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August 2013

Learning an Expensive Lesson

An individual that I work with sent me one of his clients who failed to win a contract he bid on asking me to help determine why. But companies and individuals do not win a contract for a lot of reasons; so I was not certain how I could help.

After meeting with the individual it became evident that in an effort to significantly expand his business, he had responded to a public notice seeking bids for certain work, and while he had done this work before, he had not done on this scale. It proved to be an expensive lesson.

He did a number of things correctly; such as seeking the assistance of an attorney, and reviewing the contract before proceeding. I always tell those I work with to consult an attorney before agreeing to the terms and conditions that accompany an invitation to bid. I tell my clients they also have to prepare for that discussion. Consulting with an attorney is a significant expense, and my clients should prepare themselves for that discussion.

The attorney can guide them through the major areas of risk, but he or she does not know the business and never will know it as well as the person performing the work. This is the point I give them my P.I.I.N.A.C.L.E. (with two I’s) speech. This acronym stands for Performance, Inspection, Invoicing, Notices, Audits, Change, Liability Checklist, and Entire Agreement.

I will address the first letter of this acronym in this letter, and address the others in later issues.

One of the first missteps that contributed to this individual not winning the award was his failure to understand how to identify all of the Performance requirements contained in the bid documents he received. He did not fully appreciate the fact that both public and private entities require a significant amount of information, and that a prospective bidder must submit various written plans (execution, safety, resource, schedule, and others). These requirements are part of the Performance elements of a contract, and represent cost elements in the development of the proposal and both an administrative burden and a cost in the execution of the contract.

A second misstep was his failure to understand in a meaningful way that the entity issuing the invitation to bid intended to have a significant oversight role in the execution of the work. There were several clauses related to Inspection and ultimately acceptance of the work that also carried reporting requirements which would impact the progress of the work had he been the successful bidder. He failed to address these performance issues adequately.

Thought for the day . . .

In a rapidly changing environment conditions are described as dynamic or fluid. Good leaders anticipate these instead of reacting to them.

For leadership resources from the small business community I recommend:,