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Different types of competitive tendering

A concept used in connection with building and construction work

Open tendering:

 

A job put up for tender so that all companies in the world, in principle, can tender for the job. The bidder must also comply with the Greenland Trade Licence Act before the contract can be awarded to the bidder.

 

The principal moreover assesses whether the bidders comply with the stipulated selection criteria and assesses the criteria for awarding the contract. This presents the advantage that all companies, in principle, can submit tenders and therefore results in maximum competition. The disadvantage for the principal is that he risks receiving an inappropriately large number of tenders so that the job of assessing compliance with the selection criteria and the criteria for awarding the contract becomes unmanageable. The disadvantage for the bidders is that many bidders may participate who all allocate resources to preparing a tender although, in theory, their chances of winning are slight. In the long run, this results in an excessive use of resources on tender preparation without any contracts being won.

 

 

Selective tendering:

 

In selective tendering, the principal first announces a pre-qualification round. This means that the principal first asks all interested bidders to identify themselves and present documentation to prove that they comply with the selection criteria. Based on the documentation from the bidders and market conditions, the principal selects a limited number of bidders from among those who comply with the selection criteria, and these bidders are allowed to submit tenders for the contract. It is particularly worth noting that the principal is not obliged to select the bidders who are deemed to be 'best suited for the job', but rather chooses the mix of bidders that will result in maximum competition.

 

The advantage is that the number of bidders is reduced, so that fewer companies allocate resources to preparing tenders, and their theoretical chances of winning are greater.