Tendering
Also called: Competitive bidding, Bulk procurement · Topic: Markets, Equilibrium and Government Intervention · NCERT: Beyond NCERT
Meaning
Tendering is a way of buying in which the buyer invites several suppliers to bid for one large order. The buyer announces how much it needs and the rules for choosing a winner. The order usually goes to the lowest price, sometimes with quality or delivery terms added. Because suppliers compete with each other for a big order, each one has a reason to cut its own selling price. So tendering lowers the price the supplier itself charges. This is why governments and big hospitals use it to buy medicines and equipment.
Example
In 2026, NPPA capped the trade margin on 137 non-scheduled anti-cancer drugs at 30% of MRP. The trade margin is the share of the price kept by wholesalers and retailers. That cap lowers what traders keep, but it leaves the company's own price unchanged. WHO's pricing guideline lists tendering alongside price transparency. If a government buyer asks companies to bid for a bulk order of the same drug, they compete to win it. That competition pushes down the company's price, which the margin cap cannot reach.
Don't confuse with
- Trade margin rationalisation: It caps the traders' markup between the company and the patient. Tendering lowers the company's own price through competition.
- Auction: In an auction, a seller invites bids and the highest bidder wins. In tendering, a buyer invites bids and the lowest suitable bid usually wins.