Does It Matter What Your Construction Or Engineering Tender Says?
Does It Matter What Your Tender Says?
Yes it does as it is part of the enquiry to order process, and that process requires careful management because it is one of the most difficult processes to get right.
This post mainly provides help and advice for the Construction & Engineering regarding:
- Who’s terms & conditions apply.
- Battle of the forms.
- Do my terms and conditions apply.
- Is my tender part of the contract.
- Why don’t my terms apply
It All Starts With Your Tender – Don’t Neglect It!
Now I know that not everyone reading this is involved in the tender process itself, but what is said at tender stage impacts everyone later on down the line. So, it is important to all.
What your tender says is part of the enquiry to order process, and that process requires careful management because it is one of the most difficult processes to get right.
Indeed today’s Wise Up Wednesday was prompted by the fact that we are currently advising a couple of Client’s on problems that have arisen as a result of what was done at this key stage of the process.
Whether you are an old hand at this and just need a refresher, or are looking to get to grips with this process and improve what you do, then this week’s Wise Up Wednesday is for you.
How It All Starts
Whether you are in a competitive tender situation, or are able to negotiate your way to a job, the process will usually start with an enquiry of one form or another. And your first step in that process, after having received that enquiry, and priced the works is the submission of your tender, or to give it its legal name, your offer.
When you receive an enquiry, it will probably say that you are ‘deemed’ to have read dozens of documents that you have never seen and have allowed for their contents in your price and programme.
A lot of these documents may be totally unconnected with your package of work but, by getting you to accept that you have taken them into account, the Contractor is trying to transfer as much responsibility and risk as he can onto you.
Unfortunately, modern technology makes it all too easy for a Contractor to bombard you with information at tender stage.
He is looking to make everything your problem, so it is quicker for him to copy everything onto a CD, or send you a link, rather than be selective and send you only what you need.
It also means that, if any problems occur during the construction phase he will try and point to the documents he has sent you, in order to demonstrate that you should have included for everything in your tender.
You Don’t Have Time To Check – So You Need To Protect
You simply don’t have time to check every document and his one-sided onerous sub-contract terms and conditions, so in order to protect your interests you must qualify your tender to record precisely what you have included and, equally importantly, what you have excluded.
Quite often the tender enquiry will state that qualified tenders will be ignored, but in practice if your offer is advantageous for one reason or another it will usually be considered.
If you are offering an alternative it may be appropriate to submit a compliant bid as well so that the Contractor can see the difference between what he has asked for and what you are offering.
At tender stage the issues of risk allocation and who provides what attendances and the like, might be less important to the Contractor than the overall price.
However, you need to be clear what you are offering and work from there.
Obviously, there are a number of items that should be stated clearly in your tender:
- The price, in both words and numbers, confirming that it excludes VAT, which will be added at the applicable rate.
- Any discounts for prompt payment and exactly what conditions must apply in order for those discounts to apply.
- Discount is only to be taken if payments are made on time and not simply a general main contractor’s discount.
- Also, that it is for the Subcontract sum only and variations and additional works are not subject to the discount.
- The period for which the tender is open for acceptance. This is extremely important as material price etc can be very volatile and unpredictable.
- The period over which the price is fixed. You should clearly state that the price is only fixed for the period up to anticipated completion of the sub-contract works, not practical completion of the main contract.
- It also pays to state a calendar date for the expiry of the fixed price period to protect your interests in the event that your works are delayed or postponed.
- The extent and scope of work that you have included for, particularly if what you have allowed for is not in accordance with the specification or drawings.
- Importantly you must obviously list any items that are specifically excluded from your tender. A general statement to the effect that anything that is not expressly included is in fact excluded may not be appropriate unless your tender includes a very specific schedule.
- You should clearly state which documents you have taken into account when preparing your tender. If you have allowed for only part of what is stated, then make that clear and unambiguous.
- If your tender is based on a bill of quantities provided by the Contractor, state that it is based on his quantities and is subject to re-measurement on completion.
- If your tender is based on drawings and specifications, list the drawings (with revision numbers) and specifications on which it is based.
- Set out any attendances and facilities that you will provide or require. Make sure you clearly state what attendances are provided by the Contractor, free of charge for the period that you are on site and the manner in which they are to be provided.
- In regard to the time for completion you may wish to state the periods you have assumed and in certain situations you may even submit your own programmes.
- As a minimum you should state that no agreement to programme is implied and that you anticipate a meeting to discuss the Contractor’s own programme, and the manner sequence and timing in which the works will be under taken.
- If obtaining labour and materials might be a problem, make special mention of any extended lead-in times.
- Specify how many visits to site you have allowed for and include rates and lead-in times for additional visits or mobilisations.
- The tender stage is a good time to put forward your daywork rates. You may wish to state these as all-in hourly rates, so there is no confusion as to the prime cost of your particular labour. Alternatively, if the Contractor refers to a schedule (such as RICS) you need to specify the necessary percentage additions.
- State whether you have included for the provision of a performance bond or warranties etc. and that they will only be provided subject to the wording being acceptable/mutually agreed.
Terms and Conditions
Getting the terms and conditions right is fundamentally important, so you must be clear from the outset whose terms are going to apply.
You can either state that your tender is based on a standard sub-contract (such as the JCT standard building sub-contract SBCSub/C), or you may refer to your own standard terms and conditions.
As a very minimum, if you don’t refer to any terms you should state that terms are to be agreed.
Limiting Your Liability
You should be clear that most standard form sub-contracts do not limit your liability for Liquidated and Ascertained Damages (LADs) or the delay and disruption costs of the Contractor and his other subcontractors if you cause delay.
So, extreme care is required about the level of LADs specified in the tender enquiry and if possible, you should seek to agree a lower amount more relevant to the value of your works and/or a maximum total amount.
Very specific wording is required to ensure that LADs cannot be deducted from you even if they have been deducted from the Contractor.
You may wish to try and agree an overall limit of liability for all delay and consequential costs – to say 5% of the value of your works, to be absolutely certain that your liability is excluded or limited you will need to execute an appropriate contract.
Design Requires Special Attention
You should exercise extreme caution about design and clarify whether your tender includes any element of design. If it doesn’t, say so.
If you are carrying out design, include the lead-in time that you need from receipt for design information to completion/approval of your design. If you are designing, it is imperative that the contract expressly limits your obligations to reasonable skill and care.
Reasonable skill and care is the standard to be expected of a professional designer of the relevant discipline. If your contract does not contain such a limitation your liability will be the much more onerous fitness for purpose.
The Absolute Minimum That Must Be Said
If you are uncomfortable about submitting qualified bids, or just don’t have the time to respond to every enquiry in detail, you should as an absolute minimum include a general qualification along the following lines:
“Our offer is based generally on your enquiry but there are a number of commercial and contractual issues to discuss and agree before it is capable of acceptance or your order issued’’
This should allow you to negotiate with the Contractor if your offer is otherwise of interest to him.
You Don’t Have to Go It Alone
Please remember that in addition to our work on-line we have real people, in fact a whole network of Consultants, out in the field all over the country, ready to engage with you directly.
Our experience and first-hand knowledge of the construction industry and construction disputes equips us to help you deal cost effectively with whatever challenges may be thrown at you.
Our team have been at the sharp end with National and Local Contractors, Subcontractors, PQS Practices and Specialist Dispute Resolution organisations. We’ve seen the industry from all angles, and we understand the problems that impact your business.
We also understand the need to provide value for money to our Clients and will employ our skills and tailor our service in a way that best suits your needs. Whatever your requirements, our team will provide an effective solution.
And, because we only work with Specialist Contractors, Trade Contractors and Sub-contractors, you can be sure that we know the kind of problems you face, and the solutions that work best. Saves a lot of time, and a lot of money.
Contact us, email us at email@example.com or please feel free to give us a call on 01773 712116.