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Understanding open bidding

When bidders understand open bidding as a competitive and transparent exercise, there is little room left for post-bid grievances. Illusstration by Danny Barongo

What you need to know:

  • An open tender is one of the various types of bidding where upon advertising for a tender, contractors apply for it through competitive bidding, Joseph Bahingwire explores.

Open bidding is a competitive public procurement method used for acquiring goods, services and works and is implemented basing on the Public Procurement and Disposal of Public Assets Act.
Mr Anthony Ninsiima, a procurement officer at Makerere University, says it is a transparent process which ensures that only the contractor with the best price and meeting all the requirements wins the tender.

Invitation for bids
The procurement notices used to call for bids under open bidding are called invitation for bids or invitation to tender.
“This procurement method fosters effective competition and adds value for money due to transparency. However, it is not suitable for complex procurements where the focus is more on the output and outcome of the contracting process rather than on strict adherence to standards,” he adds.
It is open to all qualified bidders and the sealed bids are opened in public for scrutiny and are chosen on the basis of price and quality.
Mr Ninsiima adds that open bidding allows anyone to submit a tender to supply the goods or services that are required after an advert has been placed in the media that offers equal opportunity to any bidder to submit their bids.
To Ms Hajara Namata, another procurement officer on larger projects, there may then be a pre-qualification process that produces a short-list of suitable suppliers from the respondents expressing interest in the contract.
These short listed bidders are invited to prepare tenders and the selection of a short list includes interviews and prequalification questionnaires.
“Open tendering is a one-stage bidding process, where all interested and responding to contract notice will be invited to submit a tender. The contract notice states where to obtain tender documents and the last date when tenders will be accepted. An open tender is open to public and all the interested firms can apply for the contract,” she says.

Advantages
The advantages of open tendering limit favouritism since everyone can apply for the tender, high competition in pricing, and it allows firms entry into the market. This helps the sector to grow.

Disadvantages
Ms Namata, however, says this model of bidding also has some disadvantages associated with it.
These include allowing inexperienced firms entry into the market, selecting firms without experience, increased tendering costs, time wastage in evaluation as well as unrealistic completion.
Like in other bidding model, open bidding also requires bid security which is the amount of money that is calculated as a percentage of the budget estimate of a procurement requirement.

Security in open bidding model

Open bidding requires bid security just like other forms of bidding.
It is used by the client as a protection against bidders withdrawing their bids prior to the end of their bid validity period or for refusing to sign the contract.
This is intended to deter bidders from withdrawing their bids, because they would otherwise forfeit the bid security amount to the client.
Mr Andrew Kavuma, a contractor in Kampala, says bid security gives the client some assurance that the selected bidder will sign the contract or otherwise forfeit their bid security.
A bid security may be required of firms that submit offers in response to an invitation for bids. It is commonly used when procuring goods and works.
If the procurement method used does not permit revealing the allocated budget, care must be taken to set the bid security as a fixed amount or as a percentage of the bidders’ bid rather than as a percentage of the allocated budget.