What it means
A tender is a formal invitation to suppliers to bid for a contract, such as building work, IT services or the supply of goods. Buyers use tenders to compare price, quality and delivery terms fairly.
A retender simply repeats the exercise, either for the same contract or for a rewritten version of it. There are several common triggers.
The first round may have drawn too few bids, all the prices may have been far above budget or a bidder may have challenged the process. A contract may also have reached its end date, and the buyer retenders to find out whether the market can offer better terms.
Retendering has costs. It takes staff time, delays the project and may cause bidders to lose confidence if they feel the process is unstable.
Suppliers who spent money preparing the first bid may be less willing to bid again, so the pool of bidders can shrink. It also has benefits.
Competition can push prices down and sharpen the quality of what is offered, and a clean process protects the buyer from legal challenges. Public bodies in particular must follow procurement rules, so a flawed process often has to be rerun.
Before retendering, a sensible buyer asks why the first attempt failed. If the specification was unclear or the budget unrealistic, simply repeating the tender will give the same disappointing result.
Fixing the cause comes first, and the new round follows. Good record keeping matters throughout.
The buyer should document why the first process ended, what changed in the new specification and how bids were scored, so that the decision can be defended if a bidder complains or an auditor asks later.
In practice
Real-world examples.
Example
A city council invites bids to resurface 40 kilometres of road, but only one contractor responds and the price is well above budget. The council simplifies the specification, splits the work into two lots and retenders to attract more bidders.
Example
A hospital group's contract for cleaning services reaches its end date. The procurement team retenders the contract so that several suppliers can compete on price and service levels, and the incumbent has to justify its rates. The panel scores each bid on price, quality and track record, then awards the contract to the best overall offer.
Example
A manufacturer asks suppliers to bid for a three-year packaging contract. When it finds that one bidder was given extra information, it cancels the process and retenders so that every supplier is treated equally.
Formula
Calculation
Net saving = (Original best bid - New best bid) - Cost of delay and process
Suppose the lowest bid in the first round was $1,200,000 and, after a revised specification, the lowest bid in the retender is $1,080,000. The gross saving is $1,200,000 - $1,080,000 = $120,000, which is 10% of the original bid. If the retender added $30,000 of extra costs from staff time and project delay, the net saving is $120,000 - $30,000 = $90,000.Case study
Seen in the real world.
Greenhill Schools Trust is an illustrative, fictional education charity that tendered for a catering supplier across its twelve schools. The first round produced two bids, both well above the trust's budget, and the finance director suspected that the contract was too large for smaller caterers.
She split the contract into three regional lots and rewrote the specification to remove requirements that were not essential. The trust then retendered, and seven suppliers bid in the second round.
In this fictional case the best bids across the three lots totalled 11% less than the original best bid, even after paying for the extra administration. The illustrative lesson is that a retender works best when the buyer changes something that caused the first round to fail. The trust also published its scoring method in advance, which helped bidders trust the second round.
Watch out
Common mistakes.
- Retendering without finding out why the first round failed, so that the same problem simply repeats.
- Counting only the price saving and ignoring the cost and delay of running the process again.
- Sharing new information with the favoured bidder but not with others, which can invalidate the process.
Questions
People also ask.
When do organisations usually retender?
They retender when bids are too few or too expensive, when a process is challenged, or when an existing contract ends and the market should be tested.
Does retendering always lower the price?
No, a retender can produce a higher price if the market has moved or if suppliers are discouraged, so the result must be compared with the cost of the delay.
Can an incumbent supplier bid again?
Yes, in most processes the current supplier may bid alongside competitors, provided it has no unfair advantage from inside information.
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