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Let’s Simplify a Few Bidding Terms

Baskar Sundaram

Simple terms like  buyer, RFX, seller, proposal, contract, procurement, etc.have been used to explain various processes involved in bidding. However, you may come across different other terms when you actually step into the bidding process, depending upon the industry you work in, the geographical location of the buyer organizations and a lot of other parameters.

You may come across these terms used by buyers in various forms, addressing different activities or roles. Plenty of content on these terms is already available but here are some important terms explained:

Sole Source Procurement: Sometimes, buyers directly call one bidder to submit the bid/quote and award the contract. This is called a ‘Sole Source Procurement/Purchase’. This usually happens when the buyer is well acquainted or understands the capability of the seller and is convinced to release an order. Sometimes, the seller is already working for the buyer organisation on a project. So, the buyer can prefer the same seller for another similar project based on the procurement norms/policies.

Public Procurement: Procurement is the process of buying something. Public Procurement is basically the term used for procurement when government departments purchase goods/services. This is quite a different process and varies from country to country because the government departments or ministries have to follow the stringent norms and policies set for Procurement by the respective countries. The policies are made to avoid fraudulent practices and corruption in public procurement. One of the norms which has to be understood by Indian bid managers is that most of the government departments need a minimum of three bidders at the stage of Price Bid opening.

Therefore, if they receive less than three bidders, they can scrap the process and go for re-tendering. You will gradually come across other policies/norms when you actually participate in the government bids. The policies change from ministry to ministry and department to department.

Empanelment Empanelment is like pooling a group of vendors and keeping them ready to respond quickly whenever a requirement arises. This is done by established customer organisations, government departments, public sector units, etc. by registering various bidders as trusted vendors in the specific business segment. This is explained in more depth going forward.

RFX: RFP/RFQ/RFE/EOI/RFI/NIT/NIB/ITT/Tender, etc. are the documents published by buyers inviting sellers to submit their proposals. Since most of them start with ‘RF – Request For’, we can group them under one abbreviation ‘RFX’. The industry knows what RFX is. We find similar abbreviations for C level executives ‘CXO’ implying CEO, CFO, CTO, CMO, etc.

RFX (Limited or Public or Sole Source) indicates Tender Document, Notice Inviting Tenders (NIT), Notice Inviting Bids (NIB), Invitation to Tender (ITT) Bid, Solicitation, Request for Proposal (RFP), Request for Quotation/Quote(RFQ), Request for Information (RFI), Request for Empanelment (RFE), Expressions of Interest (EOI), Vendor evaluation questionnaire, or any other term, depending on the geographical location and industry domains you work in.RFX basically consists of all the requirements of the buyer Organisations. RFX can be a one-page document or a 1000 paged document set. It varies from buyer to buyer and project to project.

EMD/TDF/PBG: You find these terms more often in the tender documents, especially when published by government departments. No need to worry if you don’t understand the terms when you see them for the first time. EMD stands for Earnest Money Deposit while TDF stands for Tender Document Fee, TPF stands for Tender Processing Fee and PBG stands for Performance Bank Guarantee.

In Public Procurement, the customers usually (not mandatorily) ask to deposit a · Non-Refundable TDF – Tender Document Fee/Cost/Cost of RFP/Application Money

  • Non-Refundable TPF – Tender Processing Fee
  • Refundable EMD (= Bid Security = Bid Bond) – Earnest Money Deposit and
  • Refundable PBG – Performance Bank Guarantee/Performance Security Deposit

These are to secure them from any unforeseen risks.

TDF: The fee paid by the seller (Bidder) to buy a Tender (RFX) Document. TPF: TPF is similar to the non-refundable fee.This fee is paid by the bidder towards the processing of Procurement process. TPF generally applies for eTendering processes and is paid to the vendor/mediator who manages the e-Tender Portal.

EMD: This is similar to the refundable amount that covers the risks during the bidding phase and applicable/valid till the finalisation of the winning bidder. EMD is asked to be submitted at the time of bid submission. This amount is refunded when bidders fairly participate in the procurement and lose the bid. EMD can be forfeited when the bidder fails to stick to RFX Terms & Conditions or try to missell/misrepresent, etc. If you win the bid, EMD can be refunded or may be adjusted in PBG. As perthe Terms & Conditions of RFX, the winning bidder has to sign an agreement and start work as per the agreed plan.

When you win the bid but do not accept to sign the agreement or start the work, the buyer has full rights to forfeit the EMD.

PBG: This is similar to the refundable security deposit. PBG- Performance Bank Guarantee/Bid Security/Performance Security Extract from a real Tender Document PBG is to cover the risks during (throughout) the contract execution, usually valid for six months (may vary from buyer to buyer) post the end of the contract period. PBG is usually asked to be submitted within a week or 15 days post issuing the Purchase Order to the seller. The buyer has full rights to deduct any amount in the form of penalties from PBG if the seller fails to execute the project as per the agreed schedule. Real time statement extracted from an RFP published on Public portal.

The EMD of the successful bidder can either be converted as part of the performance security on request of the bidder or will be refunded after receipt of Performance Guarantee/Security. In case the selected bidder/vendor opts to convert the EMD to be part of the performance security, balance amount towards the performance security is to be submitted by the selected bidder / vendor with the BUYER in the form of bank guarantee from scheduled bank immediately within seven  days of issue of work order but before execution of the agreement.

The EMD of the unsuccessful bidders will be refunded without any interest/Bank commission/collection charges within 30 days after award of the contract / work order to the successful bidder. The balance of the performance security amount can also be submitted through demand draft issued from any of the scheduled bank drawn in favour of the buyer is payable.

Proposal: The Proposal is your response to RFX. The Proposal indicates Bid Response document, Offer, RFX Response, Bid Document, Pre-qualification bid, Technical bid, Commercial/Price Bid, Techno Commercial bid, etc. A Proposal may vary from a one-page document to many documents with multiple pages. It depends on the complexity of the project you are bidding for.

Requirements: Explicit requirements are stated whereas implicit ones are assumed. Whenever you see customer requirements, you need to understand what their implicit requirements are, so that you can precisely address them when you write a business proposal.

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