Tender reviews and risk management…
By VOLOCO LLP, Oct 31 2019 12:57PM
Dedicating the required amount of effort and investing in reviewing tenders before committing to submit is a proven strategy to identify, manage and reduce risk, potentially saving you wasted time and effort in the tendering process and even more significantly from entering into a deal that may be a bad one for you.
Knowing what to look for and where to look for it is something that is gained with experience and varies by project and the proposed contract. Below is a list of the main points to consider when reviewing a tender that is received (it is not an exhaustive list).
TENDER DELIVERABLES & TENDER PROGRAMME
• Do you know what you are expected to return with your submission? Plan it out and allocate specific actions, owners and deadlines to move towards the overall submission and deadline
• Is the tender programme achievable? If not, is it possible to request an extension?
THE FORM OF CONTRACT
• Is the form suitable for the size and complexity of the project (to be covered in a future article)?
• Are there any proposed amendments to standard form and if so, have they been provided for review?
• Is the work involved in the project what you are familiar with and can deliver? If not, proceed with caution and engage the correct support early.
• Is any of the scope hard to understand or achieve?
• Do the tender documents stipulate a construction programme and if so, can you deliver it?
• If not stipulated, are you expected to submit your own? You will need to understand the programme to be able to price the preliminaries anyway.
• Depending on the duration of the contract, you may need to consider inflation costs in your pricing
• Is the project traditional (designed by others), design & build or Contractor Designed Portions (CDP’s)?
• Status of design (is it as developed as the tender documents state?)
• Avoid any fitness for purpose obligations (reasonable skill and care is an acceptable level of design burden). This is covered in more detail in a previous article.
• Identify proposed novation of design team for Design & Build contracts and review the novation agreements (important that any novated design consultants are responsible for the design “ab initio” (from the beginning)
• Understand the planning status
• Identify who is responsible for discharging any conditions and what they are
• Identify the limit or otherwise of liability you are exposed to under the proposed contractual arrangement (it ought to be capped and at a level that is commensurate with the project and in line with insurance cover you have
• Understand the extent of any damages that failing to complete will expose you
• Make sure they are commensurate with the project and ensure that the rate would not erode the project margin too rapidly
• If there are contractually “nominated” or “named” sub-contractors, you will need to engage them but ultimately will not be fully responsible for their performance.
• If there are any “preferred sub-contractors”, there will be an expectation that you use them (and it may harm your submission not to), but you will also be fully responsible for their performance
• Identify any provisional sums and if they are Defined or Undefined
• Defined: a sum provided for work which is not completely designed but for which the following information shall be provided:
• Undefined: a sum provided for work that is not completely designed, but for which the information required for a defined provisional sum cannot be provided.
• A defined provisional sum should therefore have the necessary information for the Contractor to be able to include sufficient programme and prelim allowances within their tender submission. The risk for this will then lie with the Contractor. By extension, this means that a Contractor cannot be expected to include programme and prelim allowances for undefined provisional sums so the risk will remain with the Employer.
• Good idea to understand what your competition is (how many tendering and are you able identify who they are to have a clearer idea of your chances of success)
RELATIONSHIPS WITH CLIENT TEAM
• Do you know the client or any of their professional team (Architect, Structural Engineer, Project Manager etc) and can these relationships help you gain an insight into a win strategy?
WIN STRATEGY / UNIQUE SELLING POINTS
• What can you offer that makes your company a better choice for the project where price may not be the only or most important differentiator (it could be quality standards, your team and experience, innovation etc)?
• You can focus on these in your submission to enhance your chances of success
• Identifying who the decision maker(s) and influencer(s) are is important as is understanding or trying to establish what makes them tick. You can tailor your submission to appeal to them in the right way.
• Do the documents set out the policies and limits of cover required?
• Are you able to provide what has been requested?
• It may be worth sending the details to your broker to check that you have the cover required
• Ensure you can effectively deliver the project based on its geography
• Do you have a supply chain to support both your tender and delivery? This is a key defining factor when evaluating any tender.
• Do you have a team that is available with the right experience to support the tender if necessary and then deliver the project?
• A basic, but make sure you have all the documents that are listed / noted / mentioned within the tender. If not, request them.
• If a Preliminaries document has been provided, read it, as it may include requirements that are not obvious elsewhere and you will be expected to comply with. It may be as simple as working hours.
• Check the specifications and ensure any specification is issued to your supply chain when pricing as there could be some unusual requirements set out that have cost and/or programme implications
• Most contracts will set out how these are to be dealt with and hopefully this is set out in the tender documents
• Important as it is not unusual for there to be inconsistency within the tender documents that is likely to transfer into the contract documents and you need to be clear on who will bear the cost of remedy.
• Understand how any existing/unforeseen conditions are to be dealt with that will most likely include
• Asbestos / Services (buried/hidden) / Ground conditions / Condition and performance of existing services
• You ought not to be taking the risk in any of these unless you have had sufficient time and opportunity to fully explore same with intrusive surveys, scans etc, trial pits (if earlier ones were not sufficient) etc. Ideally qualify these risks out in your submission
• The Pre-Construction Information Pack should help identify potential risks (this must be required with the tender information as is a requirement for the Principal Designer to provide under the CDM regulations
• Check that the Employer cannot assign the burden of the contract without the written consent of the Contractor (you don’t want to end up with a different client and have not say in it)
• There could be requirements for Payment and/or Performance bonds
• Avoid “on demand” bonds
• Be cautious about bond expiry dates
• Ensure you obtain a quote for any bond requirement and understand the implications or make it clear early that you are not going to provide one (this could be a deal breaker though)
THE LEGAL SYSTEM GOVERNING THE CONTRACT
• Ensure that no other legal system is stipulated other than that within which you are operating and are familiar with
VALUATION & PAYMENT
• Frequency of valuations: Minimum monthly (the norm)
• Process for valuation/payment: Make sure you understand it and the triggers along the way
• Payment terms: Ideally 30 days (make sure the terms are stated)
Making sure you review all tenders to prevent wasted time and effort and reduce risk is plain good sense. It might be something you are not able to do in-house (either through lack of experience, confidence or time. If so, VOLOCO can provide this service for a lump sum fixed fee. We have been successfully providing this service to our clients, reducing risks and saving them significant sums of money in the process. Get in touch if you would like to discuss this further for a specific tender or just talk about the service generally.