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An invitation for bid is a request from an agency, organization, or company for vendors to supply bids to complete a project or meet ongoing supply needs. Each bid should contain a detailed breakdown of what will be provided and at what cost. Typically, the lowest bid wins, although other factors may play a role in the process of deciding how to award a contract. Invitations for bid are often listed in newspapers and on public bulletin boards, and can also be obtained through an organization's office.
Also known as an invitation to bid, this request simply asks for pricing information. This differs from a request for proposal, where the document includes a discussion of what is needed and invites vendors to not just provide a price estimate, but also discuss how they will meet a need. In requests for proposal, more pricing leeway is allowed, as a bidder may show that a more expensive method has long-term benefits, or that it is more capable of meeting the need than another vendor.
The invitation for bid process is often sealed. Bidders receive documentation on the specifications and have a set period of time in which to submit a bid. On a given date and time, personnel open all the bids at once, record the pertinent details, and determine which bidder should get the contract. In the case of government agencies, this information is open to the public and any vendor can ask to see the bids, including the winning bid.
In cases where the contract does not go the lowest bid, this is usually due to concerns about the vendor's ability to deliver. An invitation for bid may be suspiciously low or it could come from a company with a bad reputation. Government agencies in particular cannot do business with vendors in certain nations or associated with particular regimes, and thus might turn down a seemingly reasonable bid if there are ethical or political concerns. If the lowest bid is rejected, the agency must provide a solid reason to avoid accusations of favoritism or discrimination.
It is important to read through an invitation for bid very carefully. Companies familiar with the process may have personnel who focus on reviewing all open requests, finding ones that would be a good fit for the company, and preparing bids. The documentation must be followed exactly, and the bid should be full and complete. If there is an error with the invitation for bid, the company needs to correct it as quickly as possible, as the bid may be grounds for a contract and a mistake could become very costly.