Delegation Limits

Problem:

When submitting a response to a request for quote or request for tender you don’t know if your offer will be the winning offer. Your offer/bid is usually competing against multiple other offers, so you need to get your offer to be better than your competitors.

Lesson:

The client company’s delegation limits are one important factor in determining whether your offer is accepted. The delegation limit is the value that the person assessing the offer is allowed to approve.

Solution:

When submitting an offer, be aware of the delegation limits (or approval limits) of the company/department you are submitting to. If your offer is below the delegation limit, it could be approved more easily.

E.g. A company may have a limit of $20,000 that the project manager (or even deputy project manager) can approve without further approvals being necessary. Or the company may only require one quote up to that limit.  If you respond to a request for quote and your price is below that limit then, as long as your offer meets the technical requirements, it may be accepted without further approvals being necessary (and so be accepted very quickly).

Some companies will have delegation/approval limits of something like the following:

  • Under $20,000 – 1 quote required – Deputy project manager approval
  • $20,000 – $50,000 – 3 quotes required – Project manager approval
  • $50,000 – $100,000 – 3 quotes required – Manager approval (PM’s manager)
  • $100,000 – $500,000 – Formal tender request process, minimum 3 tenderers – 2nd level manager approval
  • $500,000 plus – Open published tender – Executive manager (3rd level manager) approval

You will probably find that these limits are not relevant for large value contracts (multiple millions), as those need very senior management approval (possibly CEO)

The client may be allowed to tell you the limits their procurement system has in place (both for the number of quotes required and also for the approval limits). It is often worth asking your contact there to verbally tell you these. Or the limit can sometimes be estimated by the ease of winning smaller contracts (compare wins to losses with that client, if most quickly approved were below a certain value then that may be the delegation limit). The limit can also be worked out based on comments by the client when you ask for feedback on why you didn’t win.

I generally find that if a company client is allowed to tell you the limits then they are willing to, as it makes the procurement process easier if you are within their approval limits.

Confirm Details of Verbal Conversations

Problem:

Verbal conversations don’t leave a paper trail for evidence of the topic of discussion or agreement.

I have often found that a verbal conversation (by phone or in person) will get a quicker result than communicating by email. However that conversation does not produce any evidence of what has been agreed (unless it in minuted such as in a formal meeting).

The result is that although you have agreed on something (a deliverable, a price, and due date etc.) you cannot easily hold that person or company to that agreement.

Lesson:

A written record of an agreement is very important, and when that record is shared with both parties it is much easier to hold people accountable.

Solution:

After a call or direct conversation with a client or other stakeholder (such as manager, team member, etc), type any agreements (dates, scheduled meeting times, requests etc) into an email and send it to the client to confirm the details. This is particularly important when chasing payment or discussing variations.

By sending the email, you have a written record of the agreement. It gives the other party the opportunity to respond with agreement or clarification on the agreement. Or if they do not respond you still have that record stating the content of the conversation that is now date stamped and on both your and the recipients email system.

Specify the Due Date

When submitting any document for review (such as a design, invoice for payment, report, etc.), specify the date a response is due (perhaps 10 business days).

For contractual related items (such as invoices or drawing reviews for construction) make sure this is in both the initial contract and also accompanying the transmittal as a reminder.

Failure to do this can leave the due date open, and may mean that the recipient will not respond in the time that you require, which can lead to delays in the project.

By including the due date of any deliverable requested you make expectations clear, which allows team members, clients, suppliers and any other stakeholders to have a clear understanding of what is expected of them.

Clear expectations lead to less confusion, and a higher likelihood that your project will be delivered on time, on budget and to the satisfaction of the client.

Check Geotechnical Information

Check and double check geotechnical information supplied by the client.

If the client supplies the information, it would be ideal for the contract to specify that your design/construction relies on the accuracy of that information and if it is wrong you can claim for losses. However, in reality the contract from the client may state that the contractor must verify the accuracy of the supplied technical data

If the client will not accept that that contractors can rely on the accuracy of the geotechniocal information in the tender stage, you could add in a cost line item to the tendered cost breakdown with the risk costs associated with the geotechnical data. Show a price based on accurate data, and the cost if you assume the worst case (much softer ground compared to what the data says). The client may accept a tender like that because it is not just fat built in the price, but a specific amount based on a stated  risk (which will not be charged if the risk doesn’t arise).

Failure to cover these risks in the contract can lead to substantial extra costs to your company as the contractor, possibly leading to making a loss rather than a profit on the project. The difficulties in negotiations related to the geotechnical information could also lead to reputation loss whereby you will be less likely to win future projects from that client.

Remember also that any bad impression that the client has of you or your company will affect their decision to engage you again in the future and will also affect their rating of you as a reference to other companies and to industry surveys.

Organise Design Carefully

When doing a project that requires design, you should plan the time required for design carefully and allow adequate time for the design to be completed.

You should also write a design brief describing what you expect the designers to deliver and get them to agree on a schedule and cost for this (even for an internal design department).

Make sure you also account for design review (by the senior designer), drafting, engineering review of the drafting, redrafting of changes and corrections, and final review and issue.

It is important to allow for all these things and get the design leader to agree on time allowances for this.

You may find that if a design leader has agreed to a brief (including expected delivery times) and signed it then they will be more likely to work on your designs instead of other departments or projects designs (who don’t have a clear agreement).

It is not enough to send the design lead a list of target dates or descriptions, you need to set it all out in a clear document and get them to agree to (and preferably sign) this.

Note that final design review and signoff can be a big bottle neck if there is only one designer authorised to do this.