Tenders and contracts
With plenty of businesses competing for a share of the spoils, it’s worth knowing how to put together a successful tender.
A large number of government departments and private businesses outsource various functions via tender. Invitations to submit a tender can be found on government websites or in the classified advertisements of newspapers.
Winning a tender is an excellent way to build your business, however a successful tender isn’t necessarily the one with the lowest price, but rather the one offering the best value.
Preparation of a tender calls for careful consideration of your venture’s ability to profitably fulfil the terms of the contract. There’s no point winning a tender if it locks you into a loss-generating deal.
To demonstrate your ability to fulfil a tender, you may be asked to provide specific details about your business including previous tender successes and annual turnover along with a copy of your business plan.
If you are unsure about preparing a tender, there are a range of organisations that offer professional tender writing services. It can be a good idea to use such a service until you are familiar with the tendering process. Do shop around though as prices vary widely.
Drafting a contract
When your business is awarded a contract by tender, it’s time to celebrate! But not for long – at this stage it’s worth having the terms of your successful tender drawn up in a contract.
A contract is an agreement between two or more parties to provide goods or services at a given price. While the law doesn’t call for all contracts to be in writing, it makes sense to request a written contract following a tender – or at least an informal letter reconfirming the terms of your winning tender.
As a guide, a contract should spell out delivery or completion dates, pricing details (plus possible price variations) as well as payment arrangements. Note too, you may want to include clauses that address additional issues such as what happens if the contract is terminated early.
It’s understandable that amid the euphoria of winning a tender, you may feel it’s unnecessary to formalise the arrangement. Do bear in mind though that if your business is run as a sole trader or partnership, your personal liability is unlimited if something goes wrong. A contract won’t change this, but at least everyone involved knows where they stand upfront.
Whatever way your business deal is structured, it makes enormous sense to have your solicitor prepare or review the contract, as the additional expense could prove to be money very well spent. Remember, a properly written contract provides some certainty and protection to all parties involved, and that includes you.
Published: 10 December 2007