20 June 2014 | Phil Machin
Despite suppliers investing a lot of time and energy into responding to a tender, many will fail to get shortlisted because they didn’t understand exactly what information was required from them.
For example the importance of demonstrating that you have valid insurance in place is critical, as without this an SME will typically be ruled out of a tender.
Some suppliers, particularly SMEs, may think this is an extreme reaction, but rather like driving a vehicle when not sufficiently insured you are exposing your company, clients and suppliers to unnecessary risk.
Large companies are required to have appropriate insurance and their insurers will require that all sub-contractors have a reasonable level of cover as well. Suppliers large and small will need cover for all eventualities. For example, if you are a sole trader consultant engaged to create software code, there are a number of potential risks, such as the inadvertent introduction of a virus or malicious code which could affect the backbone of an organisation, even causing it to cease trading for an amount of time.
Often the challenge can be due to the high number of contracts negotiated by large companies which are reliant on requesting all suppliers - large and small - to sign up to ‘boiler plate’ liabilities and indemnities. Often these do not align to the scope and value of the contract and would be impossible to fulfil under typical insurance. Suppliers are encouraged to determine the risks in advance and ensure they are prepared to negotiate reasonable indemnities, citing relevant examples and justifying the need for an appropriate and realistic level of contractual protection.
Remember that before submitting a tender response, insurance policies should be checked to ensure the company has the ability to fulfil the contract terms they are signing up to. In most instances the tender process will require the supplier to provide a copy of their insurance policy, so they should contain no inaccuracies.
While insurance may just seem like a formality, it is a critical component of the due diligence undertaken by procurement. Incorrect or missing information may well result in not being shortlisted or awarded the next contract.
☛ Phil Machin is director at Bridge Procurement