So, you're the preferred bidder

After an extensive and expensive tender period on the project that could be the centrepiece of your project portfolio, you’ve been informed that you are the lowest tenderer and sit in pole position to be awarded the contract. Everything in the garden is rosy, isn’t it…well, maybe. There are still quite a few obstacles to overcome and the post tender/pre-contract period can be quite lengthy and protracted. Depending on the tendering procedure adopted, there may be further negotiations, interviews and possibly presentations to give in order to win and finalise the contract.

There are numerous matters that may still need to be resolved. Anything from resolving technical proposals to explaining why your bid is too low may be issues that stymie being awarded the contract. So what should you do at this stage in order to progress effectively towards a successful conclusion. This article puts some suggestions together which may be of some assistance.

Initially it may be useful to review the tender rules to confirm your understanding of the post tender process. Establish exactly what rules are being followed, what the procedure is and the timetable. To be prepared you must understand what is to come and be able to recognise that due process is being followed. If there is a procedure all parties must stick to it to ensure fairness. Do not allow your bid to be compromised by a client’s failure to stick to the stated procedure.

Another initial exercise would be to go back and review your tender. Tendering is typically fraught, with bids often submitted at the eleventh hour and with last minute changes. Given these circumstances, there will probably be some errors or inconsistencies in your tender which you are unaware of. The client’s team will no doubt have picked these up so you will need to ensure you are similarly aware and appreciate the possible implications. Some inconsistencies may put you in a position you had not anticipated requiring you to choose between options. Make sure you are fully aware and have considered the ramifications before you are put on the spot to answer.

You may also wish to consider any tendering instructions and how they state errors in tenders will be dealt with [1]. Depending on whether alternative 1 or 2 is included you may be required to stand by your bid despite the error or amend the error and accept that you may no longer be the lowest tenderer. Either way the consequences of any errors should be carefully considered in advance.

Your tender review should also give you an opportunity to summarise all the issues that you are aware of and will want to raise with the client. You may have a number of queries or uncertainties where you have made assumptions and should seek clarification. Typical issues may include pricing queries and assumptions, alternative solutions, contract amendments, programme issues etc. You may also want to assign a risk level to these (a traffic light system for example) so you can focus on the priority queries during any meetings. You do not want to enter into the contract without fully understanding the client’s perspective of high risk issues.

Prior to any formal discussions, go back and re-evaluate the client that you may be working with. Are they public or private sector? What projects have they procured in the past and how have they been administered? Do you know any other contractors who have worked with them and what were they like to work with? What type of issues arose? Much of this should have been looked at previously but it is worth reviewing as you are much nearer to actually working with the client. Also, try and run any financials again to see if all is in order. Hawk can recount from its experience one contractor who, for its size, was lowest tenderer on a major project. However trading circumstances changed and after delays and procrastination, the client eventually decided to not go ahead with the project leaving the contractor on the brink of administration.

If you are called to interviews or meetings to discuss your proposals, carefully consider what your approach and attitude should be. It is still common for contractors to adopt a deferential approach to their potential client. It is reasonable and expected to be respectful, but always approach these discussions on an equal footing. Remember that you too have significant bargaining power. Most projects are set out on extremely tight timescales, particularly commercial buildings, where there is an imperative to start generating revenue as quickly as possible. The tender process can be long and drawn out and clients do not want delays in the post tender period. There is no advantage for a preferred bidder to drop out, particularly if it means going through further negotiations, or worst case, re-tendering. So always remember that you have significant bargaining power and should not roll over and accept everything that is thrown at you.

With this in mind, some clients have been known to use these discussions as an opportunity to seek to impose changes and amendments onto the contractor in a variety of ways. For example, forcing price reductions, changing scope, imposing onerous terms, reducing programme durations all at the contractor’s expense and at the threat of not being awarded the contract. Be prepared to stand your ground. If this is how a client acts pre-contract consider what it could be like post contract. Not all projects are worth winning in the long run.

When it comes to discussing the practicalities, the following, in Hawk’s experience, are typical matters that should be looked at:

Pricing queries: Ensure that you are aware of the basis of your pricing so that you can answer typical questions. Clients may want to understand how your site and off-site overheads are calculated and what is included in each; something that is essential in the event of prolongation. Also ensure that you raise and clarify any pricing assumptions that you have made as these may have major implications during the works. Be particularly aware if the contract is design and build and where the client is seeking to pass all possible risk of change onto the contractor.
Programme: Always ensure that you have total clarity over programme dates and other fundamental issues such as sectional completion and any preceding enabling works by others. Another area which can cause problems is the understanding of defined provisional sums. Clients typically have a “looser” definition of a provisional sum for defined work expecting the contractor to have made “…due allowance in their programming, planning and pricing preliminaries” [2] despite only providing a threadbare description of such work that does not comply with the requirements of NMR2 [3].
Contract amendments: Ensure that you have carried out a full review of contract amendments prior to any discussions. Be clear as to what your red lines are and ensure that you are clear how much and where you are able to accept amendments. Matters such as unlimited liability, ground conditions and full design responsibility should be fully understood as once you are tied in, you may be fully responsible.
Technical solutions and alternatives: Make sure that you have full details to hand of your technical solutions as well as any alternatives, be those materials, suppliers, subcontractors or technical solutions. Quality considerations play an ever-increasing part in contractor selection so make sure all proposals can be explained in detail, so preferably take with you suitable consultants to help explain your proposals.

There are many other matters that could come up for discussion such as collateral warranties, performance bonds, method and sequencing of works, contractor’s personnel, insurances etc. Make sure that you cover those areas that you consider are most important to you to try and minimise the extent of risk you are taking on. Take minutes for all meetings and check that these are accurate as usually they will be incorporated into the contract documents to confirm agreements.

Always remember that these are negotiations so do not simply accept all that the client wants. If there are changes introduced at this stage, be prepared to advise of any cost, programme and other implications. A win at all costs mentality may just be that; the costs and risks become too great. Contracting is a risky business where even one bad project can result in a company failing. The post tender discussions should be your opportunity to satisfying yourself that you fully understand the client’s position and, in turn, the client fully understands the basis of your bid. All projects start with good intentions, but a lack of clarity and understanding pre contract can cause serious problems post contract. If in any doubt as to what to look for or how to prepare for any post tender discussions, contact Hawk as we’ll be able to point out many of the pitfalls which have unfortunately beset other contractors. Success during this stage however, gives you a much better chance of a smooth and hopefully profitable, post contract period.