Introduction to tendering
Around the world, governments have set laws that require corporations, institutions and government agencies to procure goods and services above certain set limits to make a purchase through a competitive tendering process. Seyoum asserts that in many countries, governments’ purchases over a certain size are required to be awarded under tender (192). This is done to promote fairness and ensure that big contracts are not awarded to companies affiliated with the management. Purchase of goods under tender is also offered in cases when products and services are bought in large volumes, and there is a likelihood of price competition (Seyoum, 192).
Tendering guidelines
These tendering guidelines extend to import and export contracts. An export contract is an agreement between a seller and an overseas customer for performance, financing, and other aspects of export transactions (Seyoum, 193).
A typical export tendering process begins when a purchaser of goods and services invites potential suppliers to submit their bids. This is done through popular media, usually the newspaper, and known as a Request for Proposal (RFP). At this stage, there is no set contract between the buyer and the sellers, rather a commitment to consider their bids. The buyer may impose a certain pre-qualification condition to cut down on the number of applicants. Seyoum states that with important projects, bidders are pre-qualified before submitting their tenders to ensure they meet the basic criteria that are critical in awarding the contract (192).
Suppliers may be asked to submit security known as a tender bond, which will guarantee they will not decline to sign the contract when their bid is accepted. As stated by Export Finance Navigator, “the amount to be paid as a bid bond is usually a percentage of the export contract price, about 5 or 10 percent” (26). Financial institutions can offer a bid bond to a prospective buyer after assessing their ability to undertake the export contract and will require to guarantee security for the engagement to proceed.
Bidding and proposals
After bid proposal considerations, the successful supplier is awarded the contract. Normally, this sets the beginning of negotiations on the contract. The international contract law provides for freedom of the contract, which basically means the buyer and seller are at liberty to agree between themselves on the rules of their contract. In cases where there is no express agreement between the parties, courts of law will decide what law will govern the contract depending on the nature of the case. In most contracts, the applicable law is of the exporter’s country.
Tendering
Some of the provisions that come with the export contracts include financial liability in case of a breach of covenant. The participants will require purchasers of goods and services which are the subject of official support to make a down payment of a minimum of 15 percent of the export contract (Cipollone, 8). Other provisions that are part of the export contract are the scope of work, price and delivery terms, quality performance and reliability, applicable law and dispute resolution. A number of documents are used in export-import trade. The completion and submission of required documents are critical to the successful shipment, transportation, and discharge of the cargo at the port of destination (Seyoum, 197).
Conclusion
Much of the responsibilities in an export contract are biased towards the exporter who has to ensure the accuracy of the export trade documentations. A minimum of 16 documents is required for a successful transaction between the exporter and the buyer. This is when a full contract is deemed to be executed.
Works Cited
Cipollone, Daiana. Export Credit Financing Systems in OECD Member, and Non-Member Countries. France: OECD, 2001. Print.
Export Finance Navigator, Tender or bid bond, 2011. Web.
Seyoum, Belay. Export-Import Theory, Practices, and Procedures, Binghamton: The Haworth Press., 1956. Print.