Contract tendering has the potential to bring or win significant business for a construction business, it is also an opportunity for a client to carefully consider and select the right contractor for the project.
Both parties need to wade through complex documents and produce a persuasive and effective tender submission, generally under tight time constraints.
Contractors can often feel overwhelmed by the sheer size and complexity of the tender documentation, even before they commence estimating and pricing the project.
Successful tender responses need to undertake two key tasks or objectives:
- Evaluate Project Risks
- Comply with the project requirements and selection criteria
For tenderers, there is a lot at stake but a a large amount to gain.
Construction Contract Risk
Each project will have its own specific risk or risks.
Major risk areas are usually described in accordance with the following areas
- Completion Risk – the risk that the project will not be completed, or will be completed
sufficiently late to affect the viability of the project. - Construction Cost Risk – the risk that the project budget will be exceeded.
- Environmental Risk – the risk that the project will be sensitive to environmental and/or heritage issues, and/or environmental conditions of approval.
- Industrial Relations Risk – the risk that the project will be affected by industrial relations concerns.
- Technological Risk – the risk that the project will be sensitive to the application of new technologies.
- Operational Risk – the risk that the facility will not operate within the design specification.
- Market Risk – the risk that sufficient cashflow will not be generated by the completed facility.
- Political Risk – the risk that a change in government or in taxation legislation will affect the return on investment.
How to Identify Project Risks in Tendering
Tenderers and tender issuing coordinators need to identify the risks associated with constructing the project, subcontracting and aspects of the work as well as coordinating and managing the contract with the Client and other contractors on
site.
site.
Generally the construction risks center around the ability to deliver in accordance with the requirements of the contract in terms of
- time
- cost
- quality
Contingency should also be allowed to include any variance in the planned time, cost and quality criteria from the original estimate to that actually experienced.
As well allowance should be made to deal with the inevitable unexpected problems as they arise. A risk checklist is a good starting point, which helps document and manage this process.