The significance of the tendering contract on the opportunities for clients to encourage contractorled innovation

During the tendering process for most major construction contracts there is the opportunity for bidders to suggest alternative innovative solutions. Clearly clients are keen to take advantage of these opportunities, and equally contractors want to use their expertise to establish competitive advantage. Both parties may very well benefit from the encouragement of such innovation and the availability of cheaper methods of construction than have been contemplated by the tendering authority. However recent developments in common law have raised doubts about the ability of owners to seek alternative tenders without placing themselves at risk of litigation. This common law has recognised the existence of the so-called “tendering contract” or “process contract”. Since the tendering process is inherently price competitive, the application of the tendering contract concept is likely to severely inhibit the opportunity for alternative tenders. The “tendering contract” is automatically brought into being upon the timely submission of a conforming tender. This is contrary to the traditional view that an invitation to tender was considered to be no more than an invitation to treat, therefore submission of a tender creates obligations for neither party. Under the “tendering contract”, the owner becomes obliged to treat all tenderers equally and fairly. This paper is primarily based on the literature review. The aim of this paper is to highlight the problems with the competitive tendering process in relation to contractor-led innovation and explore ways in which owners can develop procurement procedures that will allow and encourage innovation from contractors.