Guidance on Post-Tender Negotiation
Post-tender negotiation means discussions with a bidder, or a number of bidders, after tenders have been opened and can be a useful tool in making improvements to offers. Despite its name, it is not strictly restricted to the tender process because it also covers the quotation process.
It is a means of negotiation to ensure that the University obtains true value for money by purchasing an acceptable finished product at a competitive but fair market price, within the time stipulated.
It is also a means to ensure that potential suppliers have no illusions or misunderstandings as to their exact obligations under the terms of any order/contract.
This guidance sets down some of the principal guidelines to be followed when using post-tender negotiations.
When it may be used
1) Where the final bid evaluation does not present overwhelming evidence for one particular supplier.
2) Where some doubt may exist as to quality and/or performance, or where terms and conditions need clarification and mutual agreement.
3) Where price reductions are required for the reasons described in the next paragraph.
Use of negotiations to obtain price reductions
Price is only one aspect of post-tender negotiation, and providing there are logical, well-considered and strictly honest reasons for entering into negotiations, price need not be considered a taboo subject.
Some of the common reasons for direct price negotiations are:
1) Where single tender action has been authorised.
2) Where it is known, or strongly suspected, that price fixing or cartel type arrangements are in operation.
3) Where prices appear grossly inflated over: (i) known market rates or reliable estimates:(ii) the price previously paid for identical or similar goods.
4) Where the enquiry is based on a functional or development specification rather than a detailed specification.
5) Market conditions (are they in the buyer's favour?)
6) Where the tendered prices are higher than the funds available to purchase the goods and services.
Post-tender negotiations are only appropriate in certain circumstances, usually determined by the proposed form of contract and notified to the prospective contractors in advance. The appropriateness and scope of post-tender negotiations is also determined by national codes of practice.
In carrying out post-tender negotiations, good business practices should be adhered to, which are essentially safeguarding the University's long term business relationships.
Staff should never make an unethical approach. The buyer/seller relationship
should be based on mutual interest and mutual understanding, and the principles
of fair competitive bidding should be observed. A credible reputation
of being responsible, trustworthy, impartial, uncompromised, fair and
honest in dealings with bidders and suppliers is absolutely necessary.
Because of the need to safeguard the University's long-term business relationships with its suppliers, and demonstrate good business practice and public accountability, all post-tender negotiations involving purchases and contracts over £50,000 must only be carried out with the approval of the University Purchasing Manager or Director of Finance.
Quotations, prices, specifications and other similar information from one bidder should not be disclosed to other bidders. However, this does not preclude the careful use of such information (i.e. by implication, and not by disclosure of facts) in order to improve other bids.
Such negotiations should be conducted only with those bidders who have
a reasonable chance to gain the order/contract.
Any revised offer should be confirmed by the supplier in writing via the University e-tendering facility, In-Tend.
If the post-tender negotiation is undertaken with more than one supplier, then the revised offers should be opened simultaneously, preferably in the presence of a witness.