Continuity tenders

Continuity tenders are used on occasions where a client foresees further work beyond the current project and a tendering arrangement exists for continuity of work with the same contractor.

Contractors would be informed when pricing for the first phase of work, on a competitive basis, that further work would be awarded to the successful tenderer, providing the work is of the required standard and is completed within a reasonable time.

This promise of further work is an attractive proposition to contractors and a competitive tender response would be anticipated, with firms pricing very competitively to secure not only the current tender but also the proposed future work.

There are benefits to such contracts for both the client and the contractor, but also pitfalls.

In the first instance, the client can expect lower pricing as contractors bid to secure future work as well as the current project, and the contractor, if successful, gains the security of future work.

Money can also be saved in the future as the original pricing documents can be used where work is similar, reducing tender preparation costs, and the prices submitted can be used to negotiate the value of the remaining phases.

The client might also reasonably expect to save money, despite negotiating the price for subsequent phases, as the contractor, being familiar with the design and reducing on-site issues they’ve previously encountered, should be able to work more efficiently.

The benefits to both parties should ensure a good working relationship. However, where the original price is too low, an otherwise good relationship between contractor and client could be damaged as it may become impossible for the contractor to make a profit, despite the advantage of negotiation, and the client’s expectations of low cost and/or value for money are not met.

The continuity contract is ideal for a ‘one-off’ situation where the likelihood of future work exists, noting no future work is guaranteed, as the client’s plans can change.

Again, the advantages to be gained from maintaining continuity of work with the same contractor are the same as outlined for continuity contracts, including keen tenders from competing contractors in the first instance.

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This article is from the free online course:

Procurement Strategies and Tendering

Coventry University