Public tender – What is it, definition and concept

A public tender is the procedure by which the Public Administration hires a private company to satisfy a need. It is carried out when the economic volume of the operation exceeds a certain amount.

The public tender encompasses the entire process from when the Public Administration detects a need to cover until it covers it, contracting for this the services of a private person.

The different countries of the planet offer public services to their citizens, but, in order to deliver them, a series of requirements must be met. Thus, different government institutions are in charge of performing this function and guaranteeing that the citizen will have access to said services.

However, these state institutions are often unable to cover all their needs and are forced to turn to the private sector to do so. In this circumstance, there is an action protocol called public tender that allows the hiring of private companies by the Public Administration.

Let’s see an example. If the Ministry of Education wants to buy digital boards for the classrooms of schools in the country, it will have to say what it wants those boards to be like, assign a budget and select the offer that most interests them to make the purchase.

Phases of a public tender

A public tender has five very well differentiated phases:

  • preparation: In this first phase, the corresponding administration determines the needs to be covered and exposes them through the technical and administrative specifications. These two documents explain the technical requirements of the needs to be covered and the conditions of the contract.
  • Bidding: It is the advertising phase of the public tender. This means that it is when the contest is published so that interested companies can access the specifications and know all the important information regarding it.
  • Presentation of offers: Companies that meet the requirements and are willing to win the contest will present their offers.
  • Selection: The corresponding Administration will study the different offers and will rate them based on the criteria explained in the specifications. The offer that receives the highest score will be chosen.
  • Formalization: Once the winning company has been chosen, the contract will be formalized so that the supply of the contracted product begins.
See also  Diversified company - What it is, definition and concept | 2022

Example of public tender

Suppose we are the mayor of a municipality of about 150,000 inhabitants. Our council has a fleet of 60 vehicles and we want to install a location system to be able to have information on where each of these vehicles is at all times.

We as a city council do not have the means or the capacity to install this equipment in our vehicles. For this reason, we decided to put it out to public tender so that a company specialized in the sector would be in charge of carrying out this task.

In order to publish the contest, we first have to define what needs we have and what kind of information we want the geolocation device to give us. For example, trip made, average speed, highest speed during the trip and parking place.

Once we have this, we’ll set a contract value of about $60,000 over four years, for example. Subsequently, we will prepare the technical and administrative specifications.

Secondly, we will publish the contest so that companies present their offers and we will analyze them. Once this is complete, we receive the following offers:

  • Company A: $57,500.
  • Company B: $59,000.
  • Company C: $56,000.

After evaluating each of the offers with the established parameters, company A has obtained the highest score of the three. Despite not having the lowest price, it offers better conditions in other aspects to be assessed, such as technical service, human resources, etc.

In conclusion, the public contest is the process by which the Public Administration contracts goods or services to private companies to satisfy certain needs that it cannot cover by itself.

See also  Finviz Tutorial 🥇 Invest in the best companies

Leave a Comment