A rejection letter is another term used by purchasing personnel as part of the notification process in a post tender scenario. In essence, you are notifying unsuccessful bidders that they will not be awarded your business. It is a respectful and formal way of providing closure. Much like an award letter or how a notification of award is used but unfortunately for the opposite reason.
They inform all the Vendors of your position in relation to the bid. Issuing an award is the fun or pleasant part of the tender process, completing rejection letters … not so fun. Rejection letters are important and we will do our best to attempt to explain why.
Why is this important? If you consider the recipients position, manpower and scheduling needs then you can quickly appreciate the importance of releasing the Vendor if they are not required. Regardless of whether it is for the supply of materials, manufacturing requirements or service related work, it is still the same. It is both respectful and prudent to efficiently review all bids during the tender process and avoid allowing it to drag out for months on end.
Vendors are partners in your supply chain and they do incur a cost when submitting a bid to your RFQ or RFP. It is a professional courtesy to inform bidders of either an award or rejection and it is important to remain on good terms as you do want them to participate in future tenders of a similar nature. So, a simple rejection letter can go a long way and is not much of an inconvenience if you have a standard boilerplate template.
As mentioned above, Buyers love to issue an award but often avoid or do not bother to issue a rejection letter. This is not what we would call a best practice. A best practice would be to provide formal notification to all parties involved regardless of a win or a rejection.
I know what you are thinking, as soon as you issue the rejection letter the Vendor will call and want to be debriefed. They hope you will disclose how much they missed the bid by, etc. Basically, they are asking you to do their homework for them and do not shy away from sharing this sentiment. As a Vendor, it is ethically inappropriate to ask a Buyer this question and as a Buyer you should never disclose this or any of the commercial aspects of an agreement to the Vendors competition.
One last thought as to why we firmly believe in ethical procurement practices; if your good Vendors catch wind that you are disclosing commercial aspects to the competition, then your GOOD Vendors may decline to bid on your next tender. If you begin to lose qualified Vendors you will ultimately drive up costs. Healthy competition is the only way to keep costs down!
Back to the rejection letter, it is just as important to the Vendor as the award notification because it allows them to schedule resources elsewhere. A side benefit is it encourages them to become more efficient or sharpen their pencil for your next tender. If they want your business, they will attempt to reduce overhead to become more efficient and provide you a better price or offering the next time. This is part of conditioning your Suppliers as well it encourages healthy competition for the next round of bids and is an environment you should strive to create.
A rejection letter is no different than an award letter when it comes to format or presentation. It should be on company letterhead, dated, addressed to the Vendor and have a subject or tender reference number. It should be respectful, to the point and finalized with a signature block. This block contains your name, title in typeface and allows enough space for your signature.
A professionally formatted rejection letter along with sample award letters; a letter of intent (LOI); and a sample letter of understanding (LOU) are all included in our Purchasing Bundle. You can find it on the How to Buy page.
View related posts – Invitation to Bid Cover Letter, Award Letter and Letter of Intent.