Bidding, Tenders, and Contracts

7.1 Introduction

Notwithstanding its possible impacts on the behavior of a project’s service providers, and-or on the ability of the project-management team to overcome any gaps or limitations in its provisions, a con­tract with any and all parties involved provides the essential and vital backbone to any project. This chapter discusses the types of contracts and tenders in common use and the advantages and disadvantages of each.

It commonly happens that a project managers has worked in the same place for a long time in a company with an established market presence, This in itself may serve to reinforce a certain complacency about tendering and contract procedures already familiar from pre­vious projects. Moving in the footsteps of one’s predecessors in preparing another contract, it seems natural enough to expect to arrive at the same point that they did at another time in another set of circumstances.

To avoid unpleasant surprises, however, it behooves the modern a project-management professional to cast a critical eye about the way previous contracts were actually executed, and how

their deficiencies and shortcomings were surmounted. This can be determined readily from an examination of the contractors engaged on the current project, reviewing their performance and considering how that performance might be enhanced by introduc­ing certain changes in tendering and-or other contract procedures.

A review of the close-out reports of a previous project, if they embody sufficient clarity and transparency, can quickly enlighten the project-management professional as the relative strengths and weaknesses of past projects. This facilitates the process of revising the strategies to employ in dealing with the various service providers. This can make a contribution to achieving greater success than the company may have previously enjoyed with such counterparties.

In recent times, as a result of easy transportation and commu­nications at the global level, there have emerged unprecedented changes on the development of industry as a result of the easing of communications and speeding-up of the movement between countries and continents.

Internationally, this has fostered an atmosphere of freer — in the sense of less encumbered — movement of goods and services across jurisdictions. At the same time, such apparently "freer trade" between nations and between different continents has brought intensified competition between companies and inter­national organizations in its train, each seeking to maintain cur­rent global market share and expand that share. Competition has thus heightened as each actor tries to create or corner new markets with innovative or unique goods and services that edge out rivals. These conditions themselves have served to open up an entire new field of management consulting in the area of market strategies that take into account this intensification of competition on the global scale.

The owner of a project may have offers from different coun­tries. In such an environment, decision-making informed by complete and objective information, including the latest updates about international globally-accepted standards, assumes unprec­edented importance. In particular, the potentially large physical distance separating client and a contractor’s engineering office or factory has rendered imperative to administer the arrangements of a project according to systems that guarantee the client’s confi­dence in a product or service. One such system is that of the ISO (International standardized organization which a branch of united nations), which will be discussed in chapter eight. Alongside these considerations, the conclusion of a conscientiously designed con­tract provides a further guarantee of product-quality assurance, at the right price, delivered in a timely manner. Using a device such as a FIDIC contract (a standardized document developed by the International Federation of Consulting Engineers) further assists the project’s achieving the desired success.