Australia: Beware the sleeping tiger when tendering for projects – administration risk!

Focus: Tendering for projects - administration risk
Services: Property & Projects
Industry Focus: Property

Lawyers are often asked to provide a high level 'red flag/horrors only' review of potential risks under proposed project documentation for tenderers. Quite often the party requesting the review is a new entrant in the Australian market, or a newly formed Australian company venturing into the major project space in its own name for the very first time. These parties will have a proven track record in the technical delivery of such projects and will therefore encounter few issues in preparing and pricing the technical aspects of the proposal. However, if and when these parties decide to submit a tender response without the assistance of a local in-house legal team who would ordinarily advise on the legal aspects of the contract for the purposes of the tender response, there are several considerations that can sometimes be overlooked.

It can be very tempting for some parties to resist proposing any departures to the contract terms in the belief that it will take their company out of the running, and in the hope that it will assist in getting their first project over the line and on to the deal sheet. Matters can become more complicated if the contract in question is a subcontract drafted on a back-to-back basis with a head contract, as the head contracting party in these circumstances will naturally seek to pass down all corresponding risks. Sometimes the scope for negotiation will be very limited.

In addition to the commonly known risks, it is very easy to overlook the sleeping tiger in this process – administration risk.

What to look out for

In any high level risk review, there are generally three key categories of concern from a legal perspective regardless of the nature/subject matter of the project. The first two categories of risk are well known and typically receive the most attention.

  • Liability: What is your total potential liability to the other party (worst case scenario) and how could such liability arise? Is liability for consequential loss excluded? Are you required to provide indemnities? Does the contract provide for a proportionate reduction in liability to the extent the loss is caused or contributed to by others? Is liability capped, and if it is capped, are the exclusions to the cap so significant as to render the cap meaningless or will you end up carrying significant uninsurable liability?
  • Entitlements: How do the payment provisions operate? What must you achieve/provide to ensure timely payment so as to avoid cash flow issues? What deliverables are required and when? Under what circumstances can payment be withheld or delayed? Which party takes on the risk for neutral delays and/or concurrent delays? What notices are required to obtain entitlements and in what time frames must these be provided? Are there time bars?

Most contracts will contain provisions to address some (or indeed all) of the above issues and this list is by no means exhaustive. Whether they are acceptable or open for negotiation by the other party will vary on a case by case basis depending on the type of project (high profile or not), the nature of the contracting parties (public or private) and the key drivers for the project (whether it is time/cost and/or quality critical).

Regardless of the particular facts, there is a third consideration that is often overlooked, but is critical for any party preparing a tender response. It is this: in addition to considering the contract and pricing the technical delivery aspects of a project, it is important to remember the need to factor in (and price) the administration risks.

Administration risks and management/mitigation – what you should know

It is essential to assess what will actually be involved in administering the contract in accordance with its terms in order to preserve your contractual entitlements and to then factor these costs into your tender price.

For example you should consider the following:

  • Consideration of the preparation of numerous and ongoing deliverables – you may be required to provide design documents, programs, management plans, quality plans, testing and acceptance plans, maintenance plans, risk management plans, disaster recovery plans, training plans, work health and safety plans, environmental plans, traffic management plans, security management plans, transition out plans etc. Many of these documents will require amendments and updates during the course of the project. If you are contracting with Government the list can be extensive and overwhelming, particularly for new entrants. It is also not uncommon for provision of these deliverables to be expressed as pre-conditions to payment or to your ability to progress the works or services. Do you have adequate resources and experience to prepare these? Have you priced the cost of engaging the appropriate experts that may be required to assist?
  • Consideration of the ability to administer entitlements – if you cannot (or prefer not to) amend the contract to avoid tight time frames and often onerous or inflexible notice provisions and time bars, do you have adequate resources to administer the contract? If not, what additional resources might you need and at what cost? Do you need a dedicated contract administrator(s), additional project managers, administration support or legal support during the project delivery phase? Will this be achieved on a project contract basis or will you require long-term in-house resources? How can you ensure that the project knowledge and detail is captured and recorded, particularly if the delivery phase is followed by a long-term maintenance or operation phase?

Large and/or sophisticated parties no doubt already have these resources available and the experience in providing the often numerous and ongoing deliverables and ongoing notices required under these type of contracts. However, new entrants in the project space are often unaware or reluctant to factor in these costs in when preparing tender responses and instead may be content to wait until they have the first few projects underway before they consider they can justify the associated costs.

Experience has demonstrated time and time again that factoring in these risks and making provision for these additional resources may be absolutely essential to ensuring that you are able to comply with the requirements of a contract and therefore be in a position to claim and recover amounts you would otherwise be entitled to. Taking on ad hoc resources once the project is underway can be haphazard, costly and can lead to unquantifiable reputational damage if not managed properly. Issues can also arise if the management 'on the ground' is not regularly updating the management 'in the office' who are often charged with the task of issuing contractual notices.

Less experienced principals can also come undone by putting forward principal–friendly contracts which require onerous administration and strict timing requirements if they do not have the appropriate management in place to themselves administer and/or comply with the requirements of contract.

Administration risk can certainly be a sleeping tiger for any party preparing a tender response. In order to prevent that sleeping tiger from becoming a hidden dragon, it is incredibly important to consider your ability to administer the contract and to appropriately price such arrangements right from the start to ensure that a proposed project does not become your last!

This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions