What is a tender contract?

The buyer usually issues the contract it intends to sign with the tender pack, either as a draft contract or as its terms and conditions, and awards it to the winning bidder after evaluating the bids. In public procurement, the award can be followed by a standstill period and by conditions the winner meets before signature, depending on the rules the procurement runs under.

The term’s meaning ends at signature. Running the contract through delivery is contract management, and the run-up from award to service start is planned in a mobilisation plan. Some legal glossaries give the term another meaning: a contract that governs how the tender itself is run.

What a tender contract holds

The terms the buyer drafts

The buyer usually provides the first terms of a tender contract, either as a draft contract or as its standard terms and conditions.

Take a public buyer’s tender for facilities management services. The invitation to tender pack holds a draft contract, and the draft carries a liability clause and a service level schedule. Both are the buyer’s text, written before any bidder has answered.

The legal reviewer reads the liability clause for what the organisation would answer for. The bid team reads the service level schedule to understand what it must deliver, and both readings feed into the bid manager’s sign-off.

The commitments your response adds

In the facilities management tender, the team’s completed pricing schedule sets out what the organisation will charge. The response’s service level commitments set out the levels the organisation offers against the buyer’s schedule.

Under the UNCITRAL Model Law, the buyer and the winning supplier sign a required written contract that conforms to the terms and conditions of the accepted submission, within a reasonable time after the notice of acceptance is dispatched.

So the bid manager signs off only the service levels and prices in the completed pricing schedule that the organisation can deliver, since the team cannot change those terms at award.

What your team does with the draft contract

Questions on the contract terms

A concern about a clause in the draft contract goes to the buyer as a clarification question. In the facilities management tender, the legal reviewer flags the liability clause, and the bid manager submits a question to the buyer before the team prices the contract.

The buyer sends its answer to every supplier without naming who asked, and an addendum that changes the documents binds every supplier under the UNCITRAL Model Law.

An addendum that amends the liability clause becomes the text the pricing schedule is built against.

A record of what the team accepted

The legal reviewer’s comments on the liability clause, and the bid manager’s approval of the team’s position on it, form the record that legal and compliance ask for.

That record shows which draft terms the organisation accepted or questioned, and who signed off. The record is the audit trail behind each commitment the team makes against the draft contract.

The rules that govern a tender contract

Qualifying your bid against the contract terms

Whether a bid may depart from the draft contract turns on the rules the buyer’s procurement runs under. The team checks those rules in the tender pack before it writes any qualification against a clause.

Suppliers may offer alternatives to the contractual terms and conditions only where the solicitation documents allow it, under the UNCITRAL Model Law. Those documents must then describe how the buyer evaluates alternative bids.

A bid with minor deviations that do not materially alter or depart from the terms can still count as responsive under that law, and the buyer quantifies those deviations in its evaluation. The buyer rejects a bid that is not responsive.

Where a qualification against a draft contract’s liability clause materially departs from that clause, the bid is not responsive and is rejected. The team raises this concern with the buyer as a clarification question before submitting.

When does a tender become a contract?

When a tender becomes a contract depends on the rules the buyer’s procurement follows and whether a written contract is required.

Under the UNCITRAL Model Law, the buyer notifies every supplier that bid of its decision, giving the winner’s name, the contract price, and the standstill period. When that period ends, the buyer dispatches the notice of acceptance to the winner.

With no written contract or outside approval required, the contract on the terms of the winning submission enters into force when the buyer dispatches that notice, provided the submission is still in effect. A required written contract enters into force once both parties have signed it. One that another authority must approve does not enter into force before that approval. Between acceptance and entry into force, neither party may act to obstruct the contract. For the winner, those steps fix when it is bound, and what it can hold the buyer to in the meantime.

The buyer may also require the winner to demonstrate its qualifications again, against criteria set out in the solicitation documents. If the winner fails, the buyer rejects that bid and selects the next successful bid still in effect, or cancels the procurement. That re-check sits between the award decision and signature, among the later stages of the tender process.

The World Bank’s Procurement Regulations set the standstill period at ten business days from the notification of intention to award, and the contract may not be awarded before or during it.

Can you negotiate the contract after winning a tender?

How far the terms can still move after winning depends on the procedure the buyer runs.

Under the UNCITRAL Model Law, in open tendering, the buyer may not negotiate with a supplier about the bid that supplier has submitted. Clarification may not be used to negotiate a submission, change its price or bring about a substantive change to it.

Because the written contract conforms to the accepted submission, the team signs the prices and service levels it offered.

In the EU, for example, a buyer running a competitive dialogue may negotiate with the best-ranked bidder, once bids are assessed, to confirm financial commitments or other terms by finalising the contract, under Directive 2014/24/EU. The buyer may do so only where the negotiation does not materially change essential aspects of the bid or the procurement, and does not risk distorting competition or causing discrimination.

How it differs from a tender or a framework

What is the difference between a tender and a contract?

A tender is the competition the buyer runs, together with the documents it issues, including the draft contract. The tender contract is the agreement that the competition ends in, signed with the winning bidder.

In procurement law, “tender” also names the bidder’s offer, as in the UNCITRAL Model Law, which calls each supplier’s submission its tender. The accepted bid forms the basis of the tender contract.

Framework agreements and call-off contracts

A tender can end in a framework agreement, which sets the terms for contracts the buyer later awards under it.

Under the UNCITRAL Model Law, a contract awarded under a framework agreement without second-stage competition comes with no notice of the award decision and no standstill period.

For the bid team, the call-off is the contract where the work commitments land.

In the EU, for example, Directive 2014/24/EU defines a framework agreement as one between one or more buyers and one or more suppliers that sets the terms for contracts to be awarded during a given period, in particular price and, where appropriate, quantity.