Getting quotes right

By Kevin J Foster.

There are some basic rules to follow when quoting for work in the security industry. Whether you are providing guard services, security advice, or installing security systems, if you don’t take care in the quoting process you could lose money. How? Well, obviously if you don’t win the job, there is an opportunity lost. However, if you win the job but have under-quoted, then you may not be able to recover your costs. Alternatively, you could have the price right but maybe the client won’t be happy with the outcome and won’t pay, or worse, legal action is taken against you to make you pay for your client’s losses.

This article highlights some of the basic requirements of quoting in a professional manner. Everyone’s circumstances are different, so this paper presents only a general guide. Readers should always seek legal advice from their solicitor.

Defining the Scope of Work

The first thing to consider in the quoting process is the definition of the scope of work to be done. The client generally has a clear idea about the service or product they want. For example, if a client wants a security contractor to supply and install security systems in a new building, then, as a tenderer, you will need to know what type of systems, where they will be installed, how they will be installed, and when they will be installed. If the client is unclear about these requirements, then you must seek clarification.

Similarly, with security guarding, tenderers need to know whether static or mobile patrols are required. What procedures must guards follow? How often will the guards patrol, and when, and how many guards are required?

Consultants are sometimes engaged to write the specifications and even produce drawings, to define the scope of work that must be completed for the price in the quote provided by the tenderer.

In formal tender processes the client usually nominates a person who may be contacted to clarify the scope of work. Sometimes, after discussions between the client and one or more tenderers, the scope of work may be altered or refined. In these circumstances, the changes should be confirmed. These changes are sometimes recorded as an ‘addendum’ to the tender or quote requirements.

Selection Criteria

Most clients have some criteria in mind, such as price or time, that they will use to decide which firm they want to provide the services described in the Scope of Work. The client may want to check two or three references.

Some clients include specific criteria in their tender documentation. It is very important that in your tender response, you address the stated selection criteria. Don’t just simply include a corporate brochure or standard submission and hope that clients can work out for themselves whether or not you meet the criteria. It is better to address each criterion as listed in the call for tender. It is always best to present your tender response in the same order as the Selection Criteria listed in the tender documents. In order to impress the person evaluating your quote, make sure you meet or exceed all of the requirements listed in the selection criteria.

Conditions Of Tender

Some firms may include certain conditions with their quotes. For example, you might state that your quote is valid for 90 days. The prices you have quoted might be dependent on prices from your suppliers or upon foreign currency exchange rates.

However, many corporate and government clients will provide you with specific ‘Conditions of Tender’ when they ask you for a quote. It is very important that you read and understand the conditions! If you are unclear about the Conditions obtain advice from a lawyer.

Another example of a Condition of Tender might require you to submit three copies of your quote. There may be several Conditions of Tender. If you do not comply with these conditions then the tender evaluators may not consider your quote at all. Thus you would have wasted your time in preparing the quote and lost an opportunity to make some money.

A common Condition of Tender is that the quote offered must be for products or services described in the Scope of Work. If you think that you can offer a better service or a cheaper product than those specified by the client, then by all means offer alternatives. However, for government and corporate clients you generally must offer a fully compliant tender before the client will even consider your alternatives. Therefore it is generally acceptable to offer more than one quote -one that is fully compliant with what the client has asked for and one or more alternatives that the client may consider.

Conditions of Tender effectively are the rules with which you must comply in order for your quote to be accepted by the client. Be sure you read and understand the rules before you quote!

Conditions Of Contract

The Conditions of Contract define the rules that will govern the agreement between you and your client when your quote is accepted. Many firms provide their own Conditions of Contract to their clients at the time of tender. If you choose to do this, it is strongly recommended that the conditions be drafted by a lawyer who specializes in contract law. When your client is a corporate body or a government, they may require you to meet their Conditions of Contract. Sometimes the conditions are written so that they may seem unfair to the firm providing the product or service. It is important to understand that if you agree to the conditions, then you must comply with them whether or not they are unfair!

The conditions that are common to most contracts in the security industry define which laws apply to the contract (e.g. the laws of New South Wales), the Scope of Work, the agreed price, when payment must be made, ownership of any products or information provided to the client, and rights of the parties to the contract. In security contracts there may be provisions for ensuring that the security firm does not disclose the client’s information to anyone else. The Conditions of Contract often define the insurance that the security firm must effect and maintain. For example, you may need to have public liability insurance with coverage to a specified amount of say $20 million. A word of advice – it is generally not a good idea to provide your clients with copies of your insurance policies. There are many insurance policies that will be voided if you do this – check the small print in your insurance policy and seek legal advice. If you need to provide proof of insurance to a client, then a certificate of currency may be all that is required. Check with your legal advisor.

There may also be a condition that the security firm ‘indemnify’ the client against liability in respect of claims, costs and expenses. It is a good idea to seek legal advice about this issue as it could mean that you effectively insure your client against any losses they suffer. Make sure that you only accept liability for your mistakes and errors and not someone else’s!

Similarly, there is usually a clause in the Conditions of Contract that defines the limit of liability. For example, it might be limited to $5 million. Be aware that if your insurance coverage is less than the limit of liability, you could be in serious financial trouble if your client makes a claim against you. Some clients ask for ‘unlimited liability’! Imagine one of your clients making a claim against you that far exceeds the value of everything you own – you could lose the lot! Also don’t assume that you have to make a mistake for your client to make a claim against you. If you have indemnified your client against all losses they incur, you might be footing the bill for errors or omissions made by third parties.

There are many traps for security service providers that may be hidden in the Conditions of Contract. It is very important to understand the legal implications of those conditions and how they may impact on your business. Many corporations and governments deliberately word the conditions so that risk is transferred from them to the contractor or supplier. Make sure you understand those risks. If you are unsure then seek advice from a lawyer.

Price

When you provide your quote, make sure the price you offer is for all of the work requested by the client. Note however that if you have not complied with the Conditions of Tender then your quote may not be considered. If you wish to offer alternatives, it is always good practice to first provide a quote that is fully compliant with the conditions and then offer a separate quote for alternative products or services. That way the client can evaluate your compliant tender first and, if you are selected as the preferred tenderer, the client may choose to negotiate your alternatives. This is an important principle.

Sometimes clients ask for a Schedule of Rates. This may resemble a shopping list of products or services that the client may want in the future. If you provide this Schedule, make sure you clearly define what each price is for and for how long the price will be valid. The client may use the schedule to vary the Scope of Work in the future. Ensure the prices in the Schedule of Rates will be acceptable to you for the duration of the contract. If you want the flexibility to increase the prices later in the contract, have your client agree to this at the time of signing. You may need some clauses in the contract that allow you to ‘escalate’ your prices due to inflation, exchange rates or suppliers’ increases in prices. Do not assume that your client will agree to price rises later. If a price is set for a clearly defined scope of work, then your client may legally force you to comply with that price.

This paper has described how quoting can cost you money, especially if you do not fully understand the business risks arising from Conditions of Tender and Conditions of Contract. A few basic rules have been suggested which will help to reduce the risk. In summary, quoting will cost you money if you lack a clear understanding of the scope of work covered by your price, if you do not comply with the Conditions of Tender, or if you do not comply with the Conditions of Contract. If you do not agree with the Conditions, then it is necessary to negotiate changes to them before your quote is accepted by your client.

Good luck!

Dr. Kevin J Foster is an Adjunct Associate Professor of Security Science and Risk Management at Edith Cowan University and the former Business Leader of Security Consulting for Connell Wagner Pty Ltd.