Tender and contract are two terms that are commonly used in the business world, especially in the context of procurement. However, these terms are often used interchangeably, which can lead to confusion among stakeholders. In this article, we will discuss the difference between tender and contract.
Tender:
A tender is an invitation to suppliers or contractors to submit their offers for a particular project or service. A tender is generally made public to ensure that everyone who is interested has an equal opportunity to participate. The purpose of a tender is to provide a level playing field for all suppliers so that the buyer can compare various offers and select the one that best meets their requirements.
A tender is usually issued by a buyer who is looking for a product or service. The tender document specifies the requirements, the scope of work, the timelines, and the evaluation criteria. Suppliers who are interested in bidding for the project or service have to submit their offers in accordance with the specifications laid out in the tender document.
Tenders can be classified into different types, including open tender, selective tender, and negotiated tender. Open tender is where anyone can submit an offer. Selective tender is where suppliers are pre-selected based on their qualifications and experience. Negotiated tender is where the buyer negotiates with a single supplier after receiving their initial offer.
Contract:
A contract is a legally binding agreement between the buyer and the supplier. A contract is usually signed after the buyer has evaluated the various offers received through the tender process and selected the supplier who best meets their requirements. A contract sets out the terms and conditions, including the scope of work, the payment terms, the timelines, and the performance standards.
Contracts can be classified into different types, including fixed-price contract, cost-reimbursement contract, and time and materials contract. Fixed-price contract is where the supplier agrees to deliver the project or service for a fixed price. Cost-reimbursement contract is where the supplier is reimbursed for the costs incurred in delivering the project or service. Time and materials contract is where the supplier is paid for the time and materials used to deliver the project or service.
Key Differences:
The key differences between tender and contract are as follows:
– Tender is an invitation to suppliers to submit their offers, whereas a contract is a legally binding agreement between the buyer and supplier.
– A tender is usually made public, whereas a contract is a private agreement between the parties.
– The purpose of a tender is to provide a level playing field for all suppliers, whereas the purpose of a contract is to set out the terms and conditions of the agreement.
– A tender is usually issued before a contract is signed, whereas a contract is signed after the tender process is complete.
In conclusion, tenders and contracts are two different concepts that are often used interchangeably. A tender is an invitation to suppliers to submit their offers, whereas a contract is a legally binding agreement between the buyer and supplier. Understanding the difference between these two terms is crucial for businesses to ensure that they make informed decisions when it comes to procurement.