Negotiating Government Tenders

Laura Harding , 28 February 2021

Architects must collectively resolve to stop accepting unfair or uninsurable contract terms, argues Laura Harding from Hills Thalis Architecture + Urban Projects.

As a small to medium sized practice in NSW, we have always found the negotiation of government tenders, at local, state and federal level, to be fraught – but our recent experiences plumb new depths.

In times past, we would negotiate a contract of engagement after notice that we were the successful tenderer.  We’d send the proposed contract to our insurers and advisors for checking.  There would be a few of weeks of to-ing and fro-ing on the inclusion and wording of clauses and, eventually, we’d win some, and we’d lose some – but would come to an agreement that was reasonable and insurable.

We yearn for the good old days.  Now the trauma starts much earlier.

To be eligible to tender for work we must join prequalification lists with standard contractual terms. We are asked to agree to terms as a condition of joining these lists.  We raise the same old issues – but are varyingly told that no correspondence will be entered into, or that not to worry, each contract will be negotiated on a project by project basis. If we’re lucky, we can even get these two different answers, from different people, within the same agency. We are now routinely seeing instances where acceptance of the terms ‘without amendment’ are conditions of prequalification, or conditions of tender.

Each list, of course, has its own ‘special’ contract – but they all run to type. Filled with unnecessary deeds, warranties and indemnities that imperil our insurance coverage in one clause, while simultaneously demanding that we maintain that cover in subsequent clauses. It is a requirement of the Architects Regulation of NSW that we are ‘adequately’ insured – not ‘possibly’ insured.  Copyright automatically to the principal. No reciprocal rights of termination for the consultant… the list goes on.

For additional complexity and time wasting, we have instances where we have been selected to tender from one procurement list, but then advised that we really need to be very quickly enrolled into a separate list, due to the ‘special’ circumstances of the project.  Duplicate process – duplicate inanity – same result.

Often the terms we are offered are themselves not ‘fit-for-purpose’.   Too often they appear to be contracts drafted with construction services in mind that have been minimally tweaked to try to cover the provision of consultant services.  Some are drafted with service provision in mind but are unnecessarily aggressive and punitive in their terms and inappropriate allocation of risk.

Regardless of the terms of these pre-qualifications and tender conditions, we always submit a list of issues that may jeopardise our insurance status to the tendering bodies when acceptance of the conditions of engagement are a tender requirement.  It is only lawyers who can possibly benefit from the wasteful number of insurance and contract reviews that must result from this process.  We like to speculate about the potential cost of this as we read the same tender advice, informing us that government is “working hard to make the procurement processes easier to understand and negotiate for small to medium enterprises”, and to “make it easier for local businesses to supply to government”.

What happens next varies.

Once we got a phone call to say we were the winning tenderer, but apparently the ‘legal department’ had said that we would need to withdraw all of our proposed changes to the contract, or they would award the project to an alternate tenderer.  They don’t communicate this in writing – it’s usually a phone call.  It’s never the procurement team or their lawyers on the phone – they always get the affable project lead to be the friendly ‘messenger’ who can always say, “I don’t know, I’m not qualified” when pressed on the detail.

We’ve had another instance where, in our verbal feedback session (always verbal with no record) we were informed that we were deemed non-conforming as we had ‘too many’ queries about the standard contract terms.

Repeatedly, we are told that other tenderers haven’t queried these clauses.  Sometimes this is because we are tendering against large Engineering consortia – but more often, we are tendering against other architects and urban designers.

In frustration, we recently posted on the Institute’s forum to see if other practices were experiencing these issues.  We received lots of feedback, both on and off the forum, of practices experiencing all of these problems and more.  Some, in other states, still appeared to have the opportunity to negotiate reasonable terms.  Others are trying to push back, but like us, are meeting ever-firmer resistance.  Others still are taking calculated or non-calculated risks.

A few suggestions of changes we’d like to see:

• Formal contract review and negotiation should only occur after a tender has been successful
• Contract negotiation should actually occur
• Government agencies should not be permitted to offer work on ‘take-it-or-leave-it’ terms
• Government agencies should not be permitted to include ‘full acceptance of terms’ as part of their prequalification or tender conditions to avoid contract negotiation
• The promotion of the widespread use of a standard contract across agencies – AS4122.2010 – a contract for Professional Services that was drafted with wide consultation and that does not appear to compromise insurances. (Including further consultation and agreement to draft special conditions as an option to cover D&C arrangements, novation and the like to ensure it captures the range of procurement models in the market).
• Architects should stop agreeing to unfair or uninsurable contract terms

It’s hard to escape the conclusion that professionally we’re helping to dig our own hole here.  This really is an instance where a collective and uncontroversial minimum ethical standard – that architects shouldn’t accept unfair terms where their insurance status cannot be guaranteed – should not be difficult for us to collectively enforce.

If we can’t even collectively act in our own self-interest, it raises doubts about our collective resolution and effectiveness in areas where there may be consequences to our advocacy of important social, cultural or environmental issues.

It will be interesting to see how our collective ethics play out in NSW with the advent of the Building Design Practitioners Regulation coming into force later this year.  Are we all going to increase time and fees to cover the extension to our scope that results from the increased professional duties under this regulation? Or will we race to the bottom, ever to remain only as strong as the weakest link?