By Peter Silcock, chief executive, Civil Contractors New Zealand
With investment in infrastructure topping $11 billion a year, more and more clients are saying that they can’t get enough contractors to bid for their work. This is a major issue for local authorities because without healthy competition it’s hard to get good value for your investment into public infrastructure.
Malcolm Edridge of Edridge Contracting and chair of Civil Contractors New Zealand’s Nelson / Marlborough Branch, recently commented on the workload and challenges facing local councils saying “the industry could handle the workload but will need flexibility from the councils”.
Rather than bemoaning the lack of contractor capability and capacity, councils need to step up by asking the question – can we make our work more attractive to bid on? The answer for most councils is definitely yes.
Good contractors will assess the risks, complexity, timing and resources they need to compete for and complete any project. Councillors need to be aware that what their staff may label as lack of contractor capacity or capability may in fact be poor procurement process, unattractive terms and conditions, and unacceptable risks.
It may surprise you that civil contractors have a strong understanding of your need to maximise value for money. They know they work in a competitive environment, and they’re keen to work with you to deliver value. They, too, want to make sure that the time and investment they put into competing for your business – and the time you put into assessing their proposals – is well spent.
So, we had a few of our members (both large contractors and SMEs) put their heads together. They came up with four simple steps you can take to attract the best suppliers to your tender box.
- Use simple, user-friendly RFT documents to save time and cost for both parties.
- Let them know what’s coming. Engage with your local branch of CCNZ. If they know your pipeline, your suppliers can position themselves to deliver to your needs, and plan their tenders well.
- Use standard terms and conditions.
- Don’t load up the risks.
Over the next few months I want to use this column to provide some more detailed comments around these four simple steps. So, let’s start with number four – don’t load up the risks.
It’s tempting to de-risk a contract by transferring all risks to your supplier, or inserting clauses that pass on responsibility to your suppliers if the information in your tender documents is incorrect.
We often see situations where clients have engaged consultants to produce costly technical reports but then tell contractors they can’t rely on the content of the report. Great! The consultant and council have no responsibility and the contractor can’t rely on the report. Just how much did you pay for that report that no one can rely on? Smart contractors are building the risks around that no-reliance clause into their tender price.
The problem is that risks that are outside contractors’ control generally can’t be covered by insurance. So, the only response for informed suppliers to risk transfer, is to increase their prices.
Of course, the not-so-smart suppliers won’t factor in those risks, but when the mucky stuff hits the fan you will face costly disputes or be left to carry the can. NZS 3910 requires clients to take the risk of loss or damage in respect of ‘excepted risks’. That means if it’s outside your contractor’s control, you should take on that risk yourself. Not only will your suppliers be keener to tender, but their prices will be lower and your relationships with them will be more cooperative. That way, everybody wins.
This article was first published in the November 2017 issue of NZ Local Government Magazine.