It can sometimes seem that those who are experienced in contract management and procurement are speaking a different language. For the beginner, this can be very confusing and hard to understand.
If you are just starting out in the business or want to take your knowledge to the next level, here is a beginner’s guide to the terminology.
What are bids?
A bid is a document that is submitted in response to an invitation to quote (ITQ), which is sometimes called an invitation to tender (ITT). According to the experts at What Is, an invitation to quote is the first step in the competitive tendering process. Usually, a document – the invitation to quote document – is prepared that specifies all the requirements, such as goods, timelines and services; in addition, it specifies the evaluation process that will judge whether these have been delivered.
A bid is based on the specifications provided by the purchaser, who is seeking prices or costs for delivering the goods or services required. The specific details can be stored in a contract management system from a provider such as https://www.contractswise.com/.
What are bid bonds?
A bid bond is usually used for construction projects. A third-party is involved, which is called a surety company. This company agrees to pay the purchaser the lesser of two values if the successful bidder withdraws from the process for some reason. The first value is the amount of the bond and the second value is the difference between the successful bid and the next lowest bid.
Sometimes the successful bidder is allowed to withdraw, but only for a reason specified in a solicitation document. The bid bond value is usually between five and ten per cent of the bid value and is a way of obtaining security for the purchaser.
All about contracts
A contract is a type of legal agreement. It is made between a buyer (purchaser) and a seller and records an agreement. The buyer agrees to pay for a service or goods, while the seller agrees to provide the services or goods.
Contracts can take various forms and could be referred to as general services agreements, standing agreements, continuing agreements or shared cost arrangements. They are very detailed documents that usually include timescales.