Bidding Strategy – Part 5 | How To Win a Construction Tender

5_tender_bidding-strategy

Bidding Strategy

You invest time, money and effort in bidding for tenders but do you get the results you want and do you get value out of your investments? This is a question that you should ask if you are facing a perennial drought in significant tenders and jobs. Getting a significant tender can give you a financial break that you are looking for and you can stay afloat for longer periods without needing another job. Blind bidding for any tender is not a good strategy .It will demotivate you in the long run when all your efforts yield nothing tangible. In order to get positive results from your efforts, you have to plan and devise a strategy. To bid or not to bid is a decision that you have to make and it should be backed by facts and data within your company. You have to assess the risks of bidding against your company background – can your company manage the risks? Can you find a solution to mitigate the risks?

The following are some of the risks that you need to assess:

Performance Risk – This is a risk related to the contractor’s experience and capability in successfully carrying out a construction project. The performance factor depends on a lot of things. Actually, any risk you can think of can affect your ability to perform. One of the most important things that you should look at is the magnitude and scope of the project. Can you handle the project? Have you ever done such type of a project? Are there a lot of hindrances that you might face? Hindrances to performance will exist before and after the tender stage. This includes the requirements to fulfill the preliminaries. The question is how are you going to deal with them.

Reputational Risk – When you put in low quality work, make unnecessary delays or fail to carry out a project to successful completion, your reputation will be at risk. Reputation spreads like wildfire. Besides a tainted reputation that will ruin your marketability and tarnish your company name, you may run into other problems that are caused by your failure to perform. For example, you may run into financial problems and face litigation.

Credit Risk – A lot of banks and financial institutions will give you a financial guarantee when you win a tender. This guarantee is designed to help you perform i.e. execute the project successfully. However, when you fail to perform after loan money has been spent on the project, you will run into a credit risk, which is a failure to pay back. The same applies to other creditors such as suppliers of materials. You will be required to pay back the money used for buying construction materials on credit.

Legal and Compliance Risk – Construction tenders come with contract clauses that you have to abide with. Some of these clauses include penalties for delays and non-completion, defects in work, poor workmanship and failure to comply with Architect’s specifications. When a project manager applies monetary penalties on your construction firm, your retention (profit) may be forfeited, interim payments may be withheld and excess daily charges can be applied, leading to financial ruin.

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