The pitfalls of tendering

May 11, 2017

When it comes to tendering, is it not true that we have stagnated in our thinking and that we should think “out of the box” just for once? Coming back to the mundane and tedious process of preparing and submitting a competitive tender, we look at some of the pitfalls of tendering and other issues  that are often overlooked. Graham Clarke, the Port Elizabeth branch chairman, shares some of the lessons he has learnt over the years.

The pitfalls of tendering

We should ask ourselves a number of questions at the tender stage:

What contract are you tendering on? There is a difference between the various contracts – JBCC; NEC; GCC or domestic. If an item in the BOQ states supply, install and commission you only get paid after commissioning in terms of the NEC contract, so be alert and read the contract.

Next, ask yourself what insurance excess you might be liable for, and whether there is local labour content that you must comply with. Also, are there set wage rates?

Ask yourself where is the contract in relation to distance and time from the office. Is your insurance company going to have an issue if you work in informal settlement areas? Is health and safety a standard plan or are there client-specific requirements? Is there a minimum wage rate that you may need to comply with that is higher than the prescribed NBCEI rates? Who is the builder? If you don’t know, stipulate that you want a payment guarantee – you can always use it as a bargaining tool with regards to retention and guarantees.

What guarantees is the builder or client going to expect? Look out for retention terms. How much time will you have to complete the contract? Check that it is realistic and check the penalty terms.

Is there a professional team and who are they? Look for the payment terms and be clear on who is going to pay you and how long you will have to wait for your money.

On the awarding of a tender, ask for a payment guarantee – chances are slim of actually getting this, but it is worth a try. Offer a construction guarantee rather than getting caught up with retention, if possible, and take into account the feasibility thereof. Find out the dates on which your claims must be submitted, and what the process will be.

Claims

Put in a first claim early in the contract to remove any delays that may occur in registering on the client’s system. Ensure that the claims are on time and in a format that the client or consultant wants. Insist on a payment certificate advice from the builder/consultant. Insist on a payment certificate from the principal agent, if applicable. A payment certificate is equivalent to a cash cheque. By insisting on a payment certificate from the PA, you will be made aware when retention payments are released.

During the contract

Ensure that you adhere to the programme. If you are going to have a delay due to late delivery of material, notify the principal contractor or client in writing so that you can avoid a delay claim against you later. If the principal contractor is causing delays to your progress, write to him informing him thereof. If snags or possible defects are pointed out to you by the principal contractor or consultant, rectify them immediately before you end up damaging the work of another contractor and have contra-claims against you.

If you are asked to perform extra work, ensure that you submit pricing as soon as possible so that your contract value can be adjusted, or so that extra time can be added to the contract.

Ensure that you receive a variation order for the extra work. If there is a chance that extra work could cause damage to the work of other contractors, ensure that you submit your concerns in writing to prevent contra-charges.

Payment

If your payment is late, notify the client or principal contractor immediately in a format that protects you. If the payment problem persists, notify the professional team and request direct payment – if you don’t get direct payment, the client can at least ask for proof of payment monthly from the principal contractor under JBCC.

Issue a written notification with regards to outstanding payments before you are issued with a contract instruction. Issue the notification as a suspension of works – in terms of JBCC, the principal contractor cannot terminate your contract while he is in material breach of the contract. When issuing the notice, you can request a payment guarantee before lifting the suspension due to non-payment or, depending on your contract, request direct payment from the client.

General

The JBCC contract is a comprehensive document that has committees updating and changing requirements as time and court cases go by. The principal contractors also have representation on the JBCC Technical Committee and there is no reason why they should not issue sub-contractors with documents such as payment advice notices as prescribed in the JBCC contract. Ensure that you receive payment advice notices. The ECA(SA) delegates on JPC in the East/South Cape have again reminded the professional parties to ensure that their members adhere to this requirement at all times. Where possible, insist that you sign an unaltered document. Unilateral changes to the standard contract document are normally not in your favour as sub-contractor and stand to benefit only the principal contractor.

JBCC preliminaries

There is a general misconception about the purpose and use of the JBCC preliminaries document. Commonly referred to by contractors as “Ps and Gs”, the JBCC document was compiled to cover all those items specific to the project, but which are not referred to in detail in the contract document.

It is intended that the preliminaries be referred to when preparing your rates in the bill of quantities (BoQ). Examples of such items are:

Checking of documents

– Check that no pages in the tender document are missing or duplicated.

– Make sure that you understand the meaning and intent of each item in the BoQ.

– Remember that the quantities in a provisional BoQ are only an indication of the work to be executed and are subject to re-measurement.

– Remember also that priced items in the BoQ are deemed to include all costs, overheads and profits.

Previous work and adjoining properties

Make sure that you inspect the work site. Check for access to the area where the sub-contract works are to be carried out and the condition of the roads. Check for existing services such as underground cables, pipes or sewers. Take photos of existing buildings and structures which could later be claimed to have been damaged by you.

Samples of materials

You must furnish samples of materials and equipment to be used in your installation, if called for by the principal agent.

Shop drawings

Where shop drawing are called for, submit them to the principal contractor at your expense. Only execute work in accordance with shop drawings approved by the principal agent or his agent.

Temporary services

Where the water or electrical supply is inadequate for the proper execution of the works, the principal contractor shall provide an adequate supply at their own expense. Other water or electricity for the (works) project shall be supplied either by the principal contractor or the employer, according to the agreement between the parties.

Ablution/welfare facilities

These shall be provided for the use of all persons on the site by either the principal contractor or the employer, in accordance with the agreement between the parties.

Telephones/fax /internet

The principal contractor shall supply these and recover usage costs from the users.

Prime cost amounts

If there are any PC amounts in your BoQ, remember that you must separately price for overheads and profit to cover the following, which are your responsibility: Taking delivery; unloading; checking against invoices/delivery notes; carrying; unpacking; storing; hoisting, and fixing of materials.

Attendance on subcontractors

Remember that the principal contractor is obliged to provide the following general attendance on subcontractors:Site access.

– Site access.

– Provision of water, single phase power and lighting to a position within 50 m of the place where the work is to be done. This does not include water, fuel and power for commissioning of any installation.

– An area for the subcontractor to establish temporary office accommodation and workshops.

– Use of erected scaffolding belonging to the principal contractor, while it remains erected on site.

– Reasonable use of the erected hoisting equipment belonging to the principal contractor.

Security

The principal contractor shall take all appropriate measures for general security of the works.

Lucas Bowles, ECA regional director, East/South Cape