Canada:
Here’s The Drill: Strategic Procurement – Drawbacks Of Using Nonnegotiable Supplementary Conditions In RFPs
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Requests for proposals (“RFPs“) are a
popular procurement model for those looking to hire a construction
contractor. RFPs will commonly stipulate the form of contract the
owner intends to use. If it is a standard form contract such as a
CCDC, the supplementary conditions are often attached to the RFP as
an appendix. The RFP may also require proponents acknowledge in
their proposals that they agree to the contract and supplementary
conditions without any revisions. While this can dispense
with contract negotiations, owners (and contractors using a similar
approach to retaining subtrades) should be aware of the drawbacks
associated with this “take it or leave it” strategy.
Perhaps most notably, nonnegotiable supplementary conditions can
dissuade contractors from pursuing the RFP altogether and
unintentionally shrink the pool of interested proponents. A
contractor may pass on an RFP if they see some onerous clauses in
the supplementary conditions such as hefty liquidated damages or
provisions that significantly curtailing their cost and schedule
entitlement for delay events. The contractor may in fact have been
willing to play ball had one or two of the more contentious clauses
been modified (and those modifications may have been perfectly
acceptable to the owner).
Using non-negotiable supplementary conditions can also create
challenges if they were not thoroughly finalized when attached to
the RFP. What should proponents think when they see a term in the
supplementary conditions that is highlighted or accompanied with an
internal note-to-draft that says “to be reviewed”, or
when terms in the supplementary conditions contradict terms in the
RFP? How should proponents evaluate a liquidated damages clause
that has a dollar value of “TBD”? Too often these
drafting mishaps are associated with the very clauses contractors
view as contentious or relevant to pricing and can result in
proponents making assumptions that impact their price submissions.
While proponents can try to gain clarity by submitting requests for
clarification, this may not be practical if the ambiguity or error
is discovered on the eve of the proposal submission deadline.
There may be situations where it is logical to use nonnegotiable
supplementary conditions to avoid protracted contract negotiations.
However, owners (and contractors) need to appreciate the associated
drawbacks and ensure the supplementary conditions and RFP are
carefully drafted and vetted to avoid unintended consequences.
Click here to read
Issue 1 of Here’s the Drill, “Prompt Payment –
Are your contracts in order?”.
Originally Published by WeirFoulds, February 2021
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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