What should you pay attention to when bidding?

Engineering bidding risk analysis

1. Design technical risk

Engineering design is the leader in project construction implementation. Without a perfect design, it is impossible to talk about bidding and contract. Design changes are an important cause of engineering claims, so the design work should be improved as much as possible before project bidding. Only by avoiding bidding when the design plan is uncertain can the resulting risks be avoided. Whether the design plan is confirmed should be a prerequisite for whether to launch the bidding process.

2. Construction technical risks

After the design plan is determined, the construction plan should be studied, because any construction plan cannot guarantee that there will be no changes and claims. Every construction solution, whether it is traditional or innovative, has its own unique advantages and limitations. The owner must consider and evaluate the risks in the construction plan. When new construction methods and technologies are adopted, the risk of engineering changes and claims will greatly increase, so a suitable construction plan must be determined based on the specific conditions of the project.

3. Natural and environmental risks

Natural and environmental risks include floods, earthquakes, fires, typhoons, lightning, etc., which are irresistible natural forces, unknown hydrological and meteorological conditions, and complex projects. Geological conditions, harsh climate, and the impact of construction on the environment are all potential risk factors. The tenderer should fully consider these factors when drafting the bidding documents, define the level of force majeure, and require the contractor to fully consider the impact of natural and environmental impacts on the project in the bidding documents. How to define force majeure is an important issue related to risk sharing during project implementation, because the risks caused by force majeure mainly include earthquakes, storms, rain, snow and tsunamis exceeding the levels specified in the contract, and special unpredicted geological conditions. According to the general contract conditions, such risks should be borne jointly by the contract parties, and the contractor can generally only receive compensation for construction delay.

4. Political and social risks

Political and social risks manifest themselves in many ways. In addition to having rich knowledge in the field of natural sciences, project managers also need to have political acumen. For example, the bidding for a certain domestic project has been completed, but at this time the government investor found that the overall investment scale was too large and requested to readjust the scale of the project. The project bid has not been determined six months after the bid was opened, and the bid has already exceeded the bid validity period;

For another BOT water diversion project, the bidding process has been completed. However, due to continuous drought and lack of water supply, the government had no choice but to force the project to be aborted. According to the "Tendering and Bidding Law", when the above situation occurs, the tenderer must give financial compensation to the bidder, so the tenderer should pay the price. The above two examples are not the majority in project implementation, but the above two cases are facts, which has to remind the tenderer to be cautious when bidding.

At present, the most common political and social risk borne by bidders is demolition. During the implementation of urban projects, construction delays caused by demolition problems abound. Project delays make the tenderer bear the dual risks of project delay and project delay claims. How to solve the risks caused by demolition requires the tenderer to analyze the specific situation and handle it properly.

5. Contract risk

The engineering contract is not only a legal document for project management, but also the main basis for comprehensive risk management of the project. Project managers must have a strong awareness of risks, learn to study every clause of the contract from the perspective of risk analysis and risk management when drafting contract documents, and have a comprehensive and in-depth understanding of the risk factors that may be encountered in the project. Otherwise, the risk will bring huge losses to the project.

(1) Choose the appropriate contract pricing form.

Choose different contract pricing types according to the content of different engineering projects. According to the characteristics and actual situation of the project, the pricing method is appropriately selected to reduce the contract risk of the project.

For example, for projects with good construction conditions, little change in project quantity, and mature construction technology, the risk level is small, and a fixed-price contract can be used to obtain a lower bid from the contractor in the competition; for projects with large changes in project quantity For projects with adjustable price contracts, different settlement unit prices are adopted within the range of possible changes in the project volume; for projects with higher market prices of building materials during the bidding stage, material price adjustment clauses must be added to the contract, because there are differences between the bidding stage and the implementation stage. With a time lag, materials that have climbed higher during this time period are more likely to see price cuts, but there is less room for continued price increases.

(2) Rigorous language expression.

Language is the carrier of the contract, and the contract is the basis for claims. A sound contract can prevent or reduce disputes, thereby reducing costs. If it is not strictly expressed in the contract, it may leave hidden dangers for engineering claims.

(3) Reasonable risk allocation.

According to the basic theory of risk management, construction project risks should be shared by all parties involved, and the principle of risk sharing is: any risk should be shared by the parties most suitable to bear the risk or the most capable of controlling losses. Risk transfer that conforms to this principle is reasonable and can achieve a win-win or multi-win effect.

At present, the domestic construction market is in a buyer's market, which causes the tenderer to make many asymmetric contract terms during the tender process and transfer them through risk transfer clauses. However, due to the relationship between risk responsibility and power balance, this kind of There are often greater risks hidden behind transfers. For example, some contractors, in order to compensate for the losses caused by assuming risks, increase the intensity of claims and focus mainly on claims, which not only affects project investment, but may also affect construction progress and quality; Some contractors have to rely on cutting corners and cutting corners to gain profit margins because they bear greater risk losses; some contractors are even unable to carry out construction due to pressure caused by risks, and their companies have gone bankrupt. It can be seen that reasonable risk allocation is equally important.

① From the perspective of overall project benefits, maximize the enthusiasm of all aspects. Because if the project participants do not bear any risks, they will not have any responsibility. Of course, they will not have the enthusiasm to control, and it will be impossible to do a good job. Therefore, only by allowing all parties to bear corresponding risk responsibilities can we enhance responsibility and enthusiasm through risk allocation and achieve better planning and control.

②Fair and reasonable, with a balance of responsibilities, rights and interests. First, risk responsibilities and powers should be balanced. If you have the responsibility to bear risks, you must also give the bearer the power to control and handle them. However, if you already have certain powers, you must also bear the corresponding risk responsibilities; secondly, risks and opportunities should be as equal as possible. Participants should enjoy both the benefits and opportunity benefits gained from risk control, and only in this way can participants have the courage to take risks; the third is the possibility and rationality of taking risks, and participants should have the conditions and possibilities to predict, plan, and control, There are conditions such as time and information to quickly take risk control measures. Only in this way can participants take risks rationally.

③Conform to the practice of engineering projects and the usual processing methods. If the international practice FIDIC contract clauses are adopted, the risk allocation between the contractor and the owner is clearly stipulated, which is relatively fair and reasonable.

EPC bidding risk analysis

The identification, analysis and summary of EPC general contracting bidding risks will help the general contractor take effective risk management measures as early as possible to reduce or prevent the risks. coming losses. For general contractors, EPC projects mainly have the following risks during the bidding stage.

Risks from the external environment

Under the EPC model, the external risks and economic risks originally borne by the owner in the traditional contracting model are generally required to be borne by the general contractor, mainly including the following content.

Economic risks: The EPC general contracting model generally has a long construction period, and there may be inflation and price increases, which may cause an increase in various costs. During the bidding, the general contractor and the owner generally sign a lump sum contract. If There is no price adjustment clause in the contract signed between the general contractor and the owner, which will inevitably bring risks to the general contractor, and cost losses may be catastrophic.

Political risk: Local war or civil strife occurs in the country where the project is located, resulting in civil unrest, regime change, etc. The construction project may be forced to terminate or break the contract, and the general contractor may be forced to transfer his property to protect his life and property. was forced to pay many additional expenses and suffered huge losses.

Natural and social environmental risks: Natural and environmental risks mainly include unknown hydrological and meteorological conditions, complex engineering geological conditions, harsh climate and other potential risk factors. The general contractor must fully consider them when preparing bidding documents. these factors.

Risks from owners

Advanced contracting and financing risks: EPC is usually closely related to financing. Due to the emphasis on financing arrangements, in some bidding documents, owners explicitly require EPC The general contractor brings capital to the contract, which requires that the project cost must be certain and cannot be exposed; it must also be forward-looking to ensure that the financing amount is relatively fixed and safe, otherwise the financier's risk will be great.

Risk of contract terms: Relying on the advantageous situation of having too many people and too few people, owners often impose various unequal terms and unilaterally propose overly harsh contract terms with an imbalance of responsibilities and rights in order to transfer risks.

Risks from the EPC general contractor itself

Risk of quotation errors: In the process of converting from the traditional contracting model to the general contracting model, if the contractor’s own conditions are immature, Under this circumstance, blindly bidding and quoting will lead to the risk of incorrect bidding and quoting.

When bidding for a general contracting project, the general contractor can often only obtain project information through bidding documents and a short on-site visit, and cannot fully understand the political and legal environment, natural environment, etc. of the project location. In this way, , general contractors are often unable to accurately quote EPC projects.

The general contractor’s quotation estimate does not take into account the possibility of changes in exchange rates and interest rates. This risk is especially important for international EPC projects and projects that require financing. If it is not reflected in the bid price, you will face risks. It would be disastrous.

Subcontractor selection risk: In EPC bidding projects, experienced owners will require the bidder as the general contractor to provide a list of subcontractors and corresponding performance materials. Once selected, the bidder will win the bid. It is difficult to change the contract later, and this result usually reduces the general contractor's ability to bargain with subcontractors for equipment and services. At the same time, the technical level and management level of the subcontractor and the subcontractor's breach of contract may affect the connection with other subcontracted projects, which may cause delays in the progress of the entire project and claims from other subcontractors.

Risks from the institutional arrangements of the EPC general contracting model

Volume risk: In EPC general contracting, a lump sum contract is generally required, so the general contractor often bears the volume risk , once there is a certain deviation between the quoted project quantity and the actual project quantity, and the total contract price signed by the general contractor and the owner remains unchanged, the risk of the bid and quotation will be borne entirely by the general contractor.

Contract uncertainty risk: EPC general contracting generally adopts a lump sum contract, which includes all work content. However, because the owner only provides conceptual design during the bidding, the design depth is shallow, and there are still many projects during the bidding. Uncertainty factors, that is, there will be great uncertainty in the bidder's bid.

Coordination risk: Since design units generally do not have higher-level construction qualifications, and construction companies basically do not have design qualifications, EPC general contracting projects in my country are often bid by a consortium composed of design and construction units. Winning bid. In this way, there is a problem of internal interest coordination after the design and construction units form a consortium. If the interest coordination mechanism between the design unit and the construction unit is unclear or unattractive, the designer will give up the distribution of interests with the construction unit and only focus on fixed contract income, returning to the role of the design unit under the traditional model.