Home' IAQ Yearbook : 2015 Contents 40 Infrastructure Association of Queensland Yearbook 2015
• Have the key risks changed (for example,
are there legislative changes that need to be
managed or priced)?
• Does your system process addenda to the
tender effectively and in time?
• Have you done enough appropriate due
diligence on the counter party (will they be
able to perform their end of the bargain)?
The thrill of winning work can disappear quickly
if you end up with a contract that costs you more
than you make out of it.
However, an attempt at cutting tendering costs by
merely cutting and pasting from previous tenders
may be a false economy. You may be repeating
things that have caused you not to win tenders
in the past, or it could result in your tender not
properly responding to the requirements for
information set out in the request for tender.
Getting the right people on the right job, with
the right systems and processes, can help to
contract terms and conditions
Do you have standard terms and
conditions? When did you last review them?
Are they still current and effective? Are they
being effectively included or incorporated into
your contracts? If not, even the best terms and
conditions are useless to you.
Businesses should review the content and method
of incorporation of their terms and conditions
regularly. Those terms must be current, and must
deal with any changes in law (for instance, the
recent security of payment legislation), case law
(for instance, the Regional Power Corporation
case) or industry practice. You should also review
your statements of incorporation and/or check
that copies of standard terms are being sent out
and signed or acknowledged. Where they are
not, you should know why.
If you have a standard set of exclusions that you
normally submit with tenders, they should be
reviewed to determine if they still accurately
reflect your risk management policies. They
should also be reviewed for each tender,
to determine how they fit with the tender
requirements – particularly in cases where a
fully conforming tender is required for a valid
credit risk management
The construction and infrastructure industry
has had a few tough years recently, and this
has resulted in some entities restructuring or
merging, and others unfortunately failing.
This can leave their contractual partners with
substantial unpaid invoices and claims, and/or
with an incomplete project that is not generating
revenue. Have you conducted proper due
diligence on your primary customers, clients,
head contractors, subcontractors and suppliers?
If that due diligence was done some time ago, is
it time to revisit it?
To cover any substantial exposure, at a minimum
you should review your security arrangements,
credit agreements and payment terms, and
consider whether additional financial safeguards
are necessary (for example, parent company
guarantees). If ignored, bad debts usually only
become bigger and worse, so businesses need
to commence recovery action and consider
exercising any security as soon as signs of
back-to-back (or better) contracting
Most construction and infrastructure projects
involve a contractual chain or network. It is a
vital risk management tool that your contracts
with sub-contractors or suppliers of goods or
services are on back-to-back (or better) terms
with your contracts with your customer/client/
head contractor wherever this is commercially
achievable. If there is any mismatch, you may
find yourself liable to your customer/client/head
contractor, unable to recover any such liability
from those below you in the contract chain.
Back-to-back contractual liability provisions
need to be the subject of negotiations from
the outset, not left to the last minute, and they
should be prepared on a case-by-case basis.
A standard form agreement for subcontractors
and suppliers can be a good starting point
for managing such risks, and can be ready
to roll out when any tender or request for
proposal is sought; however, such standard
forms should generally only be a starting
point for negotiations, and they may need to
be amended to reflect any specific risks that
may be imposed on your company by the
head contract if you wish to pass them down
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