Which tendering process is right for what you’re trying to source? Choose wisely: the wrong path can put you in bed with the wrong supplier, which always leads to unwanted ramifications for the broader business. There are, obviously, many steps to the procurement process, but none more important than choosing whether to use open or closed tenders.
Quick answer
A closed tender is a tender where only suppliers invited by the buyer can submit a bid. An open tender is advertised publicly, and any supplier that meets the conditions for participation can respond. The difference is who gets to bid. An open tender tests the whole market and is the default for most government buying. A closed tender (also called a limited, selective or invited tender) is quicker and cheaper to run, but it relies on the buyer already knowing the right suppliers. Choose open when you need the widest competition or must show fairness. Choose closed when the market is small and well understood, and you can justify the shortlist.
Several determining factors are involved, such as what you’re sourcing, the supplier landscape, and what vendors you already know. For government, there are also tight regulations regarding which process is to be followed. But before we delve deeper, let’s take a brief look at exactly what these two processes look like.
What is an open tender?
The name says it all: an open tender is open to anyone. Any potential supplier can view the tender documents, often issued as a Request for Tender (RFT) or Request for Proposal (RFP), and submit a response. No one is excluded; a previous or existing relationship is not required to submit a tender.
This type of tender is typical within government departments and agencies that have strict regulations regarding tenders and supplier relationships. An open tender is one way of emphasising a fair tender process where everyone has a chance to bid.
Private organisations might also use open tenders if they aren’t overly familiar with the supplier landscape or are looking to switch from an incumbent vendor.
What is a closed tender?
A closed tender, also known as a limited tender, is open to only those who are specifically invited to bid. Those who aren’t on the invitation list but submit a proposal anyway are likely to be ignored.
A closed tender isn’t as common within government departments and agencies as it excludes potential suppliers; there are, however, circumstances under which it is allowed.
Closed tenders are more popular among for-profit organisations, particularly when they know the supplier landscape well, have done their research, and narrowed the field down to a select number of vendors.
How the closed tender process works
A closed tender follows the same steps as any well-run tender. The difference is that the shortlist has to be built, and defended, before you go to market.
- Define the requirement and estimate the full contract value, including options and extensions. Value often decides whether your policy allows a closed tender at all.
- Build and justify the shortlist. Use market research, an existing panel or an earlier expression of interest. Record why each supplier was invited and why others were not.
- Issue the same documents to every invited supplier at the same time, with the evaluation criteria, the closing date and time, and how questions will be handled.
- Answer questions openly. Share every answer with all invited suppliers, not just the one who asked.
- Receive submissions by the tender close. Late submissions are normally rejected.
- Evaluate against the published criteria, clarify where needed, negotiate if the documents allow it, and award. Our guide to writing effective tender evaluations covers this step.
- Debrief unsuccessful suppliers and keep the records. A closed process attracts more scrutiny, so the file needs to show the shortlist was fair.
Open vs Closed Tenders: Pros & Cons
Open Tenders
Pros
- Open tenders don’t exclude any potential suppliers, which means your organisation gets a great overall view of the supplier market and the deals on offer.
- By not excluding any suppliers, you take an unbiased approach to the supplier market, an important factor for government departments and agencies.
Cons
- Open tenders can be a more expensive process, simply because they are more time consuming; accepting all comers means there are more bids to analyse and decide upon.
- If you aren’t excluding anyone, you’re potentially dealing with suppliers you know nothing about. This can expose you to some unscrupulous operators and generally leaves you more vulnerable to a bad deal.
- With open tenders, there is sometimes too much focus on lowest price at the expense (pardon the pun) of quality and other important considerations.
Closed tenders
Pros
- It can be a cheaper process. Inviting only a select few to submit bids means there is less time you have to spend on analysing them and deciding their potential. Less time equals less money.
- You have the opportunity to invite only those suppliers you know to be reputable and professional. This avoids any bad eggs.
- With fewer bids, there is a chance to embark upon more substantial communication and a more collaborative approach. Not only can this lead to a better deal for both sides, it also lays the foundations for a positive, long-term business relationship.
Cons
- Obviously, a lot of potential suppliers are excluded. Dealing only with those you know can reduce the chance of dealing with bad eggs, but it also means you miss out on the good ones you don’t know about. Somewhere out there, the right supplier for you is waiting; a closed tender reduces your chance of meeting them.
- There’s a level of bias with closed tenders that can make them inappropriate for government departments and agencies.
- If you’re new to the supplier landscape, or have worked with an incumbent for many years, it’s difficult to identify a shortlist of the best vendors out there.
Closed tender, limited tender, closed bid and tender close: what the terms mean
These terms are often mixed up, and some of them mean quite different things.
- Closed, invited or selective tender: used loosely for any process where the buyer chooses who may bid.
- Limited tender: the term used in the Commonwealth Procurement Rules. It means approaching one or more potential suppliers to make submissions, where the process does not meet the rules for open tender.
- Multi-stage tender: an open expression of interest followed by a request for tender to a shortlist. Under the Commonwealth rules this still counts as an open tender, because the first stage is open to the market.
- Closed bid or sealed bid: this describes how bids are submitted, not who can bid. Bids are lodged in confidence, so no bidder sees another's price. An open bid is one where prices are visible, as in a reverse auction. A tender can be open to every supplier and still use sealed bids. See our overview of auction types.
- Tender close or closing time: the deadline for submissions. A tender shown as "closed" on a tender portal has usually just passed its deadline. It does not mean it was a closed tender.
When government buyers can use a closed tender
Australian Government agencies follow the Commonwealth Procurement Rules (CPRs). The version in force from 17 November 2025 recognises two methods: open tender and limited tender.
Once the expected value of a procurement reaches the relevant threshold, a limited tender can only be used under a condition listed in the CPRs or an Appendix A exemption, and the reason must be reported on AusTender. The thresholds are:
- $125,000 for non-corporate Commonwealth entities (other than construction services)
- $400,000 for prescribed corporate Commonwealth entities (other than construction services)
- $7.5 million for construction services
The listed conditions include an open approach to market that drew no suitable submissions, extreme urgency caused by events the agency could not foresee, and goods or services that only one business can supply. Below the threshold, agencies have more discretion, but the rules for all procurements, including value for money, still apply.
States, territories and local councils have their own rules and thresholds, so check the policy that applies to your organisation before you decide. If you need a process reviewed before it goes to market, our procurement audit and governance team can help.
Open vs closed tenders: make the right choice with the right advice
As you can see, each style of tender has its strengths and weaknesses, which are exaggerated depending on the market you’re in. Making the right call on the style of tender you choose is pivotal to landing the best deal available, and Comprara can help you do just that.
As procurement consultants, we’ve not only advised countless organisations, both public and private, on the most suitable process, we’ve also facilitated many auctions. We know what parameters to set, the questions to ask, and what aspects of a potential supplier’s reputation matter to you.
If you want the contracts that can transform your organisation for the better, get in touch with the team today.
Frequently asked questions
What is a closed tender?
A closed tender is a tender process where only suppliers invited by the buyer can submit a bid. It is also called a limited, selective or invited tender. Bids from suppliers outside the invitation list are usually not considered.
What is the difference between an open tender and a closed tender?
An open tender is advertised publicly and any eligible supplier can respond. A closed tender goes only to a shortlist chosen by the buyer. Open tenders give wider competition and stronger transparency, while closed tenders are faster and cheaper to run but risk missing better suppliers. Our deeper dive on open and closed tenders covers how to choose.
What does "close tender" mean?
It usually refers to the tender close, the date and time after which submissions are no longer accepted. People also use it as shorthand for a closed tender, so check the context. A tender marked "closed" on a portal has normally just passed its deadline.
What are the advantages and disadvantages of open tendering?
Open tendering gives you the widest view of the market, shows fairness to all suppliers and can surface suppliers you did not know about. The downsides are more submissions to evaluate, a longer timeline and more effort spent checking suppliers you know little about. Clear conditions for participation and a staged evaluation help keep the workload manageable.
Can government agencies use closed tenders?
Yes, within limits. Australian Government agencies at or above the procurement threshold can use a limited tender only under the conditions or exemptions in the Commonwealth Procurement Rules, and must report the reason on AusTender. State and local government rules differ, so check the policy that applies to you.
