How to Respond to a Two-Stage Procurement Tender

The submission of the technical and financial proposals happens in 2 different stages and at completely separate times as opposed to the same time.

two stage procurement
Procurement Methods
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A key distinguishing factor of the two-stage tendering from other procurement methods, such as Requests for Proposals, is that the technical comes before the financial rather than simultaneously. Wait, does that make any sense? Lol. Ok, lets try that again – basically, the submission of proposals takes place in two stages that happen at completely separate times as outlined below:

I. Stage One

In the first stage, a procuring entity shall prepare tendering documents calling upon tenderers to submit their proposals on a partially developed technical specifications, and they are expected to contribute to the completion of the technical specifications as well as provide a methodology and work plan for carrying out the assignment.

No tender price is requested nor should be quoted by the tendering entities. The technical proposals submitted are then evaluated for responsiveness to the solicitation documents.

II. Stage Two

In the second stage, following review and consultations, new detailed specifications for the works are prepared and a restricted tender issued to all participants who were not rejected in the first-stage to submit final tenders inclusive of prices. The responsive bidders will be required to submit both the technical and financial proposals now with respect to only a single set of specifications.

The technical proposals are evaluated first, and the financial proposals remain sealed and secured. Firms achieving the minimum technical qualifying mark or greater, as stated in the call for proposals, are then invited to the public opening of their financial proposals.

Financial proposals are then evaluated, and the firm achieving the highest score on the combined technical and financial proposals evaluation is invited to contract negotiations.

The exact process followed during a two-stage procurement method can always vary depending on the degree of complexity/type of the project as well as the procuring entity involved. Further, Section 99 (7) of the PPAD Act allows the procuring entity to engage experts when developing the specifications for the proposed procurement.

The procuring entity is permitted, in the second stage and before finalising the tender documents, to amend the final specifications that had been initially set in the original tender documents. These amendments are usually informed by feedback from the bidders and experts based on the first round of the tendering process.

Here’s what the Procurement Laws say about Two-Stage Tendering

The two-stage procurement method is governed by Section 99 of the Public Procurement and Asset Disposal Act Revised Edition 2016 as outlined below:

  1. A procuring entity may engage in procurement by means of two-stage tendering when, due to complexity and inadequate knowledge on its part or advancements in technology, it is not feasible for the procuring entity to formulate detailed specifications for the goods or works or non-consultancy services in order to obtain the most satisfactory solution to its procurement needs.
  2. The provisions of this section shall apply to two-stage tendering proceedings except to the extent those provisions are excluded from this section and the tendering document shall call upon tenderers to submit, in the first stage of the two-stage tendering proceedings, initial tenders containing their proposals without a tender price.
  3. In the second stage, the procuring entity shall invite tenderers whose tenders were retained to submit final tenders with prices with respect to a single set of specifications and in formulating those specifications, the procuring entity may modify any aspect, originally set forth in the tendering document.
  4. Any such modification or addition shall be communicated to tenderers in the invitation to submit final tenders and a tenderer not wishing to submit a final tender may withdraw from the tendering proceedings without forfeiting any tender security that they may have been required to provide.
  5. The final tenders shall be evaluated and compared in order to ascertain the successful tenderer.
  6. The specifications developed under subsection (3) shall meet the requirements specified in the Public Procurement and Asset Disposal Act.
  7. When developing the specifications, the procuring entity may engage experts.

The Maximum Level of Expenditure for the use of Two-Stage Tendering

Guided by the Second Schedule of the Public Procurement and Assets Disposal Regulations (2020), where the procurement method is Two-Stage Tendering, the threshold matrix is provided as follows:

Procurement Method – Two stage tendering (section 99 of the Act)
Goods Works Services
Maximum level of expenditure shall be determined by the funds allocated in the budget for the particular procurement provided the conditions under this section are met. Maximum level of expenditure shall be determined by the funds allocated in the budget for the particular procurement provided the conditions under this section are met. Maximum level of expenditure shall be determined by the funds allocated in the budget for the particular procurement provided the conditions under this section are met.
No minimum No minimum No minimum

Why would a procuring entity use this Procurement Method?

The two-stage tendering procedure may be applied by a public procuring entity where it is not feasible for them to come up with comprehensive and clearly articulated specifications for the goods or works or non-consultancy services with an aim of obtaining the most satisfactory solution to its procurement needs. Such situations could stem out of the inadequate knowledge on the entity’s part due to the complexity of the project and/or rapid advancements in technology.

Of course as with any other method, there are merits and demerits to the use of the two-stage tendering such as the disadvantage of an extended procurement lead-time due to the two-stage submission process.

But on the positive side, especially for the procuring entity, what stands out as a major advantage is that the final awarded bidder will most likely have a good understanding of the requirements and thereby potentially reduce risks in the implementation of the contract. For you as a prospective bidder, a positive outcome of the two-stage tendering process is the highly flexible approach to awarding contracts by allowing your direct participation in the definition of the actual technical specifications and scope of work.

This article is part of the Procurement Methods blog series.