Tendering in a Recession

by | Apr 15, 2009 | Contract Administration and Major Works

For anyone who had been putting off major repairs or a refurbishment, the spring of 2009 could look like the time to go ahead. The UK was in recession, private development had slowed sharply and many contractors were short of work. Tender returns were keener than they had been for some years. Clients, landlords and managing agents could benefit, but a low price is only good value if the job is finished properly.

The opportunities

  • Competitive prices. Contractors were pricing to win, and good firms that had been too busy to tender a couple of years earlier were now keen.
  • Availability. Start dates were more flexible and programmes could be shorter.
  • VAT. The standard rate was cut to 15% from 1 December 2008 and was due to return to 17.5% after 31 December 2009. Where works were standard rated, the timing of invoices and certificates could affect the total cost, so it was worth taking advice on how the change applied to each project.

The risks

  • Prices below cost. A contractor that wins at a loss may try to recover it through claims and variations, or may fail part way through.
  • Errors in pricing. In a busy tender market, mistakes are more likely.
  • Weak supply chains. Subcontractors and suppliers were under the same pressure.

How to tender well

  1. Get the documents right. A complete specification and clear drawings leave less room for claims later.
  2. Choose the tender list carefully. Check financial standing, experience and references before inviting firms, not after.
  3. Analyse every return. Compare rates line by line, look for omissions and query anything unusually low.
  4. Use a suitable contract. Agree it in advance and do not accept tenderers’ own terms.
  5. Protect payments. Value work accurately, keep retentions and avoid paying in advance.

For blocks of flats

For leaseholders, keen prices can make long planned major works more affordable. Remember that statutory consultation under section 20 of the Landlord and Tenant Act 1985 takes time, so start early if you want to catch a favourable market.

See our Major Works and Contract Administration services, and how we delivered two mansion blocks in one programme.