Key considerations for tendering in the current economic climate 

April, 2022 - Shoosmiths LLP

The UK is currently dealing with rises in the cost of living and the impact of world events leading to availability issues and price increases across numerous sectors.

It is not surprising that we are seeing queries from clients asking us for practical advice on what they should do if they have won a tender and have discovered that their original pricing does not stack up before signing the formal contract.


There are lots of factors to consider in this situation. The starting point is often going to be what type of procurement process in play: Is it a public procurement process and therefore subject to stricter rules about post tender changes? Or is it a privately run tender?


Then there are the terms of the tender request, which may specify how long the tender submission is open for acceptance by the customer, or how long prices must be held for, and whether acceptance of the submission by the customer is effective to form the contract.


All of this will build up a picture of whether anything can be done to revisit the price, either before or after the formal contract is entered into, and if so, how the successful tenderer would need to approach that.


Bid managers and coordinators are also well advised to scrupulously examine the tender terms and accompanying contract documents to understand exactly what they are signing up to before submitting their tender submission.


A series of questions should be considered when reviewing tender documents, including:


  • Once you submit a tender, are you bound to enter into the formal contract?
  • How long is your tender submission and tendered prices open for acceptance by the customer?
  • If you are awarded the contract, how does the pricing work and what review mechanisms are available? Remember that a discussion over prices or an opportunity to request a change to the pricing does not guarantee that the customer has to agree to it.
  • How long are you tied into the contract for?
  • Are you obliged to supply goods and services under the contract (i.e. can you decline orders if the pricing isn’t viable)?
  • Do you have the right to suspend supplies in any given circumstances (i.e. force majeure) and how is that defined?
  • Would availability issues or pricing issues allow you to exercise your rights?

 


To try to practically address any issues that may arise, suppliers and customers should consider pre-tender engagement opportunities.


If suppliers are put off from a tender because the request does not take into account challenges that suppliers in the market are facing, then it might result in a limited range of options and opportunities for the customer. 


Therefore, genuine and lawful pre-bid discussions can help the customer understand what challenges suppliers are facing to determine if there is anything they can do to shape the tender requirements to ensure that they get optimum engagement from suppliers.  


If there isn’t any planned pre-tender engagement then suppliers should not be afraid of making use of any opportunities outlined in the tender documents to ask sensible questions of the customer, with a view to expressing concerns or queries around the contract documents. It is also important to understand how responses from the customer will be reflected in the final contract documents.     


Tendering can be a dynamic process, but at the moment it is not without a certain amount of trepidation from suppliers that are trying to tread a fine line between a successful submission making good business sense while avoiding the risk of entering into an unprofitable contract, because of uncertainty in the market and factors that are outside of the supplier’s control.


Good communication between tenderers and customers is key to managing and heading off that risk.


 



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