Thursday, August 16, 2012

Introduction to Specification-Compliance in Public Bids Submission.

Most businesspeople are familiar with the process of public bid submission. It is common in most industries. Whether it is in the private or public sector, the company or governmental entity will publish specifications with their requirements for the project. Events in the distribution chain can get Machiavellian. It is not uncommon for companies to award bonuses to project managers who come in underbudget. As a result, not all the requisite information is always transmitted to parties who need it. When it is, or when requirements change or are subject to a differing interpretation from the engineer on the project or the ultimate customer, somebody is left paying the bill.

In today's economic and business climate, public bid projects are increasingly competitive. In the Midwestern United States, such opportunities are not terribly plentiful. On public bid projects, the engineers are the arbiters. Specifications will say a certain thing, but the engineers (in conjunction with the ultimate customers) are the ones who end up determining whether to enforce provisions of a specification. When conflicts arise, the contractors, vendors and other suppliers act as lawyers, arguing for or against the verbiage of a particular provision in the specification. As mentioned, in some cases, not all parties will have received the pertinent specifications. On many large projects, requirements will be found throughout the specifications. This can involve thousands of pages, so it is not too difficult to see why certain requirements are not always met, omitted, or missed completely.

On large projects, mistakes and omissions can bankrupt a company. That is why compliance with specifications is so important. Public jobs are so competitive that if a company does not supply one of their vendors with the specification, the result will be a more competitive price for them to give their customers in the distribution chain. When a conflict over the goods or services to be supplied ensues, everyone is pointing fingers at another party, expecting them to foot the bill. Thus, a company must be vigilant in making sure that their company is protected from unscrupulous and unreasonable customers or suppliers.

Using the legal process is anathema to most small businesses, because resorting to it is like using the nuclear bomb. In one particular situation you may get your way, but you have damaged business relationships and may have cost yourself much more in the long run. If you use the legal process you will almost certainly not be doing business with the party against whom you are using the legal process. In many cases, word-of-mouth makes others in your industry wary of doing business with you, because the fear is that you will take them to court. Of course, there is also the possibility that this word-of-mouth is actual defamation or business interference, in which case you can take further action. It may even go so far as to be a violation of antitrust or competition law.

Industries have developed ways of dealing with these situations without resorting to the legal system. Surely, individual businesses differ. Some companies use their buying power to bully other companies. Some use a cost-benefit analysis and acquiesce in a situation when it appears likely that they will be able to make more money in the long run by extending goodwill to a company who may actually have made the mistake or omission. In my next post, I will discuss tips and pointers for companies to use in dealing with specification-compliance on public bid projects.

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