Tenderers are forced to wade through a shedload of information for the odd relevant detail, costing them a fortune. A few trips to the county court might put an end to the practice
In an article published earlier this year, Cedric Sloan complained about a long-standing problem in the construction industry – information overload. Sloan’s point was that this problem had now become a nightmare for firms struggling to get their bids in against ever-decreasing timescales (Open mike, 1 May).
The increasing use of IT in the procurement process was enabling massive volumes of information to be included in tendering documents, much of it irrelevant to the bidder, Sloan claimed.
We all know what’s going on here. There may be people who are simply too lazy to sort out the wheat from the chaff, but more often than not the real motive is risk transfer. Put the onus on somebody else to sort out what’s garbage and what isn’t. If they get it wrong, it’s down to them. So, if a ductwork contractor overlooks some item that has implications for his works package, he pays for the consequences – however costly they may be.
But, as Sloan made clear in his article, the cost to the industry of sifting through piles of junk is massive; it may even run into billions of pounds. Who pays? Ultimately the industry’s clients. And there are other consequences. Relevant details that are lost in the deluge of information could mean that the building ends up with defects, or that there is disruption to the progress of construction.
What can firms on the receiving end do about this? Well, let’s consider the law. Unless otherwise agreed, tenderers have no legal right to be paid for the work they do to arrive at their price. The law assumes that tendering costs will be met out of the profits of contracts that result from successful bids.
How far does this principle go? Let’s say I get a shedload of information when tendering for a job worth £50,000 (not unusual). It then takes me three days to go through everything in search of the tiny bits of information that are relevant to the job. The overhead cost to my business of all this is £5,000 – one-tenth of the value of the job!
In Lacey (Hounslow) vs Davis , a builder had submitted a bid to reconstruct bomb-damaged premises. He was told that he was likely to get the contract but, in the meantime, he was requested to furnish calculations for timber and steel requirements and revised estimates in respect of new specifications and plans. This was to enable the client to obtain extra compensation from the War Damage Commission. Unfortunately the client then decided to sell the property, so the builder was not given a contract.
The judge held that the builder was entitled to a quantum meruit claim for this work as it fell outside “the type of work that any builder would be expected to do without charge when tendering”. The issue, therefore, is whether sifting through thousands of items of information in order to find the relevant items is a cost outside “the type of work a builder would be expected to do without charge”.
I suggest that it is, and the very tight timescales imposed on tenderers reinforce this view. A tenderer should have a reasonable expectation that all the information provided is relevant for the purpose of submitting a price. Although they may be able to recover the cost of tendering from future contracts, it must, surely, be wrong that future clients pay for the costs associated with sifting through the junk because a present client couldn’t be bothered to do it.
So, what would I do about the problem? In extreme cases I would claim the reasonable cost of the overheads that arose because I had to read all that irrelevant junk. I would issue proceedings in the county court, and if I’m able to limit the claim to £5,000, I would be able to use the small claims procedure.
In the event that I was unsuccessful, I wouldn’t be liable for the other side’s costs.
(I wouldn’t contemplate this, of course, if I had got the job.)
I suggest that a few challenges of this nature might cause some of the worst offenders to take a bit more care with their tender documentation. And if you have been successful with a legal challenge let Building know: if need be, your anonymity can be preserved. A case of gran reserva Rioja wouldn’t go amiss, either …
Rudi Klein is a barrister and chief executive of the Specialist Engineering Contractors Group