Tender (Finance and Business)

A tender is an invitation to submit bids or offers. In business and government procurement, it refers to a formal solicitation for contractors or suppliers to compete for a project, supply contract, or service. In finance, it can also mean the acceptance of a formal offer—most commonly a tender offer, where shareholders are asked to sell their shares at a specified price.

Key takeaways

• A tender is a formal invitation to bid for projects, goods, or services.
• A tender offer is a public request for shareholders to sell shares at a set price for a limited time.
• Governments use competitive and non-competitive tenders to sell securities; large institutions typically bid competitively, while smaller investors submit non-competitive bids.
• The tendering process is structured to promote fairness, transparency, and legal compliance.

How tendering works

Tendering is a structured procurement process used by governments and institutions to solicit bids. Typical features include:
* A published invitation that outlines requirements, specifications, deadlines, and evaluation criteria.
* A formal bid submission process and a transparent opening and evaluation procedure.
* Legal and regulatory rules to prevent corruption, favoritism, and collusion.
* Optional third-party tender services that help bidders prepare compliant proposals and meet deadlines.

In private-sector procurement, similar solicitations are often called requests for proposals (RFPs), which allow bidders to propose solutions and pricing that meet the issuer’s needs.

Tender offer vs. tender (procurement)

These terms are often confused but differ fundamentally:
* Tender (procurement): an invitation to suppliers or contractors to submit bids for a project or contract.
* Tender offer (corporate finance): a public solicitation to shareholders to sell their shares at a specified price within a defined period. Tender offers are typically used for stock buybacks or takeovers and are subject to regulation.

Example: A company may launch a tender offer to repurchase outstanding debt or equity; the offer usually specifies price, quantity, and a deadline, and may be withdrawn if enough holders do not accept.

Competitive vs. non-competitive tenders (government securities)

When governments auction debt (Treasury bills, notes, bonds), they typically allow two bidding methods:
* Competitive tender: Institutional investors submit price/yield bids. Winners are determined by the most competitive bids (e.g., lowest yield for the auction).
* Non-competitive tender: Smaller investors submit bids without specifying price; they accept the auction’s clearing price. This guarantees allocation but not a chosen yield.

The competitive auction establishes the market-clearing price, which is then used to set the price for non-competitive bidders.

Common examples of tendering

• Government contracts: Agencies issue calls for bids for construction, IT systems, services, or supplies. Companies prepare proposals and pricing to win contracts.
• Corporate buybacks and takeovers: Tender offers invite shareholders to sell shares at a premium for a limited time.
• Treasury auctions: Governments sell debt through competitive and non-competitive tenders.

Many governments publish contract opportunities and pre-solicitation notices in centralized procurement portals to help suppliers find and respond to tenders.

Typical steps in the tender process

1. Issuer publishes the tender/RFP with scope, specifications, and deadlines.
2. Interested bidders prepare and submit proposals or bids by the deadline.
3. Issuer opens and evaluates submissions against defined criteria (price, technical capability, compliance).
4. Winner(s) selected and contract awarded.
5. Contract performance and completion.

Related terms

• Tender offer — corporate solicitation to buy securities from holders.
• Non-competitive bid — guaranteed allocation at the auction-clearing price.
• Competitive bid — price-driven bidding used by large institutional buyers.
• Short tender / hedged tender — specialized tendering strategies used in securities dealings.

Bottom line

“Tender” broadly denotes a formal process for soliciting bids, intended to ensure fair, transparent competition for contracts or securities. In finance it also describes processes for buying and selling securities—particularly through auctions and corporate tender offers—each governed by rules to protect market integrity and stakeholders.