Tenders: high rewards but high risks

03 December 2018

Governments and, increasingly big companies, are using tender processes (including Request for Proposals and Request for Tenders) to award contracts to transport and logistics companies.

A successful tender bid hopefully means high rewards for you, the supplier, but if you have not properly costed your bid to take into account all of the requirements (including legal obligations), the successful bid may turn out to be a significant burden both in terms of carrying risks and making losses rather than profits. To minimise the risks and maximise the rewards, we recommend that you include the following in your due diligence and tender bid preparation:

Pricing

In assessing your pricing, you need to fully examine not only the specification of services to determine the scope of work required (including scoping the site and visiting the routes), but also reviewing the general conditions of contract so that you can build in all the necessary compliance costs and build in a factor for the risks being taken on.

Compliance with submission requirements

Carefully check what you are required to lodge, including all schedules and attachments, numbers of copies, means of lodging (whether delivery or email) and the deadlines.

Evaluation criteria

Most tenders include a list of criteria by which tender bids will be adjudged and often the criteria are weighted. Whilst these criteria and weightings are often said to be non-binding, they are a strong guide to how you should build your tender bid.

Confidentiality

You should carefully check the tender provisions in relation to the confidentiality and use of your tender bid. You should ensure that any trade secrets or commercially sensitive information are governed by express confidentiality requirements and that the other party must not use your information for any other purposes. Unless the tender provisions otherwise require, you should mark your bid “Commercial in Confidence” and subject to copyright.

Accuracy of information

Often the tender invitation provides that by submitting your tender, you are warranting that the information you provide is true and correct. The risks of submitting false or misleading information are significant. You could be liable for damages.

Consequences of acceptance

Typically a request for tender will provide that by submitting your tender, it is a formal legal offer which, if accepted by the other party, forms a binding contract in the form of the general conditions of contract (included in the Tender Invitation pack) as completed and amended by your tender bid. Accordingly, it is critical that a legal review is undertaken of the general conditions of contract and any exceptions or variations are included in your tender bid. You should not be afraid to raise exceptions. By not doing so, you are accepting the general conditions of contract as is and may be subjecting yourself to an unacceptable level of risk and cost.

In our experience, the highest risk areas that usually always require amendment are liability and indemnity and intellectual property provisions:

Liability and indemnity

  • Liability and indemnity should be fault based. These clauses typically make you liable for anything that goes wrong. This is unfair and unacceptable. It is reasonable for you to accept responsibility for your wrongful or negligent acts or omissions. You should not accept liability beyond what you are responsible for and can reasonably control.
  • You should always try and confine liability to direct loss and damage and exclude consequential loss such as loss of profits, loss of reputation, etc.
  • It is not always possible, but you should strive to cap liability.
  • You should always make sure that you carry insurance to cover the level of liability and indemnities that you agree to.
  • You should run the insurance clauses and levels by your insurer or broker to make sure they are acceptable.

Intellectual property

  • You should always retain ownership of your background or existing intellectual property.
  • Insofar as you are required to licence such background intellectual property, the licence should be confined to the purposes of the contract.
  • In relation to intellectual property that is generated by you performing the services, ideally you should retain ownership and licence it to the other party. However this is not always achievable. If you do have to assign such intellectual property, then it is critical that you carve out your background intellectual property.

Our team have extensive experience in advising on tenders and reviewing and amending general conditions of contracts within tender processes. Whilst we can generally assist on short notice, it is best to involve us at an early stage of a tender so that you can incorporate our input into the development of your bid.