Tenders and Quotes have many common characteristics but have subtle differences. This article clarifies the differences in a deeper understanding of tendering.A tender and a quote are both formal offers to perform work in return for payment. ‘Work’ is the supply of goods or services or both. Payment is generally via a fixed price or a schedule of rates. Buyers may request work via a tender from suppliers by issuing some form of Request for Tender (RFT) or via a quote by issuing some form of Request for Quote (RFQ).
The acceptance of response to a tender or a quote typically results in a contract between the buyer and the supplier.
Requests for tenders and quotes typically have the following common characteristics:
- A written request document
- A defined scope of works
- Responses are requested from more than one supplier
- A deadline for response
- A fixed price or schedule of rates is requested
- A contract is awarded to the successful respondent
The use of tenders for works is common where the monetary value is high (typically greater than $250,000), the scope of work is complex, or there is significant risk involved. The tender process is more rigorous than the process used for quotations. Each tender is governed by its own rules and conditions referred to as the conditions of the tender. In addition, there are often pre-determined criteria to evaluate the tender responses, which typically include the respondent’s experience and capability.
As tenders are typical of a higher monetary value, they are often made public and are open to anyone who meets the eligibility criteria. This can result in intense competition with ten or more respondents. Requests for Quote (RFQ) typically have a lower monetary value, which results in less competition.
The main differences between a Tender and Quote:
- Tenders follow a more formal process than quotations with greater probity
- Tenders are typically of higher monetary value than quotes
- Response to tenders usually take more time and effort
- Contract terms and conditions for tenders are more onerous and may include performance bonds or guarantees
- The process for evaluation of responses to a tender is typically more complicated and takes longer
- A Request for Quote (RFQ) is for purchasing goods and services that are lower in risk and complexity
- A Request for Tender (RFT) is for the purchase of goods and services that are high in complexity or risk, which can be strategic by nature. RFTs can be either open, meaning released to the public, or closed, meaning issued to a restricted number of suppliers.