Bid Alert: Review The Contract Terms

If you intend to provide a service to a public agency, be sure to consider the impact of long term contractual issues on the cost and profitibility when preparing the proposal. The agency’s contractual requirements are typically incorporated into the solitication. If they are not, you may have to inquire as to what they will include prior to submitting a proposal. It is imperative to know whether performance of the contract is doable and sustainable.

For example, are there upfront costs that will be incurred?  What if the contract has a termination for convenience clause?  Will you lose your investment? Are there insurance and bonding requirements?  How much will these items cost? Is there a mechanism to seek price adjustments in the event your costs increase?  If so, what is the likelihood that the agency will actually approve cost increases over the lifetime of the contract?

These are the types of questions that should be asked prior to submitting a proposal to provide the public agency with services.  On the one hand, service providers routinely seek to competitively price their proposals in an effort to gain contract awards.  On the other hand, the question that must be asked is whether that pricing structure will be sustainable over the duration of the contract, and considering the contractual terms.

If there are questions, the agency may have a procedure to seek clarification, and get answers by way of addenda.  You may also want to consider consulting with legal counsel if interpretation of the contract terms are an issue.