Commercial reviews in the tender process of contractors

Abstract

Purpose

The purpose of this paper is to show the extent to which clients amend standard form contracts in practice, the locus of the amendments, and how contractors respond to the amendments when putting together a bid.

Design/methodology/approach

Four live observational case studies were carried out in two of the top 20 UK construction firms. The whole process used to review the proposed terms and conditions of the contract was shadowed using participant observation, interview and documentary analysis.

Findings

All four cases showed strong evidence of amendments relating mostly to payment and contractual aspects: 83 amendments in Case Study 1 (CS1), 80 in CS2, 15 in CS3 and 29 in CS4. This comprised clauses that were modified (37 per cent), substituted (23 per cent), deleted (7 per cent) and new additions (33 per cent). Risks inherent in the amendments were mostly addressed through contractual rather than price mechanisms, to reflect commercial imperatives. “Qualifications” and “clarifications” were included in the tender submissions for post‐tender negotiations. Thus, the amendments did not necessarily influence price. There was no evidence of a “standard‐form contract“ being used as such, although clients may draw on published “standard‐form contracts” to derive the forms of contract actually used in practice.

Practical implications

Contractors should pay attention to clauses relating to contractual and financial aspects when reviewing tender documents. Clients should draft equitable payment and contractual terms and conditions to reduce risk of dispute. Indeed, it is prudent for clients not to pass on inestimable risks.

Originality/value

A better understanding of the extent and locus of amendments in standard form contracts, and how contractors respond, is provided.

Citation

Laryea, S. and Hughes, W. (2009), "Commercial reviews in the tender process of contractors", Engineering, Construction and Architectural Management, Vol. 16 No. 6, pp. 558-572. https://doi.org/10.1108/09699980911002575