed by another manufacturer. OEMs may directly or indirectly participate in tenders.
- Price Escalation Clause: This clause accounts for fluctuations in the cost of raw materials or other inputs during the project execution.
- Request for Proposal (RFP): A document that outlines the scope of the project and invites proposals from bidders. It includes technical, commercial, and functional requirements.
- Request for Proposal (RFP): A document outlining the project details, requirements, and expectations for bidders to propose their solutions. [Duplicate merged]
- Request for Quotation (RFQ): A document that invites suppliers to submit a quotation for the supply of goods or services. It is generally used for smaller contracts.
- (Request for Quotation (RFQ): Focuses primarily on pricing and basic qualification of the bidder, often used for straightforward procurement. [Duplicate merged]
- Retention Money: A portion of the payment (5-10%) withheld until the successful completion of the project.
- Reverse Auction: A type of auction in which sellers bid for the prices at which they are willing to sell their goods and services. The lowest bid usually wins.
- Technical Bid: Focuses on the bidder's technical capabilities, experience, and compliance with the tender requirements.
- TIN (Taxpayer Identification Number): A unique number assigned to business entities for tax purposes. It is mandatory for bidding in many tenders.
- Two-bid System: A process where technical and financial bids are submitted separately and evaluated sequentially. The financial bid is opened only if the technical bid qualifies.
- Scope (of a contract): Outlines the work that needs to be done to complete the contract.
- Scope creep: Refers to the gradual expansion of the original project requirements. This usually occurs when new tasks or deliverables are added without corresponding increases in time, resources or budget.
- Selection criteria: Used to assess a supplier’s ability to deliver goods or services. Criteria may include capability, experience, and capacity. Not to be confused with evaluation criteria.
- Shortlisting: Shortlisting occurs when a buyer narrows down a list of potential suppliers before inviting them to tender or request more information.
- Sole supplier: A business that is the only source of a particular good or service. This may occur in regional or remote areas, or for highly specialized requirements.
- Specification: A specification describes in detail the essential criteria for the goods or services to be provided. This includes quality, performance and design requirements.
- Standing offer arrangement (SOA): A standing offer arrangement is an agreement between a buyer and supplier(s) to provide goods or services at agreed pricing for a set period. Buyers use these arrangements to save time, streamline purchasing and gain pricing benefits.
- Subcontractor: A subcontractor is a business or individual contracted by a supplier to carry out part of the work the supplier has agreed to deliver.
- Work Order / Work Order (WO): An official order issued to the successful bidder to begin the work. It includes project details, timelines, and payment terms. (A Work Order is an official document issued to the successful bidder, authorizing them to commence the project. It includes details about timelines, milestones, and payment schedules.)