A potential client posed this question the other day: “Why should I pay you to review the contract prior to submission of my tender, when I don’t know if I’m going to win the tender. Isn’t that a waste of money? Can’t I just wait until I’ve won the tender and then get you to review the contract?”

Request for Tender

The tender process is usually started by the issue of a Request for Tender (RFT) or similar document. This usually contains (among other documents) tender conditions, a draft contract and a scope of works or specification. A binding contract requires an offer and a corresponding acceptance of that offer. For the purposes of contract law, the RFT is not an offer, but rather an “Invitation to Treat”, or, in other words, a request to an offer”.

Submission of Tender and Acceptance

To the surprise of many people, in the absence of any express words to the contrary, in the tender conditions, the tender contract is normally formed when the purchaser communicates its acceptance of the tender to the successful tenderer. This is because the tender submission constitutes an offer to provide goods or services on the terms set out in the tender documents and the acceptance of this offer results in a binding contract. The contract incorporates the draft contract from the tender package, the tender scope of works or specifications and the offer (including pricing) constituted by the submitted tender. In such circumstances, the subsequent signing the contract document is a mere formality.

Contract Negotiation

The parties often conduct some further negotiations after the tenderer has been chosen, but prior to signing the contract. However, if at that point, the tenderer requests some changes to the draft contract for the first time, the purchaser is not bound to accept those changes, as the contract has already been formed (even if the actual contract document hasn’t been signed). The implication of this is that the time to ask for changes to a tender contract is when you submit your tender, which is exactly why many RFT packages invite contract departures to be included in a tender submission and, in many cases, even provide a form into which such departures or exceptions can be inserted.

If you have included departures with your tender submission, then the contract is only formed when the parties agree on final terms. This happens during final negotiations after the tender has been awarded, but it means that if the purchaser does not agree to all of your departures, they are not bound to award you the contract. On the flip side it also means that if the purchaser does not agree to all of your departures you are also not bound to accept the award of the contract. At this point it is up to the parties to negotiate and agree on which of the departures will be included in the final contract.

Summary

The bottom line is that if a draft contract is included with an RFT and you don’t like some aspects of it, you should ask for any changes to the contract at the time you submit your tender. If you don’t include contract departures with your tender submission, then you’ve most likely missed the boat, because as soon as you get that letter saying you’ve won the tender, the contract is already formed and you then have no right to insist on amendments to the contract.

Stephen King
The Tender Lawyer
17 May 2019