Tender business – a walkaround
July 29, 2011
It had started in Aug 2010. A Govt. firm released an invitation to bid for supply of a type of mechanical/hydraulic equipment which my company manufactures. By the time we finished with the inspection, it was already June 2011. The whole experience of the tender, has given me loads of experience, the excerpts of which, I feel will benefit many first timers.
- Keep an eye on the newspaper for the pre-bid meeting. Or keep in touch with the concerned authorities for the same. It is important to attend the meeting with full preparation. I committed the mistake of not doing so. The required specifications were copied from a competitor leaflet and we were not complying with some of the parameters. We were lucky enough for we could convince the authorities to postpone the tender submission date just a day prior to scheduled date. In the meantime, we convinced the authorities to make the necessary amendments. Had we attended the pre-bid meeting, we could have saved a month and the extra efforts we had put in.
- Pricing strategy is probably the most important aspect of any tender. We had committed the mistake of keeping very low margins. This was because, we did not go through the tender document properly. One must keep in mind the cost of third party inspection which varies from 0.5 % to 1 % of the product invoice value. One should also keep in mind the additional ‘miscellaneous‘ expenses. Anna Hazare and Baba Ramdev may be fighting hard to fight against corruption, but the fact will remain fact; corruption is the DNA of Indian blood. Only as times it remain dormant in some people. The obvious bribe is not ‘corrupt or black money’; it is just ‘kharcha paani‘ which the common man do not consider as bad.
- Having a clarity on the selection basis is must. A misconceived criteria can act like a boomerang. We did not have the clarity; rather we had assumed that the total cost will be the basis of selection. Our package included maintenance charge for 5 years for the product to be supplied. Now, VAT on the product was 4 % and the service tax on the maintenance charge was 10.3 %. We assumed that the total price will be basis of selection. So, we deliberately transferred some amount of the maintenance charge to product price. So, total price including the taxes got reduced. But, the selection criteria was the price of the product only. We were lucky enough this time again! But, it was a good lesson learnt.
- Do not hurry for the delivery. Just after opening of the price bid, as we were L1, we transferred our stock to regional office. Which was a big mistake. We ended up in keeping the inventory for 9 months. Imagine the interest lost!!! (apart from the money blocked). The first step is to receive the Notice to Proceed. After which we had to get our General Assembly drawings approved. Getting the drawings approved is a huge task, esp when the product is not a simple structure. In case of bolts, nuts or plates, it’s easy to provide the necessary drawing. But, if the structure is as complicated as say, car, it’s not easy to provide the GA drawing showing dimensions of all the parts. In fact, it is next to impossible. Explaining the drawing, resolving queries and getting it approved, took us more than 8 months!
- Inspection is another critical part. In any equipment or complicated machines, the technical specifications required are the primary basis of eligibility. Now, we had transferred the stock to local RSO. But, we forgot that many parameters can not be measured at RSO. Say, engine HP. Moreover, the specifications of OEM materials can not be checked at Site. Though most of the parameters can be measured in factory, but for some OEM materials, it may be beyond the scope. For those materials, we have to issue Test Certificate and Guarantee certificate, where the manufacturer of the item certifies the parameters and guarantees the performance. To enable the third party inspector to use this as a tool for inspection, it should be mentioned in the Purchase order/the letter issued by the purchaser. So, the best thing is to ensure that for the parameters which cannot be tested at site, the purchaser should request the Third party to inspect those parameters against the Test Certificate and Guarantee Certificate.
- Communication with the purchaser or any other party regarding the tender must be in written (hard copy. avoid emails) with proof of receipt. It may be hectic, but it ensures safety!
- Last and the most important. Keep an eye on the LD clause. Improper communication (read verbal) must be avoided for this. Go through the payment terms properly and keep buffer for those miscellaneous expenses in the margin to avoid delay in payment.
I guess these should be enough for a beginner!
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