Does your business bid for projects via a competitive tender process? At tender stage, there’s no guarantee that you will win the project. So why would you fork out your hard earned bucks for someone else to review a contract that you might never have to sign? Here are 4 reasons you need a tender stage contract review.
Reason 1: You have better things to do with your time
The tender package typically includes reams of documents: project requirements, draft programs, tender conditions, HSE policies, insurance forms, site plans… the list goes on.
Somewhere in all that paperwork will be the draft project contract. There’s an expectation that you will review the contract and identify any issues that you have with it in your tender.
I can hear you groaning just thinking about it.
Anyway, let’s assume you’ve conducted a thorough tender evaluation and decided to spend time and money preparing a whizz bang bid.
You break out the draft contract and it’s anywhere between 30 and 150 pages of repetitive legal mumbo jumbo. You know it will take you a day or more to work through it, and it will feel like you’re wading through mud the entire time. It’s time that you could be spending refining your price or coming up with amazing innovations for a project-winning tender.
I can’t help you calculate quantities BUT I love reading contracts. I will happily take this one off your hands. We all have our passions in life. Yours might be footy or knitting. Mine is contracts. No need to judge! I can read that contract in half the time you can, digest it and produce a concise, plain English table summarising what it all means.
Reason 2: It helps you lower barriers to concluding the deal
During my time as an in-house lawyer and now in my own practice, I’ve reviewed and negotiated countless contracts. I know exactly which clauses are likely to bring a project unstuck. Plus I can help you propose reasonable, legally sound amendments that the principal will accept.
A professional, well drafted clarification schedule will help manage your legal risk. Bonus: it will lift the quality of your tender to another level.
Reason 3: Understanding your risk helps you protect and improve your margin
I’ve written before about my views on the three key purposes of a contract:
It’s really hard to find a way through confrontation when you’re in the trenches. Ideally, you should agree on risk allocation at the outset while everyone is still in honeymoon phase. You’ll have an infinitely greater chance of staying on track and achieving the margin you pitched for in your tender.
Reason 4: You’ll look like a professional outfit
Our sales culture means that service providers want to convey a message that the “customer is always right”, even if it puts them at a big legal or commercial disadvantage. We are fearful of difficult conversations and confrontation and this makes tenderers reluctant to request changes to the draft contract.
However in my experience, resource companies and tier 1 contractors feel nervous when subcontractors don’t put in a single clarification, as it suggests that they haven’t read or understood the contract. Your clients fully expect your tender to include a request for reasonable changes to the contract. Negotiating the risk allocation makes for a more robust agreement and, in turn, a better project outcome.
And isn’t that what everyone really wants?
At the end of the day both you and your client want to achieve a fantastic project outcome, and to make a healthy profit in the process. Reviewing the contract at tender stage is one of the first and most important steps on that journey.