Your business has grown. You are buying more goods and services than ever. But when did you last check whether your major suppliers are giving you the best value?
Perhaps your logistics contract has been renewed for years without a competitive review. Or your IT, packaging or facilities management costs have crept upwards while service levels have remained unchanged. Even a modest saving on a £200,000 annual contract could make a meaningful difference to your bottom line. And a better supplier might improve service, reliability and flexibility as well as price.
Yet many established SMEs continue renewing contracts without testing the market. Unlike larger organisations, they rarely have a procurement team to manage the process.
The good news is that you don’t need a procurement department to run an effective tender. A structured approach can help you compare suppliers fairly, negotiate with confidence and secure better value. This guide explains when a tender is worth the effort, which documents to use, how to evaluate competing bids and how to negotiate before signing.
When Should Your Business Put a Contract Out to Tender?
A tender costs time on both sides, so it needs a reason. Run one when any of these is true:
- The annual spend is large enough that a small percentage saving pays for the effort (e.g. £50k a year).
- The contract will run for more than a year or is hard to exit.
- The same supplier has been renewed for three or more years without anyone testing the market.
- Service has slipped and conversations have not fixed it.
- The business has changed (e.g. volumes have doubled, or a second site now needs deliveries).
For small, one-off purchases, three written quotes are usually enough. A full tender for a £3,000 laptop order wastes everyone’s time.
RFI, RFQ or RFP: Which Tender Document Do You Need?
The three documents do different jobs. Sending the wrong one is a common reason tenders produce incomparable answers.
- Send a request for information (RFI) when you do not yet know what the market offers. It asks suppliers to describe their capabilities, capacity, and approach, without a price.
- Send a request for quotation (RFQ) when the specification is fixed, and price is the main difference (e.g. packaging, printed materials, a component made to your drawing).
- Send a request for proposal (RFP) when you want suppliers to propose how they would meet a need (e.g. an IT managed service, outsourced warehousing, marketing support). Price matters, although the approach and the team behind it matter as much.
To choose between an RFQ and an RFP, ask whether two suppliers would deliver exactly the same thing. If they would, use an RFQ. If each would deliver something different, use an RFP.
Public sector buyers call the whole package an invitation to tender (ITT). In a private business, the label matters less than being clear about what you are asking for.
How to Run a Successful Tender in Seven Steps
1. Define Your Requirements Before Contacting Suppliers
Write the specification before speaking to any supplier. Describe the outcome you need, the volumes, the service levels and the constraints (e.g. delivery windows, certifications, payment terms). A loose specification produces bids that cannot be compared, and suppliers price the uncertainty into their quotes.
Share current volumes and, where you are comfortable, current spend. Suppliers quote sharper prices when they can see what the contract is worth.
2. Shortlist the Right Suppliers
Start with the incumbent, their competitors, trade association directories and recommendations from peers in your sector. Cut the long list to four to six bidders using a short RFI or a phone call. More than six creates evaluation work without adding much competition.
Always invite the incumbent. Their bid is the benchmark, and a fair process often produces their best price in years.
3. Prepare a Clear Tender Pack
Keep the pack short enough that a small supplier will answer it properly. It needs:
- a one-page summary of the business and why you are tendering
- the specification and volumes
- a pricing schedule in a fixed format
- the questions you want answered, each with a word limit
- your contract terms, or a note that terms will be agreed with the preferred supplier
- the timetable and a single named contact
The fixed pricing schedule does most of the work. Without it, one supplier quotes per unit, another per pallet and a third bundles delivery into the price, and comparing them takes days.
4. Set Your Evaluation Criteria Before Receiving Bids
Decide the evaluation criteria and their weightings before any bid is opened. Setting them afterwards invites people to score towards the supplier they already prefer.
A simple weighted scorecard works for most SME tenders (e.g. price 40%, quality and service 30%, capability and capacity 20%, terms and risk 10%). Score each answer from 0 to 5 against a written description of what each score means. Public bodies call this the most economically advantageous tender (MEAT), and the principle carries over: the cheapest bid only wins if it also meets the standard.
5. Give Every Supplier a Fair Opportunity
Give suppliers a fixed window to ask questions, usually one to two weeks, and share every answer with every bidder. Set a hard deadline and hold to it.
Late bids and private side conversations are how disputes start. They also teach suppliers that your process is negotiable.
6. Compare Bids on Value, Not Just Price
Score each bid independently first, ideally with two people, then compare scores and discuss the gaps. Check the pricing arithmetic and look for anything left out (e.g. delivery, set-up fees, price rises after year one).
A bid far below the others needs explaining. It may reflect a genuine efficiency, or a supplier that has misread the specification.
7. Negotiate the Best Deal and Award the Contract
Take two suppliers into a final round. Negotiating with two keeps competition alive until the contract is signed and gives you a fallback if the preferred supplier’s terms move.
Negotiate the full package at once: price, payment terms, the price review mechanism, minimum order quantities and service levels. Trading them one at a time lets a supplier give ground on one line and recover it on another.
Tell unsuccessful bidders the outcome and give short, honest feedback. They will bid more sharply next time.
Five Tendering Mistakes That Can Cost Your Business Money
- Tendering only to frighten the incumbent. Suppliers notice, and they stop bidding seriously.
- Sending the pack out before the specification is agreed internally.
- Letting the lowest price win when that bid excluded costs the others included.
- Running the process through long email threads with no single contact and no fixed deadline.
- Ignoring the cost of switching (e.g. new tooling, running down old stock, retraining staff) when comparing the incumbent with a newcomer.
Tendering FAQs for SME Owners
| Question | Answer |
|---|---|
| What are the stages of the tendering process? | For a private business, the tendering process runs in seven stages: define the requirement, build the supplier list, write the tender pack, agree the scoring, run the clarification period, evaluate the bids, then negotiate and award. Public sector tenders follow a similar path with extra legal steps under the Procurement Act 2023. |
| What is the difference between an RFQ and an RFP? | An RFQ asks for a price against a fixed specification. An RFP asks suppliers to propose how they would meet a need, and it is scored on approach and quality as well as price. |
| How long does a tender take? | A simple RFQ can run in three to four weeks. A larger RFP with a clarification period, site visits and a negotiation round usually takes eight to twelve weeks. |
| Should I always pick the cheapest bid? | Pick the bid that scores highest against the criteria you set before opening them. Where price carries the most weight the cheapest bid will often win, although only if it meets the standard. |
Could Your Next Supplier Review Improve Your Bottom Line?
Start by looking at your five largest supplier contracts. When were they last tested against the market? Are you confident you are receiving the best combination of price, service and reliability?
If a major contract is due for renewal in the next six months, now is a good time to review your options. For straightforward purchases, three competitive quotations may be sufficient. But where contracts are substantial, complex or difficult to exit, a structured tender could deliver better value and reduce risk.
You do not have to manage the process alone. An experienced procurement adviser can help you identify opportunities, assess suppliers, run a fair tender and negotiate the best overall deal. If you suspect your business could be getting better value from its suppliers, speak to a UKBA adviser before your next major contract renewal.