Congratulations! You've Just Won a Contract That Could Send You Broke

There's nothing quite like finding a tender that looks absolutely perfect.

Big contract.

Impressive client.

Lots of lovely potential revenue.

Possibly enough to buy that new ute you've been eyeing off.

You download the documents.

You skim the scope.

You start getting excited.

You tell everyone.

"We should definitely go for this one!"

Then you discover there are 286 pages of tender documentation.

Never mind. You're enthusiastic.

You make a coffee.

You start reading.

And somewhere around page 94, things take a turn.

Oh shite.

The Contract Has a Few Little Conditions

Nothing too dramatic.

Just a couple of tiny contractual details.

Like the fact that you might be responsible for practically everything that goes wrong.

Ever.

Including things you didn't cause, couldn't reasonably prevent and possibly weren't even aware existed.

Then there's the insurance.

Apparently the client would like you to have enough cover to rebuild half of Sydney.

You're a small business providing a fairly straightforward service.

But fine.

Let's see what the broker says.

The broker says something unprintable.

Right.

Moving on.

Mobilisation Starts Approximately Yesterday

The tender closes Friday.

The evaluation will take a few weeks.

The contract award date is somewhat vague.

Services commence Monday.

Which Monday?

Excellent question.

Nobody knows.

But apparently you're expected to have 25 trained employees, six vehicles, new equipment, operating procedures, reporting software, completed inductions and a fully functioning management structure ready to go.

No problem.

You can probably just nip down to Bunnings and pick up a complete operational workforce in Aisle 7.

Next to the cable ties.

The Scope Is Delightfully Vague

The specification lists the main services.

So far, so good.

Then comes the phrase:

"Any other associated services as required by the Principal."

Ah.

Lovely.

What associated services?

How often?

At what locations?

Using what resources?

For how long?

Silence.

But don't worry.

The pricing schedule asks for a fixed annual price.

Of course it does.

The KPIs Have Been Written by Someone With Tremendous Optimism

Respond to every incident within 15 minutes.

Rectify all defects within two hours.

Maintain 100% availability.

Provide detailed performance reports by 9 am on the first working day of every month.

Attend meetings whenever required.

And under no circumstances disappoint anybody.

Ever.

I'm exaggerating slightly.

But only slightly.

The problem isn't having performance standards.

It's agreeing to standards without checking whether you can actually meet them.

Because that impressive KPI you enthusiastically ticked YES to during tender preparation can become a rather uncomfortable conversation six weeks into the contract.

Particularly if there's a financial deduction attached.

The Payment Terms Are Also Quite Entertaining

You'll need to recruit people, buy equipment, pay suppliers, arrange insurance and mobilise the contract.

Your first payment?

Well, that's subject to several approvals, a few milestones and the alignment of certain celestial bodies.

Meanwhile, payroll happens every week.

Employees can be terribly unreasonable about that.

They keep expecting actual money.

And apparently "We're waiting for the client to approve the first invoice" isn't accepted at Woolworths.

But Look at the Contract Value!

Ah yes.

The contract value.

That beautiful, enormous number sitting at the top of the opportunity.

Let's say it's worth $1 million.

Fantastic!

Except $1 million in revenue is not $1 million in profit.

I know.

Devastating news.

Once you've allowed for wages, equipment, insurance, management, overheads, reporting, mobilisation, compliance, unexpected costs and the seventeen other things nobody mentioned in the original excitement, the picture can look a little different.

And if you've underpriced the risk?

Well, congratulations.

You may have just won yourself a very demanding hobby.

Sometimes the Red Flag Is You

Not literally.

Although if you're waving a giant red flag around the office, someone should probably ask why.

I mean the business itself.

Perhaps the opportunity is outside your normal area of expertise.

Perhaps you don't have the resources.

Perhaps the contract is too large for your current systems.

Perhaps winning it would mean neglecting your existing clients.

Or perhaps you're chasing it because it's big and shiny and everyone else seems terribly excited.

None of those things automatically makes the opportunity impossible.

But they're worth thinking about before you spend three weeks writing a tender and another three years regretting it.

Here's a Revolutionary Idea

Before committing to a tender, read the documents properly.

I know.

Groundbreaking stuff.

Look beyond the headline contract value.

Understand the scope.

Check the mobilisation requirements.

Review the insurance.

Examine the KPIs.

Read the pricing conditions.

Consider the cash flow.

And if something doesn't make sense, ask a clarification question through the proper process.

If the risk is significant, get professional advice.

If it's manageable, work out how you'll manage it.

If it can be priced, understand the cost.

And if the whole thing is beginning to resemble a contractual horror movie?

You are allowed to walk away.

Really.

Nobody will come and confiscate your tendering licence.

Five Articles, Five Useful Resources, and Hopefully Fewer Headaches

This is the first in a five-part series I'm putting together about the tendering lifecycle.

We're starting with red flags, then moving on to clarification questions, evaluation criteria, handing over a winning tender to the people who actually have to deliver it, and learning from tender feedback.

I've also created a free Tender Red Flags Checklist as part of the TenderWise resource collection, because it's considerably easier to spot a problem when you know what you're looking for.

And because finding these things out before submitting is generally preferable to discovering them after you've ordered the celebratory champagne.

The Moral of the Story?

Winning a tender is wonderful.

Winning a profitable, manageable contract that suits your business is even better.

But winning a contract with unrealistic obligations, dreadful payment terms, disproportionate risk and no realistic chance of making money?

That's not necessarily a victory.

That's potentially an expensive lesson with a commencement date.

And nobody needs another one of those.